Information Integration
As traditional company assets are increasingly commoditized, information is moving
to the forefront as an organizations most valuable asset. This value has been
market-proven by solutions such as customer relationship management and supply
chain management that have enabled companies to dramatically improve margins
through better customer insight and supplier negotiations. Many organizations
are now beginning to consider the significant benefits that integrated information
offers in the business performance management (BPM) arena.
When implemented properly, information integration forms the foundation for BPM by bringing disparate data sources together into a common business language. However, achieving this has proven to be difficult and has left many well-intentioned BPM solutions inadequate. Indeed, many attempts to establish information integration through enterprise systems or data warehouses have failed to live up to expectations. Those that succeed adopt a comprehensive approach that addresses the business process, organizational change, and technology requirements required across five primary challenges.
1. Cap the Data Gusher
Lack of data is not part of the problem. In fact, most organizations are awash in it. Research firm Gartner indicates that the average Fortune 1000 organization has more than eight data stores, 15 information platforms, 10 critical systems, and hundreds to thousands of business applications. Information flowing through a company today can be likened to the early days of the oil boom — seemingly never-ending volumes of data spraying uncontrollably through a gusher.
ERP systems and the Web are but two of the dynamics creating this powerful data flow. ERP systems are designed to integrate business transaction processes, but typically are implemented at the business unit or regional level resulting in multiple instances of the same ERP product and/or multiple ERP products across many large organizations. The Web has introduced new valuable data sources previously not accessible, such as customer, supplier, and competitor information, but it also brings the challenge of controlling this external information. These factors, combined with globalization, mergers and acquisitions, and the typical host of legacy and other applications existing in most companies today, make for a challenging web of systems from which to harvest critical data about business performance.
The initial challenge then is to examine what information should be captured to support the performance management environment, and as importantly, what information should not. This requires a careful review of what information is needed to guide the business and support decision-making across the organization and the identification of where that information is located in the source systems.
After the data has been identified, business rules must be adopted to establish a common business language. Without this, there will inevitably be disagreements and misunderstandings across the enterprise regarding the data, resulting in significant efforts to reconcile the differences. More importantly, the lack of a common business language will eventually lead to general mistrust and resistance to use the information. Therefore, business rules must be clearly established and will pave the way for a shift from data compilation and reconciliation activities to more value-added business performance analysis and corrective actions.
2. Juggle Multiple Dimensions
Just as a juggler must keep multiple balls in the air, so too must a robust performance management environment simultaneously support multiple reporting dimensions. As shown in Figure 1, two prime examples of this include the vertical dimension needed to provide managers the insight needed to manage performance within their areas of responsibility, and the horizontal dimension required to deliver broad, companywide performance information to senior management and those responsible for shared business functions.
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Figure 1: Corporate Organization
The vertical view is aimed at providing an integrated view of business performance across all functional areas (e.g., marketing, sales, finance, customer service) within a specific business unit, geographical area, or department. This type of information integration is commonly delivered through multifunctional solutions that integrate data across the various functions by imposing structured business processes. ERP systems are commonly used for this purpose; and, when delivered at the business-unit level through a single instance, provide the built-in integration to offer a relatively straightforward solution. If a single ERP solution is not in place, then achieving this vertical view becomes substantially more difficult and requires a separate solution to integrate the information across the multiple functions (e.g., customer information across the billing system, marketing application, and customer service system). This level of information has been aggressively demanded by business-unit leaders seeking to improve their organizations business effectiveness, and has commonly led to separate deployments of ERP solutions within individual business units. While viable at this level, this approach typically results in fragmented information and redundant data architectures across the enterprise, which over time become inflexible and costly to maintain.
The horizontal view is aimed at providing information integration across business units to provide an enterprise level view of business performance. This requires a certain level of information consistency and comparability across the business units, and it can be very challenging for large enterprises that have grown by acquisition or operate in countries with unique reporting requirements. The information landscape in these companies frequently is fragmented across multiple systems and lacks a common business language. Even in those cases where a common language is established, maintaining it over time can be difficult as divergence occurs across the business units to adapt to local business or regulatory changes, or as new acquisitions occur.
As a result, the need for enterprise-wide information uniformity must be balanced with the need for business-unit-level information diversity. Juggling these contrasting views of business performance can be a significant integration challenge as each organization must find its own balance point between these two primary dimensions.
3. Accept That Change Is Constant
The next step to achieving information integration requires accepting that change is constant. Company reorganizations, mergers and acquisitions, and new or shifting sales channels and product offerings are all commonplace in todays business world. Therefore, information integration must be as flexible as the ever-changing enterprise it serves. It must allow for integrated views of the past, present, and future structures of the enterprise to meet both internal performance management and regulatory requirements. This critical factor is often overlooked during the development of BPM solutions only to be recognized after deployment when these solutions prove to be rigid and unable to stand the test of time.
