Gartner: Predictive Metrics Can Increase Profitability by 20 Percent

Organisations that use predictive business performance metrics will increase their profitability by 20 percent by 2017, according to Gartner, Inc.

 

Gartner said organisations should use predictive metrics to alert workers that a business moment (a transient opportunity exploited dynamically that requires unprecedented business velocity and agility) is about to occur, and guide them on the best next action to take in the context of a particular customer's expectations.

 

As we are entering the digital world, businesses will need to digitalise business processes, invent new digital business models, and compete at the speed of business moments. Senior IT managers and business process directors will increasingly be called on to manage an unprecedented degree and pace of business change, and to seize transient business moments by discovering what customers value and by personalizing processes to deliver that value — all in the same instant.

 

"Using historical measures to gauge business and process performance is a thing of the past," said Samantha Searle, research analyst at Gartner. "To prevail in challenging market conditions, businesses need predictive metrics — also known as "leading indicators" — rather than just historical metrics (aka "lagging indicators")." Predictive risk metrics are particularly important for mitigating and even preventing the impact of disruptive events on profitability.

 

Only 31 Percent of Business and IT Leaders Have Metrics That Contribute to Strategic KPIs
A recent Gartner survey, conducted among 498 business and IT leaders in the fourth quarter of 2013, showed that 71 per cent of business and IT leaders understood which KPIs are critical to supporting the business strategy. But, only 48 percent said they can access metrics that help them understand how their work contributes to strategic KPIs, and 31 percent agreed they had a dashboard to provide visibility of these metrics.

 

"However, visible metrics won't help drive strategic business outcomes, such as increasing profitability, if business and IT leaders don't have the right metrics in place," says Searle.

 

Conversations that Gartner analysts had with business and IT leaders revealed that they often misinterpret the term "KPI" (which is a measure that should indicate what you need to do to significantly improve performance, and is therefore predictive) and don't actually have predictive measures in place. "They persist in using historical measures and consequently miss the opportunity to either capture a business moment that would increase profit or intervene to prevent an unforeseen event, resulting in a decrease in profit," adds Searle.

 

Businesses that struggle to cope with today’s accelerated business cycles, which require business and IT leaders to track work in progress, are seeing an increasingly vital need to make optimisation adjustments in real time, and increase organizational responsiveness to market dynamics and evolving event patterns.

 

Today, organisations are adopting intelligent business process management suites (iBPMSs) and operational intelligence platforms to dramatically increase their successful and proactive response to unexpected business disruptions. Such technologies leverage predictive analytics and provide information that makes it easier to identify relevant predictive metrics. Gartner estimates that the BPMS market will reach $2.8 billion in 2014, an 8.8 percent growth from 2013.

 

"Business process directors who don't apply predictive metrics to cross-boundary business processes will leave their organisations vulnerable to the risk of failing to execute their business strategies," says Searle. "This is because they are unable to anticipate how well critical processes are driving strategic business outcomes, and therefore are unable to make well-informed decisions and intervene when process performance has plummeted below acceptable levels."

 

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