Business Intelligence (BI) and Performance Management are two very different elements of a technology stack for companies that are trying to improve their profitability and increase efficiency. Many companies feel BI can address their Performance Management needs, though this is usually not the best approach. While the two can work hand in hand, one solution will often fit a business better than the other. The lines between Business Intelligence and Performance Management can blur, but there are clear distinctions between them that are important to be aware of. What is the difference between business intelligence and performance management, you ask? We’re here to explain. 

What is Business Intelligence?

Business Intelligence is widely known as the technologies and practices for collection, analysis and presentation of business information. Business Intelligence helps you understand historic results to support better decision-making for your organization, for purposes like financial analysis, inventory and supply chain management, marketing segmentation and targeting, and even historical analysis of employee performance. Businesses take data that they collect about their business activities and analyze it so they can successfully reach their goals. It can help organizations identify ways to increase profit, track performance, compare themselves with competitors, predict success (or failure), and make decisions that will alter the success of the company. BI is trending towards self-service, and now some BI applications require very little technical skills or help from IT, making it more accessible than ever before. 

What is Performance Management?

Performance Management refers to the optimization of overall business processes and activities to achieve business goals. It is not just analysis, but operational.  A company uses Performance Management to set goals and collect and analyze data to decide what changes management has made are providing results, and alter the ones that are not. It allows organizations to define and communicate key performance indicators (KPIs) and goals, generate reports and  scorecards, and provide leaders with tools to monitor and manage the efficiency and success of business activities by taking action to course-correct or initiate improvements. Performance Management is data-driven analysis to predict and improve the performance of teams and management to gain higher efficiency and profitability. The data collected and analyzed with Performance Management is also used to create long and short-term goals for the organization. 

Now it’s time to visualize:

Performance Management: Think of a dashboard in your car.  It tells you real-time, in an operational context, how you are performing so that you can make decisions in real-time.  For example, “do I have enough gas to get there?” or “Am I going too slow or fast?” or “Is anything going wrong with my car and do I need to take action to correct it?”.  That’s how analytics is presented and used for Performance Management.  

BI reporting and analysis: Think about how insurance tracking devices work. The device feed your driving data to insurance companies who then define the appropriate rate discounts. They use historical data over a period of time to create how much is owed or how a mechanic gathers data from the car’s onboard computer and sensors to diagnose a problem. Action is taken from that insight. That’s how analytics is presented and used for Business Intelligence.  

Business Intelligence vs. Performance Management:

BI is best for analyzing and displaying where you have been as an organization. Typical BI reporting tools will show historical data that you can use to make future decisions. Performance Management will also show you historical data, but it typically includes real time data, snapshots of historic data, as well as what future activity data it will take to reach your goals. While BI uses data collection to analyze and evaluate historical data, Performance Management uses data collection to evaluate and improve the process and methodologies of an organization. 

BI helps companies react to situations they’ve uncovered through analytics. If a company sees that their pipeline is lower this year than it was last year, they can understand what has changed and come up with an action plan to increase the pipeline by the end of the year. The problem with this approach is that it may be too late. On the other hand, Performance Management measures performance against a goal which is already set, with activities that ultimately affect that goal. It’s a proactive approach, and almost acts like a built-in action plan within analytics. The data-driven BI application can act alone or as a precursor to Performance Management System, and Performance Management can act alone or be enhanced with a BI system. BI drives data, while Performance Management drives people.

Know where your company lacks visibility and where your company is lacking in activity, and use the knowledge from this article to help make a decision for what is best for your company. For more information on BI, check out applications like Power BI and Tableau. For more info on Performance Management, request a free, personalized LevelEleven demo