Retrofitting Operational Systems for Management Needs Fails Businesses

Originally published on LinkedIn on September 26, 2024

Distinguishing between operational systems and management systems is crucial. While the rigidity of operational systems is necessary for day-to-day activities, the dynamic nature of strategic management demands more flexible, dedicated systems.  A common mistake business makes is trying to retrofit operational systems for management purposes, which can compromise critical organizational information and efficient operations.

Operational system versus management system

As its name implies, an operational system is necessary for the operations of the business.  These systems are transactional, making the data within it factual and unequivocal.  Examples are POS systems that record customer transactions, workforce management systems that record labour hours, and payroll systems that execute and record payroll transactions.

Operational needs change infrequently.  Operational systems are rigid and structured, designed for efficiency, accuracy and compliance.  It requires a significant effort to change an operational system and conduct due diligence to avoid negative ramifications.  Examples of such complex change are integration of new entities through mergers or acquisitions or introduction of new business models.

Conversely, management systems support monitoring, control and decision-making.  Management systems source data from operational systems to compile, aggregate, transform and report it as useful and valuable information for tactical and strategic decision-making.  Examples are financial planning systems and business intelligence platforms.

Management needs change frequently: redefining reporting regions, reorganizing sales account assignments, recategorizing products or services, or frequent replanning and forecasting.  Furthermore, management information often combines data from multiple data sources.

A simple rule of thumb to assess whether a system is operational or management is to ask: “If this system goes down, is it catastrophic or just inconvenient?”

Approaches to developing management systems

Rather than modifying an operational system for management needs, I advocate for developing ancillary systems designed for management use cases without altering the foundational operational system(s).  These can range from basic spreadsheets to a commercial open-model planning tool such as Pigment or Anaplan, or a hybrid grassroots in-house system.

The ubiquity of spreadsheets makes it familiar to anyone in a business-related role. There is no proverbial black box as formulae and logic are visible and traceable.  However, its flexibility is also its weakness.  Spreadsheets can easily be broken and a weakness is how the model adapts to data updates.

At the other end, open-model planning tools are SaaS solutions that are powerful spreadsheet-based platforms that support data connectivity, versioning, and access and permission management.  They are robust and rigid systems protected from inadvertent damage yet customizable to the management use case.  However, these tools come with a cost, which must be weighed against the benefits.

Finally, what I call a hybrid grassroots solution uses a spreadsheet user-interface (UI) and a connected database backend, technology likely already available in your organization.  This setup offers more than a straightforward spreadsheet by connecting to a data source for regular data synchronization, allowing users to append management information to operational data, and making it accessible within the system ecosystem for reporting, analysis or dependent systems.

Conclusion

Following this approach is easier said than done.  A common challenge is having the technical skills within the organization.  It is common for organizations to apply management needs in operational systems because that is the only system it knows.

It is crucial for organizations to recognize the inherent value of operational systems and make efforts to maintain its integrity by not imposing management functions on it.

Instead, bring in a business analyst to assess management requirements and devise a suitable solution.  Their skill set is agnostic of specific systems, and they should recommend varying approaches and solutions.

While adapting an operational system may seem like a cost-effective shortcut, over time it can become more expensive to maintain and adapt to evolving management and operational needs.