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 #4: A forensic approach to profitability analysis

EPMReflections 2014_4

Although we had started our new series of Financial Excellence with Game-Changers radio shows in March, the show I bring you here, Predicting Profitable Performance in Challenging Times, is from April 2014. I particularly liked this show because it deals with the often overlooked subject of profitability.

04_SAP Radio Show

A thoroughly engaging and entertaining show – in fact all of these radio shows are anything but dull – my favourite quote in the show is something said by SAP’s Rob Jenkins, who expresses that it is possible to “achieve a near-forensic view of product and customer profitability”. Having started my SAP career in the team that created SAP Profitability and Cost Management, I couldn’t agree more with Rob – and I love the image that a “forensic view” conjures up, implying to me that one can really get to the detail of the source of customer profitability if one has a mind to do so.

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.

The First Barrier to Enterprise Performance Management: How to Get Started?

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

In my work career I have the fortune to travel extensively around the globe. As a result, I observe the issues and concerns facing executives, mid-level managers, and those in the project team trenches. During my travels one question has repeatedly emerged: how do we get started?

At my gray-haired age, I’m not sure why I have overlooked this fundamental and basic issue, but it is now becoming clearer to me that a key barrier preventing organizations from pursuing their vision of enterprise performance management (EPM) – regardless of their vision of it – is that they do not know how to get started. There are other barriers too, such as the false perception of some senior executives that the benefits from enterprise performance management do not exceed the administrative effort and expense, but the behavior of senior executives is a topic for another day. This article discusses why the barrier that prevents organizations from getting started has slowed the adoption rate of performance management.

Enterprise Performance Management: An Enigma or Simply Ambiguous?

There will be confusion for a long time to precisely define enterprise performance management (EPM). In my mind, the good news is this: enterprise performance management is not a new managerial method that everyone now has to learn, but rather it is the assemblage and integration of existing improvement methods that most managers are already familiar with. Collectively, these methods are interdependent, working together to manage the execution of an organization’s strategy. And most organizations have already begun to implement some of the EPM portfolio of methods, such as the balanced scorecard, but not enough of them have reached that flash point where substantial synergy kicks in.

Some executives and many mid-level managers have misconceptions about the components of the EPM suite. For example, many believe that the high accuracy in calculating product and service-line costs requires employee timesheets recorded at fifteen minute intervals, when in truth the major and dominant determinant of cost accuracy is much more influenced by better mapping of how work activities are uniquely consumed by outputs (e.g., products, services, channels, and customers). Regardless of the misconceptions, and there are many since most managers have yet to see or experience an organization that is nearing the complete vision of EPM, the problem is that these misconceptions prevent an organization from making progress – from moving ahead!

One proven way to break through this barrier and to get the ball rolling for good is to use the approach of rapid prototyping coupled with iterative re-design and re-modeling. Rapid prototyping works because within two or three days an organization has successfully accomplished constructing its initial system – albeit it at a high level. The “getting started” is over before you hardly knew it had begun!

Rapid Prototyping of Activity-Based Costing (ABC) and the Balanced Scorecard (BSC)

Those who remember the miscues of the early 1990s in implementing activity-based costing systems can now with hindsight realize those ABC implementations that fell short of expectations were way over-designed and over-built. The diminishing returns in additional accuracy were not worth the exponentially burdensome extra level of administrative effort required to collect and calculate the cost data. Worse yet, it took forever to create that gargantuan cost model. These implementations collapsed under their own weight long before the employee teams and managers could ultimately use the cost data originally promised for decision support.

While ABC information answers eternal organizational questions such as “where do we make or lose money?”, “what does something cost now?” and “what will something cost if something else changes?”, what has rescued this initiative is the application of rapid prototyping. Since calculating costs is not bookkeeping but rather a modeling exercise to transform spending expenses on resources (e.g., salaries, travel, power, supplies) into the calculated costs of the consuming outputs and outcomes (ultimately the costs of products, service-lines, channels, and customers), then the first model can be scaled into deeper levels that are more revealing. So the prudent approach is to build the first complete scope ABC model in two days using estimates from only four or five cross-functional employees who are familiar with their areas. On the third day, these employees brief a peer group – and maybe, but cautiously, an executive or two – so more work colleagues can get a vision of what an ABC system could eventually look like in their organization and be used.

Of course the cost data in this initial model is not accurate, but the next iteration becomes more accurate and granular by taking a few more days, going deeper, and replacing estimates with fact-based data in a few crucial areas. An organization benefits from making its design and assumption mistakes early on, not later when it will be much more difficult. Better yet, during the co-worker briefing that follows each iteration, their colleagues internalize what they are seeing and can immediately relate it to their problems. Project teams need two parallel plans: (1) an implementation plan, and (2) a communication plan. The second plan is much more important than the first! Resistance to change is what stops progress, and this can be overcome when the buy-in process starts out with an effective way of education.

