Abstract

There is no question that Business Intelligence can play a significant role in increasing internal productivity as well as competitiveness. To some extent I am going to play the role of devil’s advocate in this article and challenge people to utilize Business Intelligence at the right time and by the right people.

Why do firms suddenly need Business Intelligence?

I have read a number of articles recently that advocate the use of Business Intelligence by many people within an organization. Actually the reasoning seems to be valid. IT departments are swamped with requests for service by more and more people. Many of these requests are Business Intelligence oriented. People see things happening in their market place and need to respond as quickly as possible. Business experts say that we need to become more agile, ready to change our operational and sales strategies in an instant to meet an ever more chaotic competitive environment. Business Intelligence tools are becoming more and more powerful.

The recommended solution is simple. Teach people how to utilize Business Intelligence tools so they don’t have to wait on the IT department several weeks. The underlying assumption is equally simple. If people know how to use Business Intelligence tools, they can react quickly as market conditions shift.

Do you really need to move this quickly?

I don’t think that Business Intelligence for SMBs and SMEs needs to be based on the assumption that we need to react quickly; almost it seems as if there’s a panic. If we don’t address the crisis de jour, our opportunity to meet the challenge will pass in just a few weeks. That’s what some industry experts seem to be saying. Be ready to react instantaneously and in order to do so you need instantaneous information from your Business Intelligence system. Since IT cannot react that quickly, it’s up to the individual to generate the information they need. That means these individuals need to know how to use the Business Intelligence system.

I accept the fact that firms need to react to changing market conditions, but I don’t agree that reaction times are measured in days, not months. Business conditions do change, but you shouldn’t try to react with a speed of a commodities trader. Yes, some firms make money in the commodities market, but there are also far too many examples of firms and unsupervised individuals making bad bets.

Maybe the underlying issue is the whole notion of reacting to changing market conditions. If you need to react quickly, that’s a knee jerk motion and you may not have all of the information you need simply because you tried to use your Business Intelligence system to react quickly.

Maybe you should be more proactive?

Rather than trying to use your Business Intelligence system quickly in order to react quickly, you should proactively use your Business Intelligence system to put you in a position where you can react quickly and effectively. I think that’s the issue. You cannot achieve long term success if you are constantly reacting to changing market conditions.

This doesn’t mean you should never react quickly. Sometimes you need to do so, but the key issue is creating a proactive Business Intelligence system so that when conditions change, you already have simulated the conditions. Proactive means that you have discussed various scenarios and have the information at hand when and if conditions change. Actually you should have already defined market scenarios and used your Business Intelligence system to help you determine what your reaction should be. Proactive means that you have already asked and answered the question.

Who should generate the intelligence?

If you have decided that it’s best to be more proactive, who should be responsible for generating the information you need to make sound business decisions? I am still not convinced that people need to be spending their precious time designing Business Intelligence reports. Many Business Intelligence systems are very powerful, but this power tends to be wrapped in complexity. Most people (and firms for that matter) need to concentrate on what they do well. Sales and marketing executives should spend time determining what the firm should do, not determining how vital information can be extracted from the Business Intelligence system. That should be the responsibility of the Business Intelligence guru. Sales and marketing executives should be using information effectively, not generating it.

Does IT need to be responsible? Possibly or you could create one or more super users that know the Business Intelligence system intimately. Business Intelligence for SMBs and SMEs (given their rather limited number of employees) has to be more of a one man or woman show. That’s not the best scenario due to the risk of losing that valuable person, but then that’s an issue for all SMBs and SMEs and every one of their most talented employees. The key question you need to address is in essence the experience/benefit ratio of any Business Intelligence system. People who use a Business Intelligence tool infrequently are going to take longer to extract the information simply because they need to refresh their memory before they begin. At the same time their reliability of the data extracted might not be as high, again simply because they are not quite as knowledgeable as someone who does this more frequently.

