Most of you would have heard the terms BI (Business Intelligence) and CPM (Corporate Performance Management) but in our discussions with organisations it is clear there is a lot of confusion among CFO’s about the difference between BI and CPM tools.
Whilst there are differences between CPM and BI tools, the fact remains that at the core of both is data, and it’s essentially the same data that is drivings both.
Both Business Intelligence and Corporate Performance Management systems pull data from the many and various data sources within your business. Once this data is structured and integrated in a way to suit your business you can then analyse this information. With things like slice and dice, and drill-down, and drill-through, you can get to the detail and information on your business that you need, to enable you to prioritise market opportunities, company strengths, and mitigate weaknesses and risks.
There are many different Business Intelligence platforms out there, with Power BI being one of the most prevalent. At their core BI platforms gather and integrate data relevant to your organisations business performance. With this integrated data you are able to analyse performance, and provide visualisation through dashboards and other charts and graphs.
Business Intelligence is predominantly a backwards looking tool, in that it enables you to see how things were, how your business performed. The focus of BI tools are more on visual data such as dashboards, graphs, scorecards, and big data analysis such as website traffic and customer buying behaviour.
Through analysis of this information, both immediate and longer term historical, you can determine trends within your business, trends which you can use to project and forecast forward. The more data you can incorporate into your BI tool the greater your ability to explain the reasons for certain outcomes. This could be internal business data (such as inventory, orders, website traffic, etc.), industry specific data, micro economic data, or even macro economic data such as FX rates, cash rates, Inflation, GDP numbers. The more (relevant) data you can integrate the better your ability to project forward.
But how, and where, do you then utilise this information to project and forecast?
Much like BI tools, CPM tools such as Jedox and BOARD, also allow you to track and manage your company’s performance and KPI’s. However they also give you the ability to analyse historical data to determine trends, and strengths and weaknesses. However while both definitions have some overlap there are differences.
CPM tools provide the added ability to plan, budget and forecast. In most planning and budgeting systems, the starting point is the current year’s actual numbers. In ‘normal’ times the best starting point for next year’s budget is this year’s actuals. These actual numbers are historical numbers, generally the same historical numbers that are used within your BI tool.
From these actual numbers you can generate your budget. Depending on your requirements and business you may apply CPI uplift to fixed costs, increase staff cost based on EBA mandates, budget for an increase in sales/revenue growing industry size or improving market share. For some businesses they go the next step, and apply the knowledge they have gained from the analysis of historical data to drive their budget, that is driver based budgeting. Knowing the impact of seasonality on your sales or costs, or the impact of exchange rates, or inflation, or the price of iron ore, or gold, or oil on your business can allow you to take your use of a CPM tool to the next level.
With an effective implementation of a CPM system, you can get the best of it all. With access to dashboards and visualisations you can keep track of KPI’s and company performance like in a standalone BI tool. However, with this information you can then go straight into generating re-forecasts based on this latest information, and conducting what-if and sensitivity analysis at the same time, the importance of which is often overlook until it’s too late
As stated above, at the core of both is data, they both use essentially the same data, possibly structured in different ways, but the same data. However they provide different levels of functionality and analysis. Organisations use historical data combined with KPI drivers to plan, budget and forecast for the future. Then they monitor performance by comparing these plans to what is happening. If things change they can quickly and easily adjust the forecast and perform what-if analysis and scenario planning/testing using this actual data.
Having BI without CPM is only providing one piece of the puzzle.
There are many BI and CPM only tools in the marketplace but the best gains in efficiencies and lowering costs to implement are achieved when a single product is used for both. BOARD and Jedox are such products which provides both CPM and BI in the same platform.
It would seem obvious to have a ‘single source of the truth’ and use the same platform for both functions.
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