Digitalization can address many of the issues that have compromised KPI effectiveness in the past. We see a future where KPIs will be smart, backed up with changes in culture and organization to get the most out of the new information, and allowing digital technology to determine the optimum course of action.
Calculating and reporting KPIs is a routine practice in the energy and chemicals industry, it is key to helping decision makers act, and helping managers oversee performance. Digitalization can address many of the issues that have compromised KPI effectiveness in the past. Digitalization tools are helping increase the visibility and timeliness of KPIs, break down organizational silos and drive consistency across organization
However, this is not enough in itself. The challenges of poor underlying data, difficulties of setting targets and the interactions between conflicting KPIs mean that, all too often, KPIs are not effective in delivering any true improvement in performance.
We see a future evolving where KPIs will be focused on identifying exceptions and anomalies. KPIs will be smart, with targets adapting to variable situations optimized by rigorous modelling. KPIs will leverage predictive analytics rather than retrospectively measuring what went wrong. This will require changes in culture and organization to get the most out of the new information, and rigorous and robust technology to calculate the correct course of action.
In this paper we reprise the basic principles and objectives of KPIs with regards to achieving operational excellence, discuss some of the root causes for ineffective KPIs, and then explain how various digitalization technologies and approaches can transform the effectiveness of KPIs in your business.