Why is There High Interest in Enterprise Performance Management? – Part 1

By Gary Cokins, Founder of Analytics-Based Performance Management LLC

There is much confusion and little consensus as to what enterprise performance management (EPM) is. Different information technology research firms define it differently. Different consulting firms describe it to fit their unique competencies rather than what their clients may require. Since my impression is that most of these organizations view EPM far too narrowly – such as only a CFO initiative with better budgeting and control – my feeling is that it is better to discuss what EPM does rather than have arcane debates about defining what it is.

I argue that organizations have been performing the various methods that comprise EPM for decades – well before it received its recent popular references in the media. Organizations have been pursuing basic types of performance management methods arguably even before there were computers! So why is EPM receiving popularity as a buzz phrase now?

The Debut of EPM at the Enterprise Level

If you had done a Google search a few years ago on the term “performance management”, the results would have predominantly referred to the human resources and personnel departments’ attention to monitoring and improving individual employees including employee appraisals. But if you do that Google “search” today the shift is toward the performance of the organization or enterprise in its entirety – not for individual employees. Today the term “enterprise” typically precedes “performance management.”

Some would argue that this shift to where EPM regularly appears in the media and information technology (IT) community has been due to the IT research firms observing that business intelligence software vendors – the type with functionality more towards data-mining and analyzing data rather than producing the raw transactional data – are now integrating analytical information across multiple departments. For example, a computer manufacturer’s purchasing system detects a temporary vendor part shortage that, in turn, is directly signaled to its customer order entry agents to influence their customers to select alternative product variations, perhaps with a discount or deal as inducement, until the part shortage is resolved. The risk of a missed sales opportunity is eliminated. This “demand shaping” is more powerful than “demand management.” This type of communication from the purchasing function deep in the bowels of the production function to a call center agent deep in the sales function would have rarely existed a few years ago.

Others might argue that the increasing appearance of EPM at the organizational level arose from the same IT research firms observing that ERP software vendors like SAP now provide strong combination suites of at-a-glance visual dashboards and scoreboards. Further, these reporting tools are now linked to strategic planning and execution; managerial accounting; and forecasting tools – and they are extremely scalable to handle millions of records for products, distribution channels, and customers.

These are certainly factors, but I believe the emergence and interest with EPM in the media and marketplace has deeper root causes.

The forces causing interest in EPM today

I believe that a better way to understand what EPM is about is to understand what problems the various EPM methods solve – the immense forces on management – such as these:

  • A failure and frustration by executives to execute their usually well-formulated strategy. The terminations of CEOs by boards of directors have been recently occurring at record high levels due to this frustration
  • A lack of trust among managers to achieve results is an increasing concern. Consequently, there is an escalation in accountability of managers and employee teams for results with consequences
  • Change is the new constant. Increasingly rapid decisions by employees (without time for higher management input) needs to leverage trade-off and predictive analytics. This means a need for employees to understand their executive team’s strategy
  • Mistrust by managers of their managerial accounting information and its flawed and/or incomplete product, channel, and customer profitability reporting
  • Poor customer value management. There is a shift from being product-centric to customer-centric with customers now viewed as the primary source of shareholder wealth creation. Surveys report customer retention and growth as the CEO’s number one concern
  • Dysfunctional supply chain management with a lack of trust among the traditional adversarial relationships between buyers and sellers along the supply chain. Trading partners should ideally be collaborating and identifying mutually beneficial projects and actions
  • Balancing risk appetite with risk exposure to optimize financial results with anticipatory risk mitigation actions

Today effective EPM software goes well beyond query and reporting data mining – it addresses and resolves all of these issues. The result is rather than just monitoring the dials of its key performance indicator (KPIs) dashboards, organizations must move those dials. The purpose of EPM is not just managing but improving organizational performance.

Join me in part 2 of this blog next week where I shall discuss the deep root cause forces spurring interest in EPM today.

About the Author: Gary Cokins, CPIM

Gary_Cokins

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.

gcokins@garycokins.com; phone +919 720 2718

http://www.garycokins.com

Linkedin.com contact: http://www.linkedin.com/pub/gary-cokins/0/15a/949.

Simplifying Finance in an increasingly complex world – outlook on Financials / GRC 2015

SAPInsider Financials Logo

By Henner Schliebs, SAP. Originally posted on SAP Business Trends, 17 February 2015. Reposted with permission.

We all have read the new mantra multiple times: if we simplify everything – we can do anything. This holds true for the finance department more than ever, considering that the use of technology is key to enabling a real-time business process environment. There were some threatening results revealed in a recent study that the CFO magazine has published, like “80% of respondents would need easier to use technology if they’d wanted to meet their growth targets”. So, this latest shift in technology enabling true real-time processes will be the focus topic of this year’s Financials 2015 / GRC 2015 event hosted in Las Vegas in March (Wynn Hotel, 3/17-3/20, follow the discussion #Financials2015).

