by Gary Cokins
In my prior blog, I described the three categories that are foundational for effective business planning: destination/purpose, information access, and integration. What are the trends with these three categories?
Business plans are derived from a vision and mission
The primary responsibility of the C-suite executives is to establish strategic direction by answering the question, “Where do we want to go?” Their answer will depend on the vision and mission of the organization. An organization’s mission statement does not always need to be the oftentimes hollow words displayed on the wall of the company’s entry lobby (e.g., “We will be the best …. “). It can be simpler. For example in the 1980s when Bill Gates said “A computer on every desk” Microsoft employees understood his vision and their mission.
The trend in this first category involves answering a second follow-up question, “How will we get there … to where the executive want to go?” The digital vehicle to achieve and execute the C-suite’s strategy is the integration of the various components of the integrated business planning (IBP) framework. These include strategy maps; product, channel, and customer profitability reporting and analysis; driver-based rolling financial forecasts; enterprise risk management (ERM); and lean and quality management techniques for process improvement. Each component should have analytics imbedded in them.
Access to information
Many organizations are drowning in raw transactional data but starving for information. The trend in this category involves converting data into information. This is typically accomplished via modeling.
For example, a one page strategy map is a model of the executive team’s strategy. The process of costing to calculate individual customer profit and loss (P&L) statements is accomplished by modeling how resource expenses (e.g., salaries, supplies) are causally and proportionately consumed as calculated costs of outputs.
Associated with this trend is the emergence of business analytics. What analysts want are two capabilities: (1) easy and flexible access to data; and (2) the ability to manipulate it. The IBP framework enables this via the trend I describe below.
The integration of the IBP framework’s component methods
The more seamless the integration of the IBP framework’s components, the better will be an organization’s performance. The trends in this category involve cloud-based planning, real-time information flows, and analytics.
- Cloud-based computing – the attractiveness of remote computing power and storage over on-premises computing, maintenance benefits and the ability to easily extend use to enterprise users is commonly accepted today.
- Information flows – transactional data and its conversion into information today can flow bi-directionally between business operation systems (production, logistics, and customer demand) and financial systems (profit reporting, budgeting, rolling financial forecasts). And the flows can be in real-time (or near real-time) refreshed at short term time intervals.
- Analytics – The more savvy companies now embrace analytics as a competitive advantage. The goal of analytics should be to gain insights and foresight and solve problems, to make better and quicker decisions with more accurate and fact-based data, and to take actions.
Future trends in business planning?
In a future blog I will answer this question of future trends in business planning. But for now consider that if you can imagine a digital capability, then it will eventually (and soon) be realized.
Join me at the SAP Conference for Financial Planning, Consolidation and Controls in Las Vegas 10-11 November, where I’ll be delivering a presentation on performance and risk management. I hope to see you there!
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, Methods, Risk, and Analytics and Predictive Business Analytics.