People think by comparisons. So let me give you an analogy.
I am a big fan of movies – old black and white ones, new ones with special effects, and most types in between. I especially like musicals.
One of my favorite musical films is “West Side Story,” released in 1961. It is a retelling of Shakespeare’s tragic romance Romeo and Juliet. What does a Broadway musical and its subsequent film version have to do with a successful enterprise and corporate performance management (EPM/CPM) system? Plenty. Here is the background.
Please oblige me if you are so young that you are unaware of this film or have dismissed it as a silly folly about two tough 1950s New York City street gangs – the working-class white Jets and the Puerto Rican Sharks – dancing and singing. “West Side Story” has parallels to what it takes to complete the full vision of a successful integrated EPM/CPM system.
Essentials: a skilled team, a talented delivery team, and a breakthrough event
A first parallel is a skilled design team. Three giant talents in their respective fields collaborated on “West Side Story”: Jerome Robbins with dance choreography, Stephen Sondheim with its song lyrics, and Leonard Bernstein with its music.
A prerequisite with successful implementations of EPM/CPM methods is good model design and construction to provide cost and profit margin reporting and analysis, strategy management, performance measures, operational planning, driver-based budgeting and rolling financial forecasts, and business analytics.
A second parallel involves who will operate and maintain the EPM/CPM system. Who will analyze its information, gain insights and foresight, make decisions, and take actions?
“West Side Story’s” film actors were not widely recognized marquee names, but they were incredibly talented. They included Natalie Wood as Maria, Rita Moreno as Anita, George Chakiris as the Sharks’ leader, Bernardo, and Russ Tamblyn as the Jets’ leader, Riff. They were wonderful performers.
Similarly in the work world, without sufficient passion and zeal project managers and users of the EPM/CPM methods are just going through the motions – just showing up for a day’s pay.
A third parallel is a breakthrough moment or event. The opening night of a Broadway or London West End play or musical is a do-or-die situation depending on the acceptance of the audience and positive next-day reviews by the media critics.
A little-known fact about “West Side Story’s” opening night on Broadway is that it almost flopped. During the first hour of the performance, the audience was unemotional and unresponsive – stone cold. Perhaps this was because the audience was a bit upper-crust and uncomfortable with the characters being gang members and Puerto Rican immigrants.
Remember, it was 1961. Did some people walk out of the theater? I am not sure.
But the breakthrough moment that saved the play and sparked the audience’s interest was the rooftop scene with the Sharks and their girlfriends. The scene opens with the girls proclaiming their happiness as immigrants and singing the song “America,” starting with “I want to be in America! OK by me in America!”
It was a magical moment. The audience lit up. If you have never seen it, click on this hypertext link to see the film version of it. Then imagine you were at that 1961 opening performance. When the song ends, how would you have felt?
Was the audience’s change in mood because of a tug of USA patriotism? Was it the Latin beat of Bernstein’s incomparable music? Was it Sondheim’s inspirational song lyrics? Was it Robbins’ energetic dance choreography? Perhaps it was the synergy and chemistry of all of them combined.
What matters is the audience’s acceptance of the musical was sparked. As the story unfolds in the last hour, with the love story of Tony and Maria and the reduced animosity of the Jets and Sharks, the audience is rewarded with a most memorable experience.
Applying the three parallels to enterprise performance management
A successful implementation of an integrated EPM/CPM system benefits from all three parallels.
The developers need to be skilled. The project team needs to be talented. Finally, some sort of spark or trigger event is needed to get buy-in – both from the users of the EPM/CPM system’s information and the executive team.
An example of a breakthrough event I have witnessed that secured buy-in was when a CEO was presented with his first distribution channel and customer profitability report (using activity-based costing principles). It revealed that a high-maintenance and long-term problematic customer was woefully unprofitable to his company – both in full as well as at the variable cost level (i.e., excluding sunk and fixed expenses).
The CEO immediately ordered drastic actions that no longer tolerated status quo treatment of that onerous and demanding customer. The actions included unbundled price surcharges and inducements for the customer to alter its invasive behavior that would lower demands on the company’s work force that resulted in higher costs from that customer.
The CEO almost “fired” the customer until cooler heads prevailed. The line managers did some prudent thinking inspired by seeing the unflawed and more visible cost reporting, including the causes of the costs (i.e., cost drivers).
That one reaction by the CEO motivated his line managers to begin interpreting and acting on new information that had never been seen before. The accurate and transparent customer profitability information replaced misleading opinions based on the prior flawed and incomplete costing, which was based on the beliefs of the managers and not based on fact-based information.
Strong links in the chain
The old adage that a chain is only as strong as its weakest link can apply to an integrated EPM/CPM system. West Side Story had three elements that led to its global and timeless appeal, and each one was critical to its success:
• Developers (the music, lyrics, and dance) • Users (the actors) • Buy-in (a trigger event)
The successful implementation of information technologies is not simple. For example, some companies have abandoned their ERP software implementations before their completion. My belief is that, as with “West Side Story,” successful EPM/CPM is not about software but rather from:
(1) its model designs and imbedding business analytics into each of the EPM/CPM method (e.g., a strategy map and its companion balanced scorecard with KPIs, cost calculations, demand planning with driver-based financial projections);
(2) its users;
(3) the spark or breakthrough event.
The spark is not serendipity. The clever EPM/CPM implementation project team knows when, where and with whom to ignite it.
By Gary Cokins, EPM Channel Contributor, from: http://www.information-management.com/blogs/big-data-analytics/enterprise-performance-management-as-a-west-side-story-10029272-1.html
Gary Cokins is an internationally recognized expert, speaker, and author in advanced cost management and performance improvement systems. He is the founder of Analytics-Based Performance Management LLC at www.garycokins.com in Cary, North Carolina. His career: First ten years as an executive with a division executive with FMC Corporation; next fifteen years in consulting with Deloitte, KPMG, and EDS; and last fifteen years as a Principal Consultant with SAS, a leading provider of business intelligence and analytics software. See Gary’s articles on EPM Channel here.