Corporate Performance Management
Key Performance Indicators

Key Performance Indicators (KPI)

Sterna presents the next generation of business analytics platforms - Business Positioning System™ (BPS). Sterna BPS is a groundbreaking in-memory business analytics platform that converges strategic, operational, and predictive analytics through a set of integrated key performance indicators (KPI), empowering managers to maximize profits. By continuously calculating operational key performance indicators and alerting to financial implications, it drives managers to capitalize on opportunities and mitigate risks as they occur.

Sterna BPS can be compared to the functionality provided by Global Positioning Systems (GPS) in transportation vehicles. For instance, when I get into my car, I turn on my GPS and instantly know where I am, get directions to wherever I’m going, and learn about obstacles and special sites along the way. At the beginning of a trip, the GPS recognizes where I am and lets me enter a destination. Once that’s done, the GPS begins reporting on three key performance indicators related to my trip – my location, the remaining driving distance and the remaining driving time. While I can extract additional information from the GPS, these are my key performance indicators. During my trip, the GPS monitors my progress through these key performance indicators, alerts me to traffic problems, and predicts my arrival time so that I can let people know when to expect me.

In business, key performance indicators are financial and non-financial metrics that monitor performance relative to the organization’s goals. key performance indicators are used in various categories of business analytics (such as Business Intelligence, or performance management) to assess the present state of the business and to prescribe a course of action.

Sterna BPS “SMART” key performance indicators share five important characteristics. They are Specific, Measurable, Achievable, Relevant, and Time-based:

Specific:

Each KPI is a metric that directly supports understanding how the company is performing relative to one or more of its goals.
Measurable:

Each KPI is expressed quantitatively. The measured value can be used to determine if the performance toward a goal is getting better or worse.
Achievable:

The target for each KPI is attainable. That is, the desired result must be within the reach of the organization.


Relevant: For the KPIs to be effective, they must enable the business executives to understand the health of the organization by focusing on a few key indicators.
Time-Based: The KPIs measure performance over time.

key performance indicators are also often related to each other. In the case of a car trip, the remaining driving distance is a factor in determining the remaining driving time. If I detect a change in the driving distance because I took a wrong turn, I should anticipate that the driving time will change as well. In addition, external factors, such as traffic jams and road works, may also influence my driving time.

The same holds true for key performance indicators, and it is extremely important for business executives to understand the relationship among key performance indicators. For example, companies often focus measurements on a single aspect, whether it’s a financial or an operational KPI. While both are equally important independently, it is the combination of the two that provides managers with a navigation path to corrective actions, by highlighting the business areas that need the most attention. Likewise, in order to have the most updated information to act upon, managers need their key performance indicators to be updated at all times, especially if these KPIs are dependent upon external factors that are maintained outside of the business and in very short time intervals, such as currency exchange rates, or commodity prices.

Sterna BPS provides exactly that through the use of Business Views that are calculated in real-time, and very intuitively present both operational and financial key performance indicators. But most importantly, business views present the dependency between the two key performance indicators, i.e. the financial implications of deviations from target performance. This is done using a unique component of the business view, called “Money Surface”.