Can a strategy map and its associated balanced scorecard also be completed as quickly? You bet, but only if the executives are willing. Some balanced scorecard consultant facilitators are mastering rapid brainstorming methods. Some are as simple as having the executive team take four brief hours to have each executive individually fill out thirty to forty SWOTs (an organizational strength, weakness, opportunity, and threat assessment) on Post-It™ notes and paste all of them on wall panels divided into focus areas using frameworks like the Malcolm Baldrige Award, the European Foundation for Quality Management (EFQM), or Norton-Kaplan. Next, they manually cluster the sticky SWOT notes into common groups with similar characteristics. Then they finally describe each cluster on a larger Post-It in words reflecting a strategic objective. That’s it! These larger Post-Its can be pasted on a wall-size poster board, and the executives can return to their offices.

Next, the core process managers from the next managerial level take over. In the next day or two they identify the few and manageable projects or initiatives that can be accomplished (or the area of their process they must excel at) for each strategic objective. They then define those vital few key performance indicators (KPIs) – three at most – for each project or process specified. Voila. The initial strategy map, key projects or initiatives, and the vital few (rather than trivial many) relevant KPI measures are then defined. And as a bonus, many of those middle managers will for the first time have learned the senior executives’ strategy in a way that they can understand it, since many do not know their organization’s strategy.

Is a Ready, Fire, Aim Approach All that Bad?

Rapid prototyping achieves the benefits advocated by W. Edwards Deming, the popular quality management guru, with his plan-do-check-act (PDCA) iterative cycle. By accelerating organizational learning rates, EPM methods are more quickly implemented.

Typically, people do not like taking responsibilities for decisions, so they don’t make any. What is needed is the courage to make decisions. This is what differentiates leaders from mere managers. Managers are adverse to risk, prone to over-planning and under-executing, while leaders take calculated risks knowing they can always adjust. Let’s not wait for the stars to align to get started. Nike has the right idea: “Just do it.”

 

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.

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.

 

Is it Better to Have No Costing than Bad Costing?

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

Is it better to have no costing rather than bad costing? And what do I mean with this question?

Girl with piggy bank counting coins

The prevalent thinking is that an organization’s managerial accounting system will calculate costs differently than its financial accounting system. Why? Because financial accounting reporting must comply with regulatory rules for external compliance reporting. These rules by their nature typically over simplify cost aggregations and do not require the same level of rigor as the more accurate costs from a managerial accounting system. The culprit responsible for this added complexity is the allocation of indirect and shared expenses. Traditional cost allocations broadly apply averaged factors, such as the number of department employees or direct labor input hours used to conveniently re-assign indirect expenses to product costs.

Violating accounting’s causality principle

The obvious flaw not recognized by all accountants, is these types of allocation factors violate the cause-and-effect relationship principle of accounting. That is, the resulting costs do not reflect how each product uniquely consumes the work activity costs associated with the processes that create them.

The activity based costing (ABC) method resolves this shortcoming by decomposing resource expenses, such as salaries and supplies, into disaggregated work activities (costs) which are then reassigned to the products and service-lines consuming them (using a causal activity cost driver). An example of an activity cost driver in a bank would be the number of wire transfers for the work activity “processing wire transfers.”

When is good enough not enough?

The accounting department might argue that the majority of expenses are directly linked to products. However, they may be challenged to prove this assumption with facts. In the last few decades in almost all industries and government agencies, the number of product and service offerings has proliferated in diversity and variations to satisfy customers increasing demands for customization. For example, more colors, sizes, and ranges. Naturally, this creates complexity. Furthermore, increasing indirect and shared resources are needed to manage this additional complexity. These indirect and shared expenses (e.g., information technology) are now substantial in magnitude relative to direct expenses.

For those accountants who may be aware of this relative shift in the composition of their organization’s expense categories, they may argue that their direct costs are precise and their broad but flawed cost allocation method probably closely matches what would be calculated if multiple activity drivers were factored in correctly.

But how do they know? Maybe their assumption of good enough is no longer accurate enough for reliable decision making in today’s “big data” world.

Without facts, it is just an opinion

There is abundant evidence that when activity based costing replaces traditional, broadly averaged cost allocations that are not based on causal relationships, then the before-and-after product cost errors are grotesquely large. This means organizations not using activity based costing (or weak adaptions of it) are providing inaccurate and misleading information to their users. These users then end up making analysis and decisions based on that flawed information. Examples are gross profit margin analysis and benchmarking studies.

Perhaps letting users apply intuition and gut feel about costs may be better than reporting defective and misleading data. Maybe information users and operations managers can rely on evolving lean management and six sigma quality programs to improve their costs. My belief is that in the absence of facts, anybody’s opinion may be a good one – but usually the opinion of the most senior person wins! To the degree that the decisions of higher level managers and executives rely on intuition, gut feel, or politics, then the organization is at risk.

Unfortunately, as organizations expand costing models to include non-product cost-to-serve expenses (e.g., customer service, selling, distribution, and marketing expenses) for customer profitability analysis, the problem of bad costing will only be exacerbated.