As there will be hundreds of sessions that show customer success stories, the latest and greatest in financial management, EPM, Analytics, GRC and Ariba solutions I would like to highlight the Simple Finance sessions so that you can build your agenda around those, especially given that any S4/HANA journey will start with Simple Finance:

  1. start with the keynote where Thack Brown will elaborate on the need for speed (aka real-time finance processes) and introduces some external thought leaders to the panel discussions around a modern finance organization. I won’t tell too much when mentioning that Thack will launch another important mile stone of Simple Finance to the public…
  2. one of the most compelling use cases of Simple Finance is the central journal, so this session lead by Carsten Hilker shows you how to non-disruptively start your Simple Finance implementation arriving at one source of the truth
  3. for those in need of a high-level introduction to Simple Finance I’d highly recommend Martin Naraschewski’s session about the roadmap to Simple Finance, where he will elaborate on the needs of a typical finance transformation initiative
  4. one thing that was highly anticipated by you all is more insight into Integrated Business Planning – your unique opportunity to natively connect EPM with your Simple Finance ERP system to allow planning, simulations and scenario modeling directly on your transactional data. Pras Chatterjee off course will show integration to the new Cloud for Planning solution as well
  5. new to the game is the Simple Finance Cash Management solution that is introduced by Christian Mnich, where he will give insights into how to better plan and forecast liquidity based on an integrated process leveraging your ERP / S4HANA system
  6. a dedicated session on the new Accounting solution will provide better understanding of the concepts of the greatest innovation since R/3 building the base for S4HANA. Stefan Karl will guide you through this
  7. want to learn how to get to Simple Finance? Join charming expert Birgit Starmanns and understand what to consider if you want to adopt Simple Finance including advanced predictive finance analytics
  8. join our partner John Steele at Deloitte when he talks about real-time finance processes and the role that HANA plays in this highlighting finance use cases like fast close, financial risk management or finance operations
  9. the experts from TruQua will deliver a thrilling session around the analytics that Simple Finance can provide in form of HANA Live content or via integration of SAP Analytics and EPM solutions. Dave Dixon’s presentation is a good example
  10. finally you’d want to learn about the fast close capabilities of Simple Finance where Stefan Karl walks you through how to become a world’s fastest closing company like SAP

Note there are many “hands-on”-like sessions on the Monday (3/6) as part of the Pre-Conference Workshops that deliver tremendous value for practitioners.

Please be sure this is just the Simple Finance top 10 – please be sure you also learn from customers how SAP Financial Management solutions helped them achieve targets.

Follow the discussion on twitter or facebook or SCN and please share your thoughts.

10 Things to See and Do at SAPinsider Financials 2015

SAPInsider Financials Logo

By David Williams, Head of EPM and GRC Product Marketing, SAP

We’re already well into 2015 and the first key event for the SAP EPM (Enterprise Performance Management) team, partners, and most importantly, our customers, is just about upon us. SAPinsider Financials 2015, hosted by Wellesley Information Services, and co-located with SAPinsider GRC 2015, runs from March 17 – 20 in Las Vegas. It’s one of the key annual events that features EPM-related content. Given there’s so much to see and do at the event, and I often get asked for an agenda of EPM content, I thought why not put together a list of 10 things to see while attending the event. Think of it as a checklist of don’t miss items/sessions. Here we go:

  1. Cloud for Planning, Cloud for Planning, Cloud for Planning. The latest and greatest cloud-based planning and analysis application has been available since February. Make sure to check out one of the many SAP Cloud for Planning sessions and demos to see why it sets a new standard for planning in the cloud
  2. SAP Business Planning and Consolidation 10.1, version for SAP NetWeaver. “BPC” continues to be one of the most widely deployed planning and consolidation applications on the planet. Discover what’s new in the latest release and see how BPC fulfills integrated business planning for Finance capabilities as part of Simple Finance
  3. Close to Disclose. Closing the books and disclosing results continues to be a highly-manual task for many. Discover how you can accelerate/automate the financial close to disclose in one of the presentation or demo sessions including a Jumpstart deep dive on March 16th
  4. Speaking of Jumpstarts, there are 6 Finance ones and these are a good way to get up to speed on subjects such as SAP Simple Finance, simplifying plan and report deign in SAP Business Planning and Consolidation, and the impact of big data on Finance and GRC security among others
  5. EPM solution center. Go deep into product demos with our solution experts across a range of topics including planning, consolidation and profitability analytics, while not forgetting of course the new SAP Cloud for Planning application
  6. Show floor demos. Have a seat and take a well-earned rest from all that walking around the show floor, while watching one of the EPM solution experts show you the latest and greatest product features
  7. Customer delivered sessions. For many the key attraction of SAPinsider is hearing our customers’ financial transformation stories, in their own words. In 2015 you can hear from Lexmark, Velux, Delicato, IDEXX, Telephone and Data Systems and Applied Materials among others
  8. Simple Finance. It’s bound to be a big draw, and so there’s a number of SAP Simple Finance focused sessions. But of course don’t miss the keynote address to hear about the SAP vision to help simplify finance
  9. Visit our partners. Why not take the opportunity to speak with some of our business partners at the event? This year you’ll find the event global sponsor PwC, premier sponsors EY, KPMG and Z Option, as well as Deloitte, itelligence and BlackLine among others
  10. Say hi to the SAP team. Really please do – we’d be delighted to meet you. There will be a number of our subject matter experts at the event that can discuss topics such as planning and financial consolidations