In the end there are two objectives you need to keep in mind. If you proactively take the time now to determine what information you might need in the future and create the decision support tools (reports as well as what if analysis tools) you will need, you won’t have to react in a crisis mode when market conditions change. Second, you need to determine whether it makes sense to train people on a complex Business Intelligence tool when they may not need that tool except on an infrequent basis. Again, if you take this step now, you will be ready when the need for information occurs.

Creating an internal Business Intelligence system

Business Intelligence for SMBs and SMEs isn’t just about reacting to outside market influences. It can and should be just as important to control internal business operations. Actually this is the case for any firm.

While there is no doubt that sound business decisions are based primarily on the person making the decision, these decisions need to be based on sound information. Seat-of-the-pants decisions might work for small firms where the experience of the primary decision maker is the key element, but there is just too much information spread over too many decision makers for this practice to work in larger firms. In this case accurate and timely information must serve as the foundation upon which sound decisions can be made.

Why do you need this information?

Accounting and ERP systems can store and regurgitate just about anything you want. Actually it’s possible that for every transaction posted there can be 20, 30 or 40 fields that will allow you to slice and dice data any number of ways. The fact that you can carry reporting (intelligence?) to this level of detail doesn’t necessarily mean you should do it.

Start by asking yourself why you need the information. If it doesn’t lead to a decision, then you don’t need it.

In what format should this information be presented?

With the exception of audit trail reports, rows and columns are out. In no case can they lead to a decision.

Pie charts and bar chart are out as well. They, like row/column reports, are no more than a snapshot of a specific condition at a specific instant in time. People should never make snap decisions and that’s all this information can support.

Having said this, there is one use to which some specific data can be applied. Exception Management or Business Alerts are usually triggered by a specific value, but only if that condition falls outside an expected range. As an example, if a customer’s account exceeds its credit limit or a specific invoice becomes “x” days overdue, that condition should be brought to the attention of a named individual. Business Alerts handle the notification process while Exception Management gives users the ability to deal with an alert in a contact manager like application that allows them to track the steps they (and others) take to resolve an issue.

If rows and columns, bar charts and pie graphs are not acceptable, what’s left? Line charts are the only form of reporting that actually lets users develop a sense of the history and future of business conditions that can then give people the total picture. It really doesn’t matter where a company is today, nor does it matter where a company has been. All of that has already happened and cannot therefore be changed. What can be changed is the future and that’s where people need to concentrate their thoughts.

Think of a line chart as a beginning, a middle and an end. Historic values form the anchor upon which the line chart is constructed. The last current piece of data is the jumping off point and the extension of the line formed gives us an idea as to where our future “might” be.

Once we see the total picture, we can determine if it is heading in the right direction. Well, that’s part of the analysis, but not everything. The extended line chart gives us a hint of our future, but we still haven’t figured out if that’s where we want to be. You need a second line chart that acts as our target. Now we can see in an instant our past, one possible future and our target.

There are still two adjustments we might need to make. If the volatility of the data is significant, we may have to utilize some form of smoothing to make the data more understandable. Second, data does not follow a straight line path. Sometimes it’s increasing/decreasing over time. If that’s the case we may need to utilize some form of analysis that let’s us see these trends.

Now we can “see” the data and make a decision. If the trend seems to be within the acceptable range or budget we created, then no decision is required. If the trend seems to be heading in a negative direction, then we know we need to take action. No data analysis will ever tell us what to do, but this approach will help us determine if we need to do something and most importantly if the decisions we have taken seem to be having a positive affect.

One last thought. The key to the charts we have been discussing is that they give us an opportunity to become more proactive. If you see that your actual results are starting to trend in a negative direction, you can proactively take steps to make changes before the raw data indicates that you need to do something. Of course this is just another form of forecasting, but in this case the forecast is operationally oriented.

What information needs to be extracted and displayed?

While it is certainly easy to create graphs once the data values have been identified, the hard part is determining what you need to track. Remember, you can create any number of fields than can be used to feed your data analysis engine. Picking the right fields is the tricky part.

