Is Amazon Really The Enemy Of Aussie Retailers?

Stuart O'Neill

The inevitable launch of Amazon in Australia has local retailers running scared—to the point outgoing Wesfarmers CEO Richard Goyder said Amazon will “eat all our breakfasts, lunches, and dinners.”

It might sound dramatic, but considering the retail giant comprises half of online retail sales growth in the U.S. and is set to double this in the next 10 years, it’s only natural for local organisations to have questions and concerns.

Make no mistake, Amazon is likely to be a success in Australia

Amazon has deep pockets, a brand name synonymous with convenience, an established and globally tested business model, and already a large Australian following. Nielsen stats show 56% of Australians plan to purchase from Amazon when it launches, despite no concrete public plans for when this might happen.

But this still doesn’t make Amazon the darkest cloud on the horizon.

The greatest threat to Australia’s retail industry isn’t the emergence of another competitor, even one as established as Amazon. Of bigger risk to retailers is themselves – or more specifically, the customer experience they offer. And this makes the widespread fear and commotion around Amazon’s launch misguided. We’ve seen in Europe and the U.S. that organisations that have been able to differentiate their brand are the ones that survive. Those that do not struggle for relevance.

There is a strong link between customer experience and loyalty, with SAP’s 2016 Australian Digital Experience Report finding 76% of consumers would remain loyal to a brand if the digital experience was “delightful.” The report also points to the need for local businesses to improve the experiences they deliver, with 40% of Australians unsatisfied with current offerings.

It is much cheaper to defend the market share you have than try to gain it from somewhere else. Retailers spend millions on marketing to buy and foster loyalty, but it can be destroyed with a single bad experience. This is a more recognisable and ominous threat than Amazon will ever be.

When retailers start looking at Amazon as the greater disruptor, they’re effectively not seeing the forest for the trees. Digital disruption has already happened without Amazon’s launch, and to address this, retailers must look inward and get the fundamentals right to deliver on the expectations of today’s consumer.

Amazon is not the darkest cloud on the horizon for retailers

This means allowing customers to direct the shopping experience they want, through the channel they want, and having it all align. All contact with a brand should be considered equal, because consumers see no distinction between their experience in a dressing room, engaging with a chatbot, or loading up their online cart. If these contact points are inconsistent, consumers will seek a better experience elsewhere. Delivering on this promise is a trait Amazon has in spades.

Businesses are in the midst of a data gold rush, and retailers have the potential to know more about their customers than ever before. It is critical they use this data to inform their omnichannel strategy. Communications can be tailored, personalised, and helpful, making consumers feel valued. This differentiates the customer experience and therefore their brand.

Getting these elements right will go a long way to future-proofing any retail business from any competition, whether it comes from Amazon or others.

The importance of customer experience can’t be overstated, and with more competition coming into the market, it’s critical to act now. Amazon won’t be the cause of disruption in the industry, but if retailers don’t get their digital experience up to speed they still might lose their customers.

For more on creating a customer experience that earns loyalty, see A Winning Formula To Make Customers Happy.

Comments

Stuart O'Neill

About Stuart O'Neill

Stuart O’Neill is the head of business for the ANZ region for SAP Hybris. In this role, Stuart has helped champion e-commerce adoption amongst leading telecom and retail customers globally, leading the strategic Customer Engagement and Commerce line of business for SAP in ANZ. A technology sales professional with deep industry knowledge, Stuart has spent the past six years evangelizing an industry-wide shift to ecommerce and the cloud in Europe, Asia and Australia and has helped position hybris as a leader in the ecommerce market in Australia and NZ. Stuart has spent the last 15 years working in the networking and e-Commerce industry in both Europe and Asia and is recognized as one of the leading experts in ecommerce in Australia. His expertise has been garnered through his experience working as a sales professional with leading players in the industry including Nortel Networks, Cisco, Fujistu and Digital River. Stuart has travelled extensively, and has lived and worked in Europe, Asia and the Middle East. Stuart holds an MBA specialized in Marketing and bachelor’s degree in Civil Engineering.