The complete agenda is available here. Safe travels to Las Vegas and if you’d like to meet send me a tweet @daveswilliams!

EPM Reflections #6: Improving planning and consolidation at Petrobras

EPMReflections 2014_6

Just a few short weeks after closing the doors on the SAPinsider Financials event in Nice (see my earlier blog), we moved back over the Atlantic in June to take up residence in Orlando, for the annual SAPPHIRENOW event.

If you’ve never been to SAPPHIRENOW then I’d highly recommend it. Here’s the link to the conference website so that you can make a note of the dates. It’s the jewel in the crown of SAP conferences and presented on a huge scale. SAP solutions for EPM were proud to appear in the Line of Business Finance forum at the event this year, showcasing our EPM solutions, and more importantly having the opportunity to bring some of our customers along to the event also to share their stories of EPM use. Thankfully many of the SAPPHIRENOW stage presentations are recorded for on-demand playback, and here I am able to share with you one of our customer stories Petrobras, who present their experience of using SAP Business Planning and Consolidation, version for SAP NetWeaver, powered by SAP HANA.

06_Petrobras

And, if you like the full video link above, then why not also view a shorter video clip that Daniela Marques Pereira recorded for us afterwards which is available on YouTube.

 

EPM Reflections #3: A Leader in EPM

EPMReflections 2014_3

For SAP solutions for EPM, the big news in March was the release of the 2014 Gartner Magic Quadrant for CPM (aka EPM) Suites. This Gartner report, as with other Analyst reports, offers unbiased opinion concerning the relative merits of software vendors and their solutions in the EPM space. Gartner’s report is based not only on an assessment of software capability and innovation, but also upon customer feedback, and as such the SAP team always eagerly awaits the results of this annual survey.

Reported in this CFOKnowledge blog post by my colleague David Williams, SAP was once again indicated as a “Leader” in this Analyst report.

03_Gartner

Read David’s blog post here, or if you prefer click the image above to go straight to the short-report, available at the SAP website.

EPM Reflections #2: A new era in planning, budgeting and forecasting for SAP customers

EPMReflections 2014_2

The eagerly awaited announcement of SAP Business Planning and Consolidation, version for SAP NetWeaver 10.1 into ramp-up caused a flurry of social media activity towards the end of 2013 and into the first quarter of 2014. In this blog post on SAP SCN from February 2014, my colleague Pras Chatterjee talks about the new embedded model, which offers the potential of new and more flexible planning approaches to many SAP customers.

See the embedded model in action!

In addition to providing links to earlier blogs, this SCN post contains a number of YouTube videos looking at the embedded model in action.

Embedded Model SCN Post

This is must read and see for any SAP planning customers, so if you missed Pras’ blog first time around, then why note take a look at it now…and remember to follow the links to various other blogs and videos offered.

Performance Management from C-Suite Future Diaries

By Gary Cokins, Founder of Analytics-Based Performance Management LLC

What might C-level executives write in their diaries in the future? My crystal ball is crystal clear. Seven years from now in 2021 here are the personal diary entries of the executives of a fictitious corporation reflecting on their experience implementing a performance management framework. As you’ll see, the last diary entry written by the CEO is the most surprising.

Vice-President, Sales

Dear Diary of Sales Commissions,

Recalling 2014, I did not believe our CFO’s claim that some of our long-term customers were very unprofitable for us. That is until I saw the facts in her customer profitability reports. Also, I could not believe that our customer with the highest sales volume was much less profitable than many of our midsize customers. But then she proved that all the extra work we work did for that No. 1 customer substantially dragged down our profit. When the CEO and CFO ganged up on me to change our sales force’s commissions and bonuses to also include targets for customer profits, I thought they had flipped out. Everyone knew the name of the game was increase market share and sales growth. Now I realize the goal is growing sales profitably – what we call smart growth. You live and learn.