Think of an Income Statement. It’s got lots of data that could be graphed. Now think of virtually every accounting and ERP system’s ability to support drill down. If you can drill down from a data value to underlying information, then the information is of no use to you because it is being influenced by other data. Since you cannot track everything, you need to identify those basic factors that have the most influence on your business. Identify your profit drivers.

Maybe inventory turns in a distribution environment can be thought of as a Profit Driver. Don’t forget though that it’s not going to be possible to track every single item your carry. Maybe start with inventory turns as a whole, then by product line or possibly region. Where you start is not as important as your ability to quickly see where you may have a problem developing. Then you can drill down to a more detailed analysis.

Profit Drivers are a bit like the concept of a common denominator. You need to identify those values that are not influenced by other factors. If you can track and control these key business drivers, the Income Statement will take care if itself.

Summary

Effective business decisions drive business profitability. These decisions need to be rooted in facts that can be brought to light instantaneously. People do not have the time to guess. They need to know where to place their attention. They also need to know whether the decisions they make are having the desired effect. If there is too much data, the issues may remain clouded. If there is no way compare actual results against targets, how can you ever know if you are where you want to be or need to be. Finally, people need to identify those Profit Drivers that have the most significant impact on the organization.

Business Intelligence systems are the vehicles by which critical information can be extracted from an accounting or ERP system and used to not only monitor internal processes, but also support the strategic decision making process whereby firms can identify opportunities to create tactical advantages or meet market challenges. Since changes in tactics might need to be implemented quickly, there is no time to waste. You do not have time to query your Business Intelligence system and you certainly need to avoid the creation of erroneous data analysis.

If you are going to rely so heavily on your Business Intelligence system to support the decision making process, your analysis needs to be proactive and it needs to be managed by people that are Business Intelligence experts, not casual users. If you can determine in advance what your competition might do, then you can also determine in advance what you might do. Rather than waiting (and doing nothing) until your competition strikes, you can and should be using your Business Intelligence system to support the planning process, not support the reaction process.

Abstract

Why do so many accounting and ERP software selection projects fail to achieve their objectives or fail altogether? Absence of executive buy-in? Implementation failure? Ineffective communication. All of these are legitimate, but maybe there’s a fundamental problem that isn’t addressed adequately. The process of selecting a new accounting and ERP system isn’t just about features and functions. Maybe firms just don’t create a strong enough foundation for success. Maybe they forget that individual people drive a firm’s success. Maybe they forget that the new accounting and ERP system has to help these people do their jobs better and make better business decisions. Maybe they forget these people and their needs and therefore doom a software selection project from the get-go.

Basic Research

Before you launch into your analysis, you might want to spend some time on research or background knowledge accumulation. The more time you spend educating yourself about software selection, the industry and specific products, the better prepared you and others will be when you begin your analysis.

From the point of view of individual people within your organization, how can they know what they need to be successful if they don’t know what’s possible? Rather than one or a very few number of people researching product and functionality options, extend this investigative process to as many people as practical. Rather than building your requirements document from the top down (only including project leaders and departmental manager), build it from the bottom up as well. This might actually give you a more accurate picture of what you need as a firm.

Efficiency and Effectiveness

Efficiency and effectiveness are two key business success elements. From an operational point of view, you want to minimize the cost of doing business per dollar of revenue. However, efficiency isn’t the only answer. People will want to purchase from you because the perceived and actual benefits (other than cost) of doing business with you far outweigh the benefits of purchasing from your competition. In other words, customer service is just as important as price. The way to maximize your customer service is to maximize the effect of what you do. People must work effectively as well as efficiently. Maybe one of your fundamental areas for improvement has nothing to do with software. Maybe it has more to do with customer service and the way you interact with customers.

Identify Requirements, Constraints, Strengths and Weaknesses

Organizing the software selection process is certainly a critical step. Having formed your selection committee, one of your first steps is giving people the ability to critique their own jobs as well as the organization as a whole. Give people the ability to describe their job objectives as they see them, critique the information that flows into them from other sources, critique their portion of the accounting system, and put into their own words what they believe the organization should do well and doesn’t do well.