A View Into The Future Of Financial Planning And Analysis By Finance Executives From Asia/Pacific Region

Pras Chatterjee

Businesswoman Looking Up --- Image by � Ken Seet/CorbisLeading-edge financial planning systems promise to resolve many of the technical information gaps that have plagued many enterprises. At the same time, finance leaders recognize their own responsibility to gain the maximum value from the robust, real-time analysis these systems can deliver as managers put it to use across the enterprise.

CFO Research conducted a global study sponsored by SAP and surveyed senior finance executives to gain a better understanding of how leading-edge financial planning and business analysis capabilities can support effective decision making. Finance executives from the Asia/Pacific region (including India and Australia) recognize the need to improve their teams’ contributions to high-value FP&A activities will become increasingly urgent in the coming years. The good news is they appear to feel they have the tools and resources they’ll need in order to fulfill that promise.

In the survey, practically all of the finance executives from the Asia/Pacific region (95%) agree that over the next two years, the demand on the finance function to supply highly responsive, interactive, and flexible business analysis to decision-makers is likely to increase. Nearly as many expected the demand for ad-hoc decision support and analysis to increase (90%), and improving the ability to conduct highly sophisticated, predictive business analysis (e.g., scenario planning, “what-if” analysis, risk modeling) would yield substantial, measurable financial benefit to their company (92%).

blog #4 banner

These finance executives believe they are up to the task, however. More than half (53%) of the respondents from the region give the highest marks to their IT systems for financial planning, saying they believe their systems make a substantial contribution to their ability to support decision making. Respondents from Europe and North America, in particular, are much less likely to place themselves in this top tier.

With 95% of respondents from the Asia/Pacific region also agreeing that pressure is increasing on the finance function to improve its contribution to high-value planning, analysis, and decision-support, these executives appear to be better-positioned than most to meet those expectations.

Read the full report here:

Blog 4 Banner_AsiaPacific

 

Comments

A View Into The Future Of Financial Planning And Analysis By Finance Executives From Asia/Pacific Region

Pras Chatterjee

Businesswoman Looking Up --- Image by � Ken Seet/CorbisLeading-edge financial planning systems promise to resolve many of the technical information gaps that have plagued many enterprises. At the same time, finance leaders recognize their own responsibility to gain the maximum value from the robust, real-time analysis these systems can deliver as managers put it to use across the enterprise.

CFO Research conducted a global study sponsored by SAP and surveyed senior finance executives to gain a better understanding of how leading-edge financial planning and business analysis capabilities can support effective decision making. Finance executives from the Asia/Pacific region (including India and Australia) recognize the need to improve their teams’ contributions to high-value FP&A activities will become increasingly urgent in the coming years. The good news is they appear to feel they have the tools and resources they’ll need in order to fulfill that promise.

In the survey, practically all of the finance executives from the Asia/Pacific region (95%) agree that over the next two years, the demand on the finance function to supply highly responsive, interactive, and flexible business analysis to decision-makers is likely to increase. Nearly as many expected the demand for ad-hoc decision support and analysis to increase (90%), and improving the ability to conduct highly sophisticated, predictive business analysis (e.g., scenario planning, “what-if” analysis, risk modeling) would yield substantial, measurable financial benefit to their company (92%).

blog #4 banner

These finance executives believe they are up to the task, however. More than half (53%) of the respondents from the region give the highest marks to their IT systems for financial planning, saying they believe their systems make a substantial contribution to their ability to support decision making. Respondents from Europe and North America, in particular, are much less likely to place themselves in this top tier.

With 95% of respondents from the Asia/Pacific region also agreeing that pressure is increasing on the finance function to improve its contribution to high-value planning, analysis, and decision-support, these executives appear to be better-positioned than most to meet those expectations.

Read the full report here:

Blog 4 Banner_AsiaPacific

 

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Konstanze Werle

About Konstanze Werle

Konstanze Werle is a Director of Industries Marketing at SAP. She is a content marketing specialist with a particular focus on the travel and transportation, engineering and construction and real estate industries worldwide. Her goal is to help companies in these industries to simplify their business by sharing latest trends and innovation in their industry.

