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Source: The Real Business of IT: How CIOs Create and Communicate Value Richard Hunter and George Westerman, October, 2009, Harvard Business School Press
Key Issues
What do boards and line-of-business executives want from continuity of operations? How do the risk-based disciplines impact corporate performance? How can you present a defensible case for the value and effectiveness of BCM to an executive audience?
It is: "How will slightly longer response times affect the value proposition as the paying customer perceives it?"
(because the board wants the most cost-effective level of resilience that the enterprise requires to fulfill its mission)
Source: The Real Business of IT: How CIOs Create and Communicate Value Richard Hunter and George Westerman, October, 2009, Harvard Business School Press
Key Issues
What do boards and line-of-business executives want from continuity of operations? How do the risk-based disciplines impact corporate performance? How can you present a defensible case for the value and effectiveness of BCM to an executive audience?
Credit Risk
Customers Suppliers Compliance
Operational Risk IT
Legal Compliance Operations
Exposures
Business
IT
Business
Finance
Legal
EA PM
Marketing
Finance
Specialists
Product Management
Compliance
Purchasing
AML
Sourcing Compliance
Sales
COO
Inventory Management Inventory for 5 days only
The Business
Negative Impact KPI Manufacturing slows after 3 days
Leading Indicator That Leading Indicator That
CIO
Application Failure Pick list application
Leading Indicator That Leading Indicator That
The Business
Negative Impact KPI
Agreement Effectiveness
Miss the Quarter
Key Issues
What do boards and line-of-business executives want from continuity of operations? How do the risk-based disciplines impact corporate performance? How can you present a defensible case for the value and effectiveness of BCM to an executive audience?
Revenue
Cost
Profit
The Gartner Business Value Model: Think Operationally, Not Just Financially
Know the 6-12 metrics in the mind of every business manager
BUSINESS ASPECT AGGREGATES
Market Responsiveness
Target Market Index Product Portfolio Index Sales Opportunity Index Cost-of-Sales Index New Products Index On-Time Delivery Service Performance Supplier On-Time Delivery Supplier Service Performance Cash-to-Cash Cycle Time Recruitment Effectiveness Index HR Advisory Index Systems Performance New Projects Index Compliance Index
PRIMES
Market Coverage Index Channel Profitability Index Sales Cycle Index Forecast Accuracy Feature Function Index Order Fill Rate Customer Care Performance Supplier Order Fill Rate Supplier Care Performance Conversion Cost Benefits Administration Index HR Total Cost Index IT Support Performance IT Total Cost Index Accuracy Index Market Share Index Configurability Index Sales Close Index Customer Retention Index Time-to-Market Index Material Quality Agreement Effectiveness Supplier Material Quality Supplier Agreement Effectiveness Asset Utilization Skill Inventory Index Opportunity/Threat Index
Demand Management
Supply Management
R&D Success Index Service Accuracy Transformation Ratio Supplier Service Accuracy Supplier Transformation Ratio Sigma Value Employee Training Index
Support Services
Partnership Ratio
Service-Level Effectiveness
Advisory Index
Cost-of-Service Index
Gartner provides a catalog of KPIs in "The Gartner Business Value Model" (G00139413)
Definition
Calculation
Supplier On-Time Delivery = Orders Received On Time Total Orders During the past seven days, ABC Computers received 200 supplier shipments, of which 150 met their requested delivery date. Supplier On-Time Delivery = 150 200 = 75%
Example
Applications
Supplier on-time delivery applies to product and service businesses. It is important as organizations look to manage inventory levels by controlling the timing of material receipts. The income statement account most affected by supplier on-time delivery is operating expense.
Time-to-Market Index, On-Time Delivery, Order Fill Rate, Cash-to-Cash Cycle Time, Conversion Cost and Asset Utilization
Definition
Example
Out of 37 single-source suppliers, 11 have no BCM program or one that requires more than 12 weeks to recover. Single-Source Supplier Availability = 11 / 37 = 30%
On-Time Delivery, Supplier On-Time Delivery, Customer Retention Index, Order Fill Rate, Service Performance
On-Time Delivery
More than 10% of single-source suppliers with no BCM program or one that requires more than 12 weeks to recover manufacturing operations leads to failure to Suppliers' BCM Programs meet contractual obligations Product Design MissionCritical Personnel Turnover Less than 25% growth rate year over year in new products being delivered with no single-source component A 15% turnover rate every six months in identified key positions impacts mission-critical system stability and efficiency leads to failure to meet internal or external SLAs and delays in recovery from disaster
Systems Performance
Agreement Effectiveness
Products/services that represent 30% or more of revenue that have not exercised their recovery plans MissionCritical System within the last six months leads to delays in meeting contractual obligations, SLAs and recovery from disaster Downtime
Risk Management
Changing the oil every 3,000 miles raises costs and does not significantly lower breakdown rates Changing the oil every 10,000 miles lowers costs but significantly raises breakdown rates
Success Factors
It doesn't matter if you call it a KRI or KPI, it is the causal relationships that matter. Delivers visibility into risk to drive better business decisions with leading indicators.
Aggregates
Risk 1 Credit Risk Aggregate 1 Risk 2 Risk 1 Risk 4 Risk 3 Risk 4 Network Risk 3
Primes
Risk 5 Risk 6 Risk 5 Risk 6 Risk 1 Risk 2 Risk 3 Risk 4 Risk 7 Risk 7
Market Risk
Market Risk Aggregate 1 Risk 2 Vulnerability Information Security Management Program Maturity
Business
Budgeting/Investing
Availability Framework
Operational Risk
Continuity Management
Supply Chain Sourcing
Exercising
Risk 3 Risk 7
Risk 1 Risk 1
Compliance
IT Operations
Enterprise Architecture
Risk 1
Privacy
Supplier on-time delivery = 181 / 200 = 90.5% KPI target = 90% Single-Source Supplier Availability KRI 50 to 100 40 to 50 30 to 40 20 to 30 <20
Risk-adjusted supplier on-time delivery KPI = KPI - risk factor adjustment Risk-adjusted on-time delivery KRI = 90.5% - 2% = 88.5%
The company has visibility into negative factors and can act before revenue is lost, in this case, by identifying single-source suppliers in their supply chain and making the corrections in the design process.
Justify budget
- KPI/KRI mapping assists BCM managers in justifying the budget by linking to direct business impact.