While you want to launch this software selection process by meeting with most of the people who will be participating in the process, it will not be possible to meet with them personally to discuss requirements. Instead, create what I refer to as a Preliminary Needs Definition document and then let everyone fill it out. The format is open-ended text responses to specific questions as listed below. I have used the term “we” because individuals don’t feel very comfortable talking it terms that refer to them directly.

• What do we do now?
• What works and doesn’t work?
• What can we do individually to improve business process efficiency?
• What can we do to improve customer service?
• What should we be doing that we are not doing right now?
• What changes should be made in the business management system to help us work more effectively?
• What can other people do to help us do better?
• Are these goals or changes reasonable?
• Where is the organization today?
• Where should it be in the future?

If you consider the questions above, you will see that most have very little to do with specific functional requirements. The questions you pose here are designed to build a picture of the type of organization you want to be in the future. Improve the organization first. If you don’t look inward first, how can you possibly define how the accounting or ERP system should assist you from a functional or reporting point of view?

As you move this process forward, you are going to start to build a picture of where you need to be in the future. You may also identify opportunities for improvement (problems are no more than opportunities for improvement). Deal with these issues first as any flaws within the organization can negatively affect the effectiveness of the new accounting/ERP system.

As you move forward, please keep in mind the following suggestions.

• Build a sense of teamwork by giving each person, not just the right to participate, but the right to be heard and taken seriously.
• Begin to build a consensus of what needs to be done by holding open-ended meetings with all groups that will eventually participate.
• Start collecting improvement / requirements information from individuals and workgroups.
• Identify the most important factors affecting your success as a unique business, whether they have anything to do with the accounting or ERP system or not.
• Determine what your customers want.
• Critique current system (software and business processes).
• Determine if specific business processes will require substantial improvement.
• Build a picture of the most important functional requirements.
• Build a picture of the most important reporting requirements, keeping in mind the fact that the reports found in most accounting/ERP systems are static pictures of the firm at a single point in time. What you really need is an effective set of business metrics that help you determine where you are and where you are possibly going.
• Keep in mind the fact that your new accounting/ERP system can produce so much information that it may become difficult to identify where you need to spend you time. Consider supplementing your reporting/metrics system with some form of exception management or alerts.
• Consolidate software requirements into a high-level needs definition document that can be used to review potential candidates.

Commitment to the Process

Now you have reached the point where you must dedicate yourself, your employees and your company to the process of selecting a new accounting / ERP system. I’m not suggest­ing this is anything like a holy crusade, but the commitment is similar. This project will consume a great deal of time and ultimately money to bring to fruition. There will be a tendency on the part of some to lose interest. Their participation and input is critical. They and you must support the project until it has been completed. This is the only way to insure the product you select meets your needs, and will be accepted completely by the people who will have to use it.

Summary

This first step toward selecting a new accounting or ERP system sets the stage for everything that will follow. If you don’t give people the ability to contribute toward the critique of your current system and even the organization itself, you may not receive suggestions that could otherwise prove to be quite valuable, and you run the risk of being seen as imposing a solution on people who have not been included in this process. These people may support your final purchase decision, but they could also resist any changes you might make or resist the new system. That you do not want. Create an inclusive software selection process that will generate enthusiasm. If you ask people how you can help them, they will respond accordingly.

Business Reporting has always been one of the many soapboxes I love to jump on (http://www.accountinglibrary.com/blog/category/business-intelligence/, http://www.accountinglibrary.com/blog/category/business-alerts/, http://www.accountinglibrary.com/blog/category/exception-management/). While there is no doubt that sound business decisions are based primarily on the person making the decision, these decisions need to be based on sound information. Seat-of-the-pants decisions might work for small firms where the experience of the decision maker is the key element, but there is just too much information spread over too many decision makers for this practice to work in larger firms. In this case accurate and timely information must serve as the foundation upon which sound decisions can be based.

Why do you need this information?

Accounting and ERP systems can store and regurgitate just about anything you want. Actually it’s possible that for every transaction posted there can be 20, 30 or 40 fields that will allow you to slice and dice data any number of ways. The fact that you can carry reporting (intelligence?) to this level of detail doesn’t necessarily mean you should do it.