A View Into The Future Of Financial Planning And Analysis By Finance Executives From Asia/Pacific Region

Pras Chatterjee

Businesswoman Looking Up --- Image by � Ken Seet/CorbisLeading-edge financial planning systems promise to resolve many of the technical information gaps that have plagued many enterprises. At the same time, finance leaders recognize their own responsibility to gain the maximum value from the robust, real-time analysis these systems can deliver as managers put it to use across the enterprise.

CFO Research conducted a global study sponsored by SAP and surveyed senior finance executives to gain a better understanding of how leading-edge financial planning and business analysis capabilities can support effective decision making. Finance executives from the Asia/Pacific region (including India and Australia) recognize the need to improve their teams’ contributions to high-value FP&A activities will become increasingly urgent in the coming years. The good news is they appear to feel they have the tools and resources they’ll need in order to fulfill that promise.

In the survey, practically all of the finance executives from the Asia/Pacific region (95%) agree that over the next two years, the demand on the finance function to supply highly responsive, interactive, and flexible business analysis to decision-makers is likely to increase. Nearly as many expected the demand for ad-hoc decision support and analysis to increase (90%), and improving the ability to conduct highly sophisticated, predictive business analysis (e.g., scenario planning, “what-if” analysis, risk modeling) would yield substantial, measurable financial benefit to their company (92%).

blog #4 banner

These finance executives believe they are up to the task, however. More than half (53%) of the respondents from the region give the highest marks to their IT systems for financial planning, saying they believe their systems make a substantial contribution to their ability to support decision making. Respondents from Europe and North America, in particular, are much less likely to place themselves in this top tier.

With 95% of respondents from the Asia/Pacific region also agreeing that pressure is increasing on the finance function to improve its contribution to high-value planning, analysis, and decision-support, these executives appear to be better-positioned than most to meet those expectations.

Read the full report here:

Blog 4 Banner_AsiaPacific

 

Comments

Angelica Valentine

About Angelica Valentine

Angelica is the Marketing Manager at Wiser. Wiser collects and analyzes online and in-store data with unmatched speed, scale and accuracy. She is experienced in strategy and creation for cross-channel content. Angelica is passionate about growing engagement and conversion rates through excellent content. Her work has also appeared on VentureBeat, Bigcommerce, Retail Touchpoints, and more. She holds a Bachelor’s degree in Sociology from Barnard College of Columbia University in New York City.

A View Into The Future Of Financial Planning And Analysis By Finance Executives From Asia/Pacific Region

Pras Chatterjee

Businesswoman Looking Up --- Image by � Ken Seet/CorbisLeading-edge financial planning systems promise to resolve many of the technical information gaps that have plagued many enterprises. At the same time, finance leaders recognize their own responsibility to gain the maximum value from the robust, real-time analysis these systems can deliver as managers put it to use across the enterprise.

CFO Research conducted a global study sponsored by SAP and surveyed senior finance executives to gain a better understanding of how leading-edge financial planning and business analysis capabilities can support effective decision making. Finance executives from the Asia/Pacific region (including India and Australia) recognize the need to improve their teams’ contributions to high-value FP&A activities will become increasingly urgent in the coming years. The good news is they appear to feel they have the tools and resources they’ll need in order to fulfill that promise.

In the survey, practically all of the finance executives from the Asia/Pacific region (95%) agree that over the next two years, the demand on the finance function to supply highly responsive, interactive, and flexible business analysis to decision-makers is likely to increase. Nearly as many expected the demand for ad-hoc decision support and analysis to increase (90%), and improving the ability to conduct highly sophisticated, predictive business analysis (e.g., scenario planning, “what-if” analysis, risk modeling) would yield substantial, measurable financial benefit to their company (92%).

blog #4 banner

These finance executives believe they are up to the task, however. More than half (53%) of the respondents from the region give the highest marks to their IT systems for financial planning, saying they believe their systems make a substantial contribution to their ability to support decision making. Respondents from Europe and North America, in particular, are much less likely to place themselves in this top tier.