Vice-President, Operations

Dear Diary of Chaos,

I remember back in 2014 when my solution to reducing the cost of our dysfunctional operations was to attempt to standardize processes. But as the years progressed, I realized that our research and development organization was increasingly tailoring differentiated products and services to each customer segment – and accordingly they kept micro-segmenting our customer base and future sales prospects! These customized services grew into a huge tsunami wave that standardization of processes could not overcome. Now I am thankful we shifted our efforts towards attaining much higher forecasting accuracy. The better our forecasts became, the less uncertainty we experienced – and the better our scheduling and capacity planning. What was I thinking back then in 2014?

Vice-President, Marketing

Dear Diary of Spray-and-Pray Advertising,

My MBA marketing courses taught me the current fads of the time: Put your money into branding, spend heavily entertaining your largest customers, and use gimmicks to retain existing customers and acquire new ones. But then fortunately I discovered the secret to maximizing the yield the money we spent was by better understanding the unique preferences of our individual customers then targeting new customers with similar traits to our most economically valuable customers. My big “ah-ha” was when I saw how powerful analytics, such as statistics, correlation, regression, segmentation, forecasts – could provide us better answers. At first I feared that the administrative cost and effort to collect, understand, and apply all the necessary data would be galactic and that I would have to replace my street-smart marketing staff with PhD geeks. But then I saw my team gain competency in precision targeting of their marketing campaigns and optimizing deals, offers, discounts, and service levels based on the new intelligence we gained about our customers and their unique traits and preferences.

Vice-President, Human Resources

Dear Diary of Employee Turnover,

My staff and I reminisced today about how proficient we were back in 2014 processing paperwork for exiting employees and stacking inbound resumes in piles. I am so glad those days are over. The big breakthrough in our mindset was when we seriously applied workforce analytics to retain employees by predicting which employees were most likely to next quit so we could optionally intervene to prevent them from resigning – also to hire new employees that would truly fit our current and future needs as well as our culture. Now my challenge is growing our employees’ brains to accelerate their pace to innovate.

Chief Financial Officer (CFO)

Dear Diary of Jail Prevention and Bean-Counting,

When we built our second cafeteria in 2014 just for the on-site external auditors, I thought then that any aspiration for me to actually help improve our business would be consumed with a life of compliance and governance duties to satisfy the external investment community. Thank you, thank you, thank you for the software systems that have made those responsibilities just a minor part-time job. I now recall my excitement these past years to use my freed-up time in a much more value-adding way to help our work force and executives make better decisions and improve our profit performance. This new twist has been a rewarding surprise. Also, I love my expanded role contributing to the Green and Sustainability movement to enable my organization to achieve a negative carbon footprint with money to spare to reduce global poverty. We are now only a year away from hitting our target. Yesterday my kids told me they want to grow up just like me. I’m a hero in their eyes.

Chief Information Officer (CIO)

Dear Diary of Spreadsheet-itis,

I still laugh about the prior CIO I replaced in 2014, who was fired when our business nearly collapsed from the week that all of our spreadsheets converged into an infinite closed loop system. All our laptops kept endlessly calculating and calculating. No new data could be input or information reported. Our company logo could have been replaced with the hourglass symbol. Exclusive dependence on spreadsheets is an addiction. They are OK in moderation but not in excess. I resolved our obsession with business intelligence systems. I wish I could laugh today about the dwindling size of my IT department – all the line and staff departments now do what we used to do for them. I guess buggy-whip makers somehow found new careers. I’ll survive.

Chief Executive Officer (CEO)

Dear Diary of Relentless Pressure,

My fellow CEOs in 2014 dreamed that boards of directors would return to those ceremonial jobs for which you just showed up at quarterly board meetings to pick up your director’s check. In contrast, my board was certainly an activist one in 2014. I vividly recall trying to turn around my sagging business by training everyone with Six Sigma quality and lean management techniques. With hindsight, I am glad I shifted our attention to strategy execution and our culture to embrace measurements with accountability. Those strategy maps, scorecards, dashboards, and other enterprise performance management systems saved my tail. I realize now that Six Sigma and lean programs, though relevant, are limited in that they only teach employees how to think, but our strategy management methods and enabling software technologies taught us where to think. Better yet, they gave us the focus, traction, torque and yield regarding what actions to take to continually optimize to dynamic change. My next challenge? Grow the analytic skills and capabilities of my employees. I hope my VP of human resources is thinking about that, too.

With perfect hindsight, these 2021 diary entries could be true ones. With imperfect foresight, these C-suite executives would probably have far less successful accomplishments to write in their diary. To sustain long-term success, an embrace of the full vision of the enterprise performance management framework is not optional – it is essential.

 

About the Author: Gary Cokins, CPIM

Gary_Cokins

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.

gcokins@garycokins.com; phone +919 720 2718

http://www.garycokins.com

Linkedin.com contact: http://www.linkedin.com/pub/gary-cokins/0/15a/949.