Start by asking yourself why you need the information. If it doesn’t lead to a decision, then you don’t need it.

In what format should this information be presented?

With the exception of audit trail reports, rows and columns are out. In no case can they lead to a decision.

Pie charts and bar chart are out as well. They, like row/column reports, are no more than a snapshot of a specific condition at a specific instant in time. People should never make snap decisions and that’s all this information can support.

Having said this, there is one use to which some specific data can be applied. Exception Management or Business Alerts are usually triggered by a specific value, but only if that condition falls outside an expected range. As an example, if a customer’s account exceeds its credit limit or a specific invoice becomes “x” days overdue, that condition should be brought to the attention of a named individual. Business Alerts handle the notification process while Exception Management gives users the ability to deal with an alert in a contact manager like application.

If rows and columns, bar charts and pie graphs are not acceptable, what’s left? Line charts are the only form of reporting that actually lets users develop a sense of the history and future of business conditions that can then give people the total picture. It really doesn’t matter where a company is today, nor does it matter where a company has been. All of that has already happened and cannot therefore be changed. What can be changed is the future and that’s where people need to concentrate their thoughts.

Think of a line chart as a beginning, a middle and an end. Historic values form the anchor upon which the line chart is constructed. The last current piece of data (the most recent value) is the jumping off point and the extension of the line formed gives us an idea as to where our future “might” be.

Once we see the total picture, we can determine if it’s heading in the right direction. Well, that’s part of the analysis, but not everything. The extended line chart gives us a hint of our future, but we still haven’t figured out if that’s where we want to be. You need a second line chart that acts as our target. Now we can see in an instant our past, one possible future and our target.

There are still two adjustments we might need to make. If the volatility of the data is significant, we may have to utilize some form of smoothing to make the data more understandable. Second, data does not follow a straight line path. Sometimes it’s increasing/decreasing over time. If that’s the case we may need to utilize some form of analysis that let’s us see these trends.

Now we can “see” the data and make a decision. If the trend seems to be within the acceptable range or budget we created, then no decision is required. If the trend seems to be heading in a negative direction, then we know we need to take action. No data analysis will ever tell us what to do, but this approach will help us determine if we need to do something and most importantly if the decisions we have taken seem to be having a positive affect.

What information needs to be extracted and displayed?

While it’s certainly easy to create graphs once the data values have been identified, the hard part is determining what you need to track. Remember, you can create any number of fields than can be used to feed your data analysis engine. Picking the right fields is the tricky part.

Think of an Income Statement. It’s got lots of data that could be graphed. Now think of virtually every accounting and ERP system’s ability to support drill down. If you can drill down from a data value to underlying information, then the information is of no use to you because it is being influenced by other data. Since you cannot track everything, you need to identify those basic factors that have the most influence on your business. Identify your Profit Drivers.

Maybe inventory turns in a distribution environment can be thought of as a Profit Driver. Don’t forget though that it’s not going to be possible to track every single item your carry. Maybe start with inventory turns as a whole, then by product line or possibly region. Where you start is not as important as your ability to quickly see where you may have a problem developing. Then you can drill down to a more detailed analysis.

Summary

Efective business decisions drive business profitability. These decisions need to be rooted in facts that can be brought to light instantaneously. People do not have the time to guess. They need to know where to place their attention. They also need to know whether the decisions they make are having the desired effect. If there is too much data, the issues may remain clouded. If there is no way to compare actual results against targets, how can you ever know if you are where you want to be or need to be. Finally, people need to identify those Profit Drivers that have the most significant impact on their organization or on their specific area of responsibility.

Forget about columns and rows. Forget about bar charts and pie charts. Adopt a proactive system that helps you track not just where you have been or where you are today, but where you could be tomorrow.