With 95% of respondents from the Asia/Pacific region also agreeing that pressure is increasing on the finance function to improve its contribution to high-value planning, analysis, and decision-support, these executives appear to be better-positioned than most to meet those expectations.

Read the full report here:

Blog 4 Banner_AsiaPacific

 

Comments

A View Into The Future Of Financial Planning And Analysis By Finance Executives From Asia/Pacific Region

Pras Chatterjee

Businesswoman Looking Up --- Image by � Ken Seet/CorbisLeading-edge financial planning systems promise to resolve many of the technical information gaps that have plagued many enterprises. At the same time, finance leaders recognize their own responsibility to gain the maximum value from the robust, real-time analysis these systems can deliver as managers put it to use across the enterprise.

CFO Research conducted a global study sponsored by SAP and surveyed senior finance executives to gain a better understanding of how leading-edge financial planning and business analysis capabilities can support effective decision making. Finance executives from the Asia/Pacific region (including India and Australia) recognize the need to improve their teams’ contributions to high-value FP&A activities will become increasingly urgent in the coming years. The good news is they appear to feel they have the tools and resources they’ll need in order to fulfill that promise.

In the survey, practically all of the finance executives from the Asia/Pacific region (95%) agree that over the next two years, the demand on the finance function to supply highly responsive, interactive, and flexible business analysis to decision-makers is likely to increase. Nearly as many expected the demand for ad-hoc decision support and analysis to increase (90%), and improving the ability to conduct highly sophisticated, predictive business analysis (e.g., scenario planning, “what-if” analysis, risk modeling) would yield substantial, measurable financial benefit to their company (92%).

blog #4 banner

These finance executives believe they are up to the task, however. More than half (53%) of the respondents from the region give the highest marks to their IT systems for financial planning, saying they believe their systems make a substantial contribution to their ability to support decision making. Respondents from Europe and North America, in particular, are much less likely to place themselves in this top tier.

With 95% of respondents from the Asia/Pacific region also agreeing that pressure is increasing on the finance function to improve its contribution to high-value planning, analysis, and decision-support, these executives appear to be better-positioned than most to meet those expectations.

Read the full report here:

Blog 4 Banner_AsiaPacific

 

Comments

Uli Muench

About Uli Muench

Uli Muench is Global Vice President of the Automotive Industry Business Unit at SAP.

A View Into The Future Of Financial Planning And Analysis By Finance Executives From Asia/Pacific Region

Pras Chatterjee

Businesswoman Looking Up --- Image by � Ken Seet/CorbisLeading-edge financial planning systems promise to resolve many of the technical information gaps that have plagued many enterprises. At the same time, finance leaders recognize their own responsibility to gain the maximum value from the robust, real-time analysis these systems can deliver as managers put it to use across the enterprise.

CFO Research conducted a global study sponsored by SAP and surveyed senior finance executives to gain a better understanding of how leading-edge financial planning and business analysis capabilities can support effective decision making. Finance executives from the Asia/Pacific region (including India and Australia) recognize the need to improve their teams’ contributions to high-value FP&A activities will become increasingly urgent in the coming years. The good news is they appear to feel they have the tools and resources they’ll need in order to fulfill that promise.

In the survey, practically all of the finance executives from the Asia/Pacific region (95%) agree that over the next two years, the demand on the finance function to supply highly responsive, interactive, and flexible business analysis to decision-makers is likely to increase. Nearly as many expected the demand for ad-hoc decision support and analysis to increase (90%), and improving the ability to conduct highly sophisticated, predictive business analysis (e.g., scenario planning, “what-if” analysis, risk modeling) would yield substantial, measurable financial benefit to their company (92%).

blog #4 banner

These finance executives believe they are up to the task, however. More than half (53%) of the respondents from the region give the highest marks to their IT systems for financial planning, saying they believe their systems make a substantial contribution to their ability to support decision making. Respondents from Europe and North America, in particular, are much less likely to place themselves in this top tier.