Consider the case of a company reorganization to illustrate the need to reflect past, present, and future organizational structures. Prior to the reorganization, to support the planning process, a robust BPM environment should be able to model multiple scenarios depicting the future structure of the enterprise. After the reorganization, to support internal reporting, history should be restated to reflect the new, present organizational structure. This will immediately provide meaningful performance comparisons rather than waiting for a year to elapse to generate new history. Historical restatement may also be required to comply with accounting regulations (e.g., U.S. GAAP restatement for a change in accounting entity). Conversely, preservation of the past (e.g., historical reporting structures) is required to support tax compliance and audits that may not occur for years to come, and it may also be required to support employee compensation programs tied to the original baseline structure.
To address this challenge, careful consideration must be given to the design of the underlying data structures in the source systems. This includes the chart of accounts, legal entities, and management reporting structures. Ideally, these structures should be designed at a low enough level of detail to serve as the building blocks for both the present and potential future structures of the enterprise. To provide flexibility for future change, this means that these structures may need to be more detailed than what is currently required. Doing so forms a flexible foundation capable of supporting new roll-ups as the business changes.
In addition, the determination of where to house and maintain the reporting hierarchies is important. Multiple options exist, but maintaining the master hierarchies in a central location should be considered as this will provide good control over roll-up changes and promote reporting consistency across the enterprise. Under this scenario, the data building blocks in the source systems are mapped into the master hierarchies and are adjustable over time as business changes occur.
4. Adopt the Right Technology
While BPM is a business-driven objective, it cannot be achieved without the proper technology support. A range of technical capabilities must be considered when implementing a complete BPM solution such as data access, transformation, mapping, reference data maintenance, storage, and security. This is discussed more fully in the article Better Performance Management.
From an information integration perspective, it is critical to select the right technology capable of handling the business requirements for multiple dimensions and constant change. Until recently, there was a gap between these business requirements and the technologies available to support them. However, there are products in the market today that have rich features capable of meeting this challenge. For example, tools such as information brokers are available that offer powerful data-mapping and time-tracking features capable of meeting the information needs for both enterprise-wide uniformity and local business-unit diversity. Also, enterprise information integration (EII) has emerged as a new XML-based technology capable of real-time data exchange between applications within and across enterprises. This is evidenced by the XBRL (extensible business reporting language) taxonomies now being promoted by a consortium of companies, including the FASB and AICPA, as the preferred method for filing SEC reports.
Determining the right information-integration technology to support BPM should be coordinated through the CIO organization. It is important to ensure that the approach complies with any existing technology standards and aligns with the CIOs overall technology vision. Additionally, the information integration technical strategy for many companies is broader than just BPM and includes other business needs such as e-commerce and CRM. In the end, several integration tools may be utilized including traditional tools already existing in the enterprise as well as some of the newer technologies.
| Case Study |
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There are a number of multinational enterprises that have successfully implemented information integration initiatives. Consumer Packaged Goods Company – Business Insight Leads to Dramatic Performance Improvement
In early 2000, facing a difficult competitive environment and declining
share value, a multinational consumer packaged goods company
launched the Path to
Growth program. A patchwork quilt of over 1,000 source systems and 450 reporting
points |
5. Lead From the Top
Moving an organization toward an integrated information environment impacts all levels of the enterprise and involves both business process and technology change. As such, it must be driven from the enterprise level and led by senior management. Executive leadership will be required to arbitrate over conflicting requirements and interests within the company, which may lay dormant only to surface when information integration is pursued. For example, dealing with the vast amounts of data available, identifying what data is required, and establishing common business rules will require guidelines and consensus building. Finding the proper balance point between enterprise-wide information uniformity and business-unit diversity will require strong senior leadership and process change.
Senior leadership will also be required to authorize and deploy the resources and investment required to achieve the information integration vision. The implementation will require functional expertise to define the data scope, granularity, and business rules. Technical expertise will be required to locate and access the required data from the source systems, determine the appropriate technology and ensure compliance with company standards, and build the integrated environment. Both groups will need to work together to perform the cost-benefit analysis required to determine the trade-offs between increased data flexibility and the maintenance efforts needed to support the initiative. Outside resources may need to be engaged to bring in domain expertise, program management, or additional skilled resources.
The CFO is one member of the executive team who must play an active role in sponsoring the information integration vision. This not only forms the foundation for a robust BPM environment, but is also fundamental to ensuring sound corporate governance and risk management. As recently heightened by the Sarbanes-Oxley Act, the CFO has a fiduciary responsibility to be the champion of information transparency ensuring that financial information is timely, accurate, and accessible to both internal and external stakeholders.
Conclusion
Information integration forms the foundation required for robust business performance management by bringing together disparate data sources into a common business language. It requires the careful review of business strategy, process, and technology, and the willingness to make the necessary changes. By addressing the five challenges discussed, companies will avoid the common pitfalls that impede successful integration and realize the full potential of their performance management environments.
Just as total quality management revolutionized the manufacturing industry by integrating processes, information integration stands poised as the next major breakthrough in performance management. In a world where physical assets continue to be commoditized, the ability to effectively manage a companys information assets to achieve a competitive advantage will establish information integration as the next big thing.