Introduction

Most ERP systems can identify exceptions that should be brought to the attention of named users.  That’s what alert systems are all about.  If a tracked metric is above or below a specified target value, an alert is either posted on a user’s home page or sent to the user’s e-mail address.  Unfortunately that’s about as far as most systems have developed the concept in spite of the fact that Exception Management as a business tool has been around for almost 30 years.  The user is notified, but all of their activities after that are for the most part manual exercises.

Start with Proactive Business Metrics

Any Exception Management systems must start with well designed Business Metrics for it is these numerical values that drive the alert system.  If you are going to improve business performance, you must start by identifying the key drivers that influence your bottom line.  These drivers or KPIs (Key Performance Indicators) must be as close as possible to what I might call a “lowest common denominator”.  It makes no sense to track a value that is in fact influenced by even more basic elements.

As we discussed in the article regarding Business Metrics, some KPIs do not lend themselves well to straight line tracking.  Some key drivers might be seasonal or display a curve-like history.  In this case setting a specific alert trigger value for any extended time period may lead to less control, not more.  In addition, the most effective tracking system might not be based on where a KPI is today, but where it might be tomorrow.  In this case the alert needs to be based on a forecast and whether the KPI is beginning to move into a danger area.  Remember, an effective alert system must be proactive, not reactive.

Software Driven Exception Management

A fully proactive Exception Management system is not a Workflow Manager nor is it just a series of e-mails relating to a specific topic.  It is in fact a framework by which sound business decisions can be made.  While the ERP system would be the primary vehicle by which exceptions are identified (operating the same way present alert systems do), users would also have the ability to open their own exception topics.  Once open, multiple users could be given access to the exception file.

Such systems do exist today. Discussion Boards (most widely used in on-line education classes where students are assigned to groups for projects or papers) give people the ability to participate in group projects (or operate individually), track all thoughts and comments regarding an issue, attach documents that further the discussion, and most importantly communicate with any other person participating in the discussion.

The objective of the Exception Management system could be improvement in named metrics (e.g. improve Inventory Turns for a specific product or product line) or controlling specific conditions such as an overdue Purchase Order or Sales Order.  It could also support tasks and projects that are not driven by the Exception Management system. 

One significant benefit may be more productive use of people’s time.  Rather than attending various forms of staff meetings to discuss issues, people are free to participate in the discussion board at their own pace. Rather than listening while one person (only) speaks, people can read recent posts (the person speaking) when it is convenient, consider everyone’s recent posts and then respond in an appropriate and well informed manner. I think that’s a much more effective use of any firm’s most precious resource: people’s time.

Key Elements

Rather than simply notifying users that an exception exists, the Exception Management system creates a hybrid task manager / contact manager that

• identifies the exception and posts it to an Exception Manager applet specific to a named user,
• allows users to recognize/define an exception manually and post it to their Exception Manager, Alternately they could create a task or project that needs to be managed using the same control elements,
• lets users describe the exception in as much detail as required,
• lets users collaborate with other people in the organization by giving them access to the exception file,
• drill down to specific information that relates to the exception,
• save links to reports and metrics that contribute to the discussion regarding the exception,
• record their thought processes,
• record specific steps that have been taken to alleviate the exception,
• record metrics that track their progress toward alleviating the exception,
• share their thoughts and activities with other people in the organization,
• send a notice (but not an e-mail) to one or more people participating in the discussion so they know they should read the most current update and/or perform an act requested by the sender and
• create a next action date that helps them know when they should revisit the exception.

Summary

Exception Management is not just about notification.  It is a system that allows users to address issues and record their thoughts and activities within a software driven framework rather than doing so in a manual environment.  It allows people to work more efficiently, collaborate in a logical manner with other people in their organization, and ultimately make better business decisions.

Introduction

One of the keys to increasing business profitability is giving each employee specific information they need to make sound decisions, the ability to concentrate on the areas of the business that require their immediate attention and an environment that allows them to collaborate with others to address issues that span more then their individual areas of responsibility.  Binding all of these success factors is one key concept.  If any business wants to achieve true success, they must be proactive, not reactive.  This article will discuss how people can use Business Metrics to identify critical issues before they can have a significant negative impact on the organization.

