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198 Part II • Descriptive Analytics

senior executives. Business strategy provides an overall direction to the enterprise and is
the first and foremost important process in the BPM methodology.

2. Plan: How do we get there? When operational managers know and under-
stand the what (i.e., the organizational objectives and goals), they will be able to come
up with the how (i.e., detailed operational and financial plans). Operational and financial
plans answer two questions: What tactics and initiatives will be pursued to meet the per-
formance targets established by the strategic plan? What are the expected financial results
of executing the tactics?
An operational plan translates an organization’s strategic objectives and goals into
a set of well-defined tactics and initiatives, resource requirements, and expected results
for some future time period, usually, but not always, a year. In essence, an operational
plan is like a project plan that is designed to ensure that an organization’s strategy is
realized. Most operational plans encompass a portfolio of tactics and initiatives. The key
to successful operational planning is integration. Strategy drives tactics, and tactics drive
results. Basically, the tactics and initiatives defined in an operational plan need to be
directly linked to key objectives and targets in the strategic plan. If there is no linkage
between an individual tactic and one or more strategic objectives or targets, management
should question whether the tactic and its associated initiatives are really needed at all.
The BPM methodologies discussed later in this chapter are designed to ensure that these
linkages exist.
The financial planning and budgeting process has a logical structure that typically
starts with those tactics that generate some form of revenue or income. In organizations
that sell goods or services, the ability to generate revenue is based on either the ability
to directly produce goods and services or acquire the right amount of goods and
services to sell. After a revenue figure has been established, the associated costs of
delivering that level of revenue can be generated. Quite often, this entails input from
several departments or tactics. This means the process has to be collaborative and that
dependencies between functions need to be clearly communicated and understood. In
addition to the collaborative input, the organization also needs to add various overhead
costs, as well as the costs of the capital required. This information, once consolidated,
shows the cost by tactic as well as the cash and funding requirements to put the plan
into operation.
3. Monitor/Analyze: How are we doing? When the operational and finan-
cial plans are underway, it is imperative that the performance of the organization be
monitored. A comprehensive framework for monitoring performance should address two
key issues: what to monitor and how to monitor. Because it is impossible to look at every-
thing, an organization needs to focus on monitoring specific issues. After the organization
has identified the indicators or measures to look at, it needs to develop a strategy for mon-
itoring those factors and responding effectively. These measures are most often called key
performance indicators (or KPI, in short). An overview of the process of determining KPI
is given later in this chapter. A related topic to the selection of the optimal set of KPIs is
the balanced scorecard method, which will also be covered in detail later in this chapter.
4. Act and Adjust: What do we need to do differently? Whether a company is
interested in growing its business or simply improving its operations, virtually all strategies
depend on new projects—creating new products, entering new markets, acquiring new
customers or businesses, or streamlining some processes. Most companies approach these
new projects with a spirit of optimism rather than objectivity, ignoring the fact that most
new projects and ventures fail. What is the chance of failure? Obviously, it depends on the
type of project (Slywotzky and Weber, 2007). Hollywood movies have around a 60 per-
cent chance of failure. The same is true for mergers and acquisitions. Large IT projects fail

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