By Gary Cokins, Founder of Analytics-Based Performance Management LLC
If you have not heard about or read articles or blogs about integrated business planning (IBP) until you are now reading this article then welcome to learning about a topic that will be critical to you and your organization. For those of you who have heard of the term, this blog is intended to remove any confusion you may have about what IBP is.
This blog is the first of a series on IBP. The blogs in the series will involve the increasing role of the CFO and finance function with other line management functions that often operate in silos. In this blog I will discuss issues related to IBP. My next blogs in this series will address the various integrated components of IBP.
To begin with the issues, for many of us there may likely be a nagging question: “Is IBP such a big deal that if our organization is late to the party of deploying IBP, then will we never catch up to our competitors that have deployed it?”
Which type of capability is more critical?
I have personally gone back and forth on wondering if applying IBP is now an urgent imperative for an organization to survive or if it is simply a “nice to have” relative to other more potentially critical “must have” capabilities that an organization should ideally possess or need to improve them.
In my opinion critical capabilities involve forecasting, modeling methods, business analytics, and multi-platform reporting. Their purpose is to increase profitability, strategy execution and decisions. However, a case may be made that there is a sufficient competitive edge from simply using traditional commonly accepted managerial improvement methods without these four mentioned methods. Organizations can have risks by relying on only standard methods like lean and six sigma quality management methods or traditional standard costing. But can those methods provide a sustaining competitive edge?
Some managers view their organization as a big machine, and they believe they simply need to fine-tune its pulleys, levers, gears, and dials to maximize performance and results. The reality of this situation if often much more complex. Fine-tuning will not be sufficient. What is needed are new sets of levers, pulleys, and gears as well as better ways to manage them and display what they are doing.
Up until now many organizations believe they are not ready to apply IBP. They believe their problems have not been complex enough, their need for a large level jump in improvement is not essential, and the computing power has not been sufficiently powerful. As a result, their skepticism of the urgency for IBP is based on doubt since they observe that most companies have gradually improved without needing an IBP capability.
How much things have changed
I suggest that skeptics become advocates regarding the urgent need for IBP capabilities.
IBP is becoming an imperative for successful organizational performance. Many professionals today grew up with computers and digital devices. They understand this imperative. They embrace the need for better planning and decision making. They possess passionate brainpower combined with the now proven and accepted tools needed for forecasting, higher data quality, and timely reporting. The imperative also involves the current challenge all organizations have on how to cope with the five “Vs” of Big Data: volume, variety, velocity, viability, and value.
Regrettably many professionals prefer to rely on gut feel, intuition, and experience for making decisions. They are weighted with transactional processing that denies needed time for analysis. Fortunately today there are increasingly fewer professionals since most rising managers are tech-savvy and prefer fact-based decision making by leveraging quantitative information.
So, just what is Integrated Business Planning?
IBP seamlessly integrates user interfaces and workflows. It links strategic, operational, and financial objectives and plans to improve employee alignment with the strategy and financial performance.
Data replications drawing from disparate data sources are no longer an obstacle. IBP removes the walls between the silos in organizations regardless if they are multiple line management functions (e.g., marketing, sales, and operations) or technology platforms.
IBP integrates forecasting, resource capacity planning, what-if scenario planning, analysis, and more. With today’s previously unimaginable in-memory chip database power, calculations can be dynamically made in real time on massive amounts of data. The calculated results can be displayed on a laptop computer or any mobile device. The calculations can be performed with on-premises hardware or in the cloud.
IBP saves time and errors with a single integrated solution. It simplifies what in the past has been complex and cumbersome tasks. Bothersome reconciliations are eliminated. Tasks involving time and effort, like period-end financial closing the books and cash management, are reduced.
Note to reader – Get on the bus or be under the bus
If a task is complex with lots of data and a goal or objective to maximize, minimize, or optimize, then the capability day for IBP has arrived. IBP is essential to effectively framing problems, devising their solutions, making decisions, and taking actions.
The type of managers, hopefully only a few, who do not embrace having a strong quantitative capability will risk the consequences of being classified as Medieval. The world is no longer flat.
In my next blogs I will delve into the components that comprise IBP, starting off with a look at the link between planning and strategy execution.
About the Author: Gary Cokins, CPIM
Gary Cokins (Cornell University BS IE/OR, 1971; Northwestern University Kellogg MBA 1974) is an internationally recognized expert, speaker, and author in enterprise and corporate performance management (EPM/CPM) systems. He is the founder of Analytics-Based Performance Management LLC www.garycokins.com . He began his career in industry with a Fortune 100 company in CFO and operations roles. Then 15 years in consulting with Deloitte, KPMG, and EDS (now part of HP). From 1997 until 2013 Gary was a Principal Consultant with SAS, a business analytics software vendor. His most recent books are Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics and Predictive Business Analytics.