Why do we need Analytics or EPM? Or how is my ERP different from BI/Analytics or EPM systems?
Our Parents’ Cars gave only Transactional information:
Our parents’ cars that had simplistic dashboard, with a few gauges and some twinkling lights. When running, these gauges gave information that the gauge was meant for. Think of this information as the transactional information – the information about the car at that instant and at run-time. Putting that information together you could make a statement such as “We are going 70 miles an hour and we have 1/8th of a tank of gas”.
Your business transactions are similar, every AP, AR, sales contact, shipping transaction is an indication of one aspect of your business. Your company may run through hundreds or millions of these transactions (stored in ERP systems) every day, but looking at an individual transaction is relevant only that that point in time – much like the speedometer.
Transition to Analytics:
Today’s cars can give you diverse information such as, average speed for the trip or for the life-time, the average fuel consumption and in addition to telling you that you have 1/8th of a tank of gas, they will also tell you that you have 35 miles before empty! Now, how did the car know that it has only 35 miles to empty? Well it had all the data, all it did was aggregate the average fuel consumption and multiplied the quantity of gas in the tank by that number. What is, however, more important is that this one ‘calculated’ number, or KPI, enhances my confidence in decision making tremendously – I now know that I can drive for a meeting 25 miles away and get gas on the way back!
This ability to look at the history of information at an aggregated level, and the ability to manipulate data elements to get KPIs that help in decision making is what I call true Analytics.
Analytics to EPM – the next frontier:
Now, if my car could give me feedback like, “Rishi, fix the tire pressure on front-driver side and drive at 50 mph instead of 70 mph, you may be able to drive 40 miles to empty instead of 35 miles to empty.” I would call that true Enterprise Performance Management or EPM. My car knows that at 47 to 57 mph gives me the most mileage, and every 2 psi fall in tire pressure the tire, fuel consumption increases by 2%. Today’s cars have this information – all we need to do is extract it and present it to driver (the decision maker) as a data-driven feedback to support and improve the driving habits of the driver.
Just as for cars, Analytics and EPM solution combination can be very powerful for your business and decision makers. You certainly want to give data-driven feedback to executives. Consider the difference in the power of the following statements:
- Our profitability on outdoor furniture is low in mid-west, VS
- “Profitability for ‘patio furniture’ is lowest at 1.25% in Southern Ohio District” and can increase another 2% if we spend another $20K in marketing
- Promotion on Android phones with Best Buy has a high ROI VS
- Promotion on HTC Android phones with Best Buy was highest in Zip Code 20012 at 13%, with 32% spike in sales during the ‘August’ promotion
Our brief on Analytics and EPM: Elevate your game to leverage the data to predict business outcomes.