Background

Most classic business management reports are at their core no more than a picture of an organization at a specific point in time.  As such these status reports do not help people make decisions and do not effectively contribute to income and profit growth.

While this type of reporting was acceptable in the past (particularly since it was all we really had), we now have the technical ability to measure even the smallest events that drive any business.  The question is how can we build a framework for success?

Proactive Business Metrics

I cringe every time I see bar charts and pie charts as representative of what information users can extract from an ERP system and display on their “dashboard”.  While these charts certainly look pleasant (particularly when displayed in color), in the end they are nothing more than status reports and as such do not (or should not) drive business decision making.  Why? Bar charts and pie charts do not (and never will) lead to any form of decision or action.  A pie chart that displays the percentage of revenue generated by a firm’s top ten customers tells you nothing.  There is no basis for comparison to tell whether this is good or bad.  It looks pretty, but it leads to nothing.

Truly effective business metrics give you a basis for comparison that either tells you where you are going and whether you are above or below expectations. 

Let’s use Inventory Turns as an example.  Measure Inventory Turns each month and plot the values in a line graph showing the value for the past 12 months (or any time frame that is sufficiently long that a pattern can be discerned.  The user can visualize immediately where Inventory Turns has been and where it might be going.  It’s a good start, but not perfect.

Now add a system generate trend line that is calculated from the raw data.  In many cases the individual data points are so chaotic that it is difficult to see any trend, but the trend is what’s critical, not the individual value each month.  The trend line should not be a straight line, but a curve that shows whether Inventory Turns is improving or not.  A manager viewing this chart might be able to see instantly that the trend is acceptable and nothing needs to be done.  Next chart please!

Now let’s take this analysis one step further.  While the trend line in the example above may seem to indicate that Inventory Turns is acceptable, you need to add one final element.  How does Inventory Turns compare against expectations (budget)? Actually you could choose to not display the raw data as the trend line and the budget line are the two critical elements.  Now you have the complete picture: the actual trend and the budgeted trend.

This type of charting is used in the securities industry every day.  Computers track a stock’s value each day.  They also calculate a confidence interval above and below the trend line.  If the trend breaks above the upper confidence interval, a buy signal is generated.  Similarly, if the trend line breaks below the confidence interval, a sell signal is generated.  That is precisely what could be done to assist manager track inventory turns or any other defined success factor.

Business Metrics Delivery

Assuming that you have identified the Business Metrics that drive your business, how do you effectively deliver this information to named users?

1. Identify specific Business Metrics that drive an organization’s success and that lend themselves to a budget/actual comparison. 
2. Give users the ability to display any chart full-screen.
3. Give users the ability to drill down to the independent variables that drive the data displayed.  As an example, Inventory Turns is driven by sales, purchasing activities and receipts.
4. Give users the ability to view the actual data in table form.
5. Do not display information that is of no concern.  If the values in the chart are acceptable, give users the ability to either not have these charts displayed or display them at the bottom of their dashboard.
6. Give users the ability to request that a chart be included in their display list the following month.  In this example, Inventory Turns might fall within an acceptable range next month, but the user may want to “see” for themselves.
7. Utilize a red light / green light summary whereby users can view a list of their personal Business Metrics.  Actually all you would have to display is the name of the metric and a red/green light indicator.  This would be particularly useful if a person was tracking a significant number of charts.  If the information is acceptable, the green light will be displayed.  Obviously if the information is not acceptable, the red light would be displayed.  The user can then hyperlink to the metric of greatest interest.
8. Give users the ability to view the charts of those people reporting to him/her.  While we should assume that people will be attentive to their areas of responsibility, some managers might want to review the status of information tracked by people on their team.  Alternately, the system could be set up to track individual metrics as well as team metrics.

Summary

The real key to business success isn’t trend line charts.  It’s the recognition and subsequent tracking of what’s important to the business.  Before you can succeed in business, you have to understand what drives your business.  Then you concentrate on these basic or lowest common denominator success factors.  If you get them right, then your Income Statement will take care if itself.