With 95% of respondents from the Asia/Pacific region also agreeing that pressure is increasing on the finance function to improve its contribution to high-value planning, analysis, and decision-support, these executives appear to be better-positioned than most to meet those expectations.

Read the full report here:

Blog 4 Banner_AsiaPacific

 

Comments

A View Into The Future Of Financial Planning And Analysis By Finance Executives From Asia/Pacific Region

Pras Chatterjee

Businesswoman Looking Up --- Image by � Ken Seet/CorbisLeading-edge financial planning systems promise to resolve many of the technical information gaps that have plagued many enterprises. At the same time, finance leaders recognize their own responsibility to gain the maximum value from the robust, real-time analysis these systems can deliver as managers put it to use across the enterprise.

CFO Research conducted a global study sponsored by SAP and surveyed senior finance executives to gain a better understanding of how leading-edge financial planning and business analysis capabilities can support effective decision making. Finance executives from the Asia/Pacific region (including India and Australia) recognize the need to improve their teams’ contributions to high-value FP&A activities will become increasingly urgent in the coming years. The good news is they appear to feel they have the tools and resources they’ll need in order to fulfill that promise.

In the survey, practically all of the finance executives from the Asia/Pacific region (95%) agree that over the next two years, the demand on the finance function to supply highly responsive, interactive, and flexible business analysis to decision-makers is likely to increase. Nearly as many expected the demand for ad-hoc decision support and analysis to increase (90%), and improving the ability to conduct highly sophisticated, predictive business analysis (e.g., scenario planning, “what-if” analysis, risk modeling) would yield substantial, measurable financial benefit to their company (92%).

blog #4 banner

These finance executives believe they are up to the task, however. More than half (53%) of the respondents from the region give the highest marks to their IT systems for financial planning, saying they believe their systems make a substantial contribution to their ability to support decision making. Respondents from Europe and North America, in particular, are much less likely to place themselves in this top tier.

With 95% of respondents from the Asia/Pacific region also agreeing that pressure is increasing on the finance function to improve its contribution to high-value planning, analysis, and decision-support, these executives appear to be better-positioned than most to meet those expectations.

Read the full report here:

Blog 4 Banner_AsiaPacific

 

Comments

Shawn Slack

About Shawn Slack

Shawn Slack is the Director of Information Technology and Chief Information Officer for the City of Mississauga.

A View Into The Future Of Financial Planning And Analysis By Finance Executives From Asia/Pacific Region

Pras Chatterjee

Businesswoman Looking Up --- Image by � Ken Seet/CorbisLeading-edge financial planning systems promise to resolve many of the technical information gaps that have plagued many enterprises. At the same time, finance leaders recognize their own responsibility to gain the maximum value from the robust, real-time analysis these systems can deliver as managers put it to use across the enterprise.

CFO Research conducted a global study sponsored by SAP and surveyed senior finance executives to gain a better understanding of how leading-edge financial planning and business analysis capabilities can support effective decision making. Finance executives from the Asia/Pacific region (including India and Australia) recognize the need to improve their teams’ contributions to high-value FP&A activities will become increasingly urgent in the coming years. The good news is they appear to feel they have the tools and resources they’ll need in order to fulfill that promise.

In the survey, practically all of the finance executives from the Asia/Pacific region (95%) agree that over the next two years, the demand on the finance function to supply highly responsive, interactive, and flexible business analysis to decision-makers is likely to increase. Nearly as many expected the demand for ad-hoc decision support and analysis to increase (90%), and improving the ability to conduct highly sophisticated, predictive business analysis (e.g., scenario planning, “what-if” analysis, risk modeling) would yield substantial, measurable financial benefit to their company (92%).

blog #4 banner

These finance executives believe they are up to the task, however. More than half (53%) of the respondents from the region give the highest marks to their IT systems for financial planning, saying they believe their systems make a substantial contribution to their ability to support decision making. Respondents from Europe and North America, in particular, are much less likely to place themselves in this top tier.