So, is it better to have no costing than bad costing? Is it better to mislead managers and leave them to rely on intuition and whatever other non-financial information to make decisions? If you ask me I would not take that risk. Today organizations increasingly speak in the language of money. Money is typically a common denominator for decisions. Many PowerPoint presentations conclude with ROI or cost impact measures. If you cannot speak the language of money then it is difficult to communicate your ideas and build supportive cases for change.

 

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.

The CFO’s Expanding Role – Reality or Delusion?

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

Did my last blog on the topic of the annual budget resonate with anyone? I have a suspicion that it probably did. Here in my final blog for a few weeks I am going to turn my attention to the CFO.

Am I alone in wondering if the many references and articles concerning the CFO’s emerging role as a “trusted advisor” is more hype than reality? Increasingly, I read articles and research studies alleging this emerging CFO role to be actually happening. In an article written by Gianni Giacomelli, senior vice-president at Genpact, titled “Can a CFO Innovate?” he states:

“Modern financial executives are moving toward a more central and expanded role as stewards of the company’s longevity, using the finance function to enable growth, especially in new markets and in response to market changes. For those who are ready for change, the new finance is an exciting and rewarding way to help shape a more intelligent enterprise that is better connected to the market and its customers.”

Really? Just to devil’s advocate for a moment, what proof do we have that Gianni’s observation is true? When we cut to the chase, what are CFOs more concerned about – regulatory compliance or organizational performance improvement? Certainly many CFOs monitor and report on performance using scorecards and dashboards. But do they actively participate in assisting line managers to move those dials. For example, do they:

  • Assist sales and marketing managers with identifying which types of customers to retain, grow, win back, and acquire?
  • Assist operations managers to determine which productivity actions and projects will realize gains in efficiency, effectiveness, quality, and cost reduction?

Or do they simply serve as gatekeepers and keep score?

Bean counter or bean grower?

In an article by Myles Corson, a consultant with the Financial Accounting Advisory Services of Ernst & Young LLP, titled “The Evolving Role of Today’s CFO”, he writes:

“In addition to overseeing the company’s financial health, CFOs are increasingly involved in setting operational and commercial strategy, navigating their companies safely through tighter credit markets, more complex regulation and unstable trading conditions. … As organizations continue to adjust to market volatility and economic uncertainty, CFOs must increasingly provide expert advice to support boardroom decisions. In fact, many CFOs feel that they are in an exceptional position to offer this level of strategic counsel because of their ability to gather information from disparate parts of the company.”

But is this evolving role one of just better reporting or one creating a greater impact on analysis and decisions?

In a survey conducted by my fellow Big Fat Blogger Mary Driscoll of the America Productivity and Quality Center, titled, “A New CFO Priority,” she writes:

“Surprisingly, only five percent of survey respondents believe that finance is currently delivering game-changing value to their enterprises. Is this cause for concern? … Finance organizations that are seen as a partner to the business generate thoughtful, clear, and authoritative analyses. However, the biggest barrier preventing business partnership is the lack of time to perform this same work.”

My intent is not to be a naysayer and deny there is truly an evolving and expanding role of the CFO. In fact, my intent is just the opposite. I am a believer that, particularly given the opportunity provided by the nexus of technological forces ( advanced analytics, cloud, in-memory computing, mobile and social computing) the CFO’s finance and accounting function is uniquely positioned at this moment in time to accelerate the adoption rate of enterprise performance management (EPM) methods along with emerging business analytics to gain crucial insights that were previously inaccessible and truly facilitate business innovation in new and novel ways. Finance and accounting professionals were born with a quantitative aptitude – which technology will only further fuel.

Boeing 747 Jetliner Taking Off, Sunset Silhouette

Delusion or reality?

But do we know or just think we know? Which is it – delusion or reality? I along with my colleagues, for example, bemoan the slow progress in performance improvement methods such as the adoption of activity-based costing (ABC) principles. If ABC is done at all it is typically only taken as far as product and service-line gross profit margin line reporting and does not look beneath that line to report and analyze channel and costs-to-serve for arguably more critical customer profitability reporting and analysis. And what about marginal / incremental expense analysis for that matter? This involves classifying available / used resources as sunk, fixed, step-fixed, semi-variable, or variable. This involves an understanding managerial economics, not just managerial accounting. How many finance organizations have built core competencies in these functions?   My suspicion is that many finance organizations are for the most part dealing with more fundamental problems and have yet to build core competencies in many of the practices espoused by analysts, consultants and business pundits.

For now though, my opinion is the CFO function is about to enter a golden age of business analytics and managerial accounting. But we need more evidence. Are CFOs taxiing on the runway, or have they begun lift-off?

I hope that you have enjoyed reading my series of blogs over the last few weeks. I’m taking a break now as I prepare to head to Chicago for the SAP Conference for EPM on 13/14 October, where I’ll be talking more about the subject of performance management and analytics and looking at best practice approaches, as well as taking a look to what we might expect to see in the future. If you’re in Chicago why not pop along and take in the show – but if not then please watch out for my next article as I shall look forward to resuming my blog series soon. Thanks for reading!

 

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.

Hear Gary share some of his thoughts concerning EPM innovations and best practices at the SAP Conference for EPM in Chicago, October 13/14, 2014