With 95% of respondents from the Asia/Pacific region also agreeing that pressure is increasing on the finance function to improve its contribution to high-value planning, analysis, and decision-support, these executives appear to be better-positioned than most to meet those expectations.

Read the full report here:

Blog 4 Banner_AsiaPacific

 

Comments

Daniel Schmid

About Daniel Schmid

Daniel Schmid was appointed Chief Sustainability Officer at SAP in 2014. Since 2008 he has been engaged in transforming SAP into a role model of a sustainable organization, establishing mid and long term sustainability targets. Linking non-financial and financial performance are key achievements of Daniel and his team.

A View Into The Future Of Financial Planning And Analysis By Finance Executives From Asia/Pacific Region

Pras Chatterjee

Businesswoman Looking Up --- Image by � Ken Seet/CorbisLeading-edge financial planning systems promise to resolve many of the technical information gaps that have plagued many enterprises. At the same time, finance leaders recognize their own responsibility to gain the maximum value from the robust, real-time analysis these systems can deliver as managers put it to use across the enterprise.

CFO Research conducted a global study sponsored by SAP and surveyed senior finance executives to gain a better understanding of how leading-edge financial planning and business analysis capabilities can support effective decision making. Finance executives from the Asia/Pacific region (including India and Australia) recognize the need to improve their teams’ contributions to high-value FP&A activities will become increasingly urgent in the coming years. The good news is they appear to feel they have the tools and resources they’ll need in order to fulfill that promise.

In the survey, practically all of the finance executives from the Asia/Pacific region (95%) agree that over the next two years, the demand on the finance function to supply highly responsive, interactive, and flexible business analysis to decision-makers is likely to increase. Nearly as many expected the demand for ad-hoc decision support and analysis to increase (90%), and improving the ability to conduct highly sophisticated, predictive business analysis (e.g., scenario planning, “what-if” analysis, risk modeling) would yield substantial, measurable financial benefit to their company (92%).

blog #4 banner

These finance executives believe they are up to the task, however. More than half (53%) of the respondents from the region give the highest marks to their IT systems for financial planning, saying they believe their systems make a substantial contribution to their ability to support decision making. Respondents from Europe and North America, in particular, are much less likely to place themselves in this top tier.

With 95% of respondents from the Asia/Pacific region also agreeing that pressure is increasing on the finance function to improve its contribution to high-value planning, analysis, and decision-support, these executives appear to be better-positioned than most to meet those expectations.

Read the full report here:

Blog 4 Banner_AsiaPacific

 

Comments

Michael Laprocido

About Michael Laprocido

Mike Laprocido serves as a Strategic Industry Advisor for SAP. He is responsible for developing thought leadership and driving SAP solution adoption in the chemical and oil and gas industries. With over three decades in various executive roles at BP Oil, BP Chemicals, Kuraray America, Panda Energy and IBM prior to joining SAP, Mike has gained a broad and deep industry knowledge base that he leverages to help his clients to innovate and transform their business through the application of digital technology.

A View Into The Future Of Financial Planning And Analysis By Finance Executives From Asia/Pacific Region

Pras Chatterjee

Businesswoman Looking Up --- Image by � Ken Seet/CorbisLeading-edge financial planning systems promise to resolve many of the technical information gaps that have plagued many enterprises. At the same time, finance leaders recognize their own responsibility to gain the maximum value from the robust, real-time analysis these systems can deliver as managers put it to use across the enterprise.

CFO Research conducted a global study sponsored by SAP and surveyed senior finance executives to gain a better understanding of how leading-edge financial planning and business analysis capabilities can support effective decision making. Finance executives from the Asia/Pacific region (including India and Australia) recognize the need to improve their teams’ contributions to high-value FP&A activities will become increasingly urgent in the coming years. The good news is they appear to feel they have the tools and resources they’ll need in order to fulfill that promise.

In the survey, practically all of the finance executives from the Asia/Pacific region (95%) agree that over the next two years, the demand on the finance function to supply highly responsive, interactive, and flexible business analysis to decision-makers is likely to increase. Nearly as many expected the demand for ad-hoc decision support and analysis to increase (90%), and improving the ability to conduct highly sophisticated, predictive business analysis (e.g., scenario planning, “what-if” analysis, risk modeling) would yield substantial, measurable financial benefit to their company (92%).

blog #4 banner

These finance executives believe they are up to the task, however. More than half (53%) of the respondents from the region give the highest marks to their IT systems for financial planning, saying they believe their systems make a substantial contribution to their ability to support decision making. Respondents from Europe and North America, in particular, are much less likely to place themselves in this top tier.

With 95% of respondents from the Asia/Pacific region also agreeing that pressure is increasing on the finance function to improve its contribution to high-value planning, analysis, and decision-support, these executives appear to be better-positioned than most to meet those expectations.

Read the full report here:

Blog 4 Banner_AsiaPacific

 

Comments

How Does Integrated Business Planning Support Strategy Execution?

Chris Grundy

In my initial blog in this series related to integrated business planning (IBP), I described IBP as seamlessly integrating user interfaces and workflows. IBP links strategic, operational, and financial objectives and plans to improve employee alignment with the executive team’s strategy Group Of Business People In Conference Room, Businesswoman Pointing At Presentation Board --- Image by © Eric Audras/PhotoAlto/Corbisand financial performance.

I further referenced how the CFO’s financial function is increasingly contributing its skills and capabilities beyond financial reporting to performing as a strategic advisor and facilitator. In this blog I will discuss issues, needs and solutions related to strategy execution and how IBP is part of the solution.

Measurements are key to aligning employees with the strategy

My career spans 40 years, and I began it as a headquarters strategic planner in the early 1970s for a large U.S. conglomerate with more than 50 divisions. In those days we created forms at headquarters and annually mandated the divisions to complete them as a first draft. They were ten-year strategic plans, and after they were completed we would skeptically interrogate the divisions’ staffs about their plans as if we were law enforcement officers.

That was then, and today is now. That method for strategic planning is archaic and no longer applicable. Why? With today’s increasing volatility, uncertainty, Internet-led communications, and globalization removing trade barriers each new day requires frequent strategic adjustments to anticipate continually changing customer needs, disruptive new technologies, and counter-tactics by competitors.

To complicate matters the frustration that executives have is comparatively less with their strategy formulation, which many executives are reasonably good at, and more with strategy execution. Organizations struggle with aligning the behavior and priorities of their managers and employee teams with the leadership’s usually well-formulated strategy. Organizations strain to determine what correct performance measures, popularly referred to as key performance indicators (KPIs), to select and assign to managers to hold them responsible and accountable including setting target levels for the KPIs. They strain to determine if they can even afford the executive team’s strategy!

To further complicate matters, measurements are not about just monitoring the dials of a strategic balanced scorecard and its cascaded performance measures displayed in operational dashboards. The challenge is with moving the dials. This involves selecting the projects and initiatives as well as the core processes to improve with actions to achieve the organization’s strategic objectives.

IBP provides the capabilities to integrate strategic, operational, and financial objectives and plans. It resolves issues arising when non-integrated plans are produced in silos (e.g., operations, sales, and marketing). When plans are not integrated it is likely the financial projections will be imperfect. Quite simply, they are not in sync.

One aspect of IBP is it links the strategy to the budget, which is rarely the case given the way organizations typically create budgets with rolled-up consolidations of cost center spreadsheets. IBP provides modeling tools to test and validate reality with illusion.

Key concepts with targets, forecasts, and plans

Before describing how IBP supports strategy execution, some key concepts are needed.

Targets are what we would like to happen; these are initially created by producing a forecast. A forecast is what we believe will happen. And plans are then what we intend to do to with actions and changes to strive to achieve our targets.

Affordable strategy execution begins with the executives defining a set of causally linked strategic objectives. A one-page strategy map diagram is today commonly accepted as the means to do this. Today’s software technology replaces PowerPoint strategy diagrams for this, and much more (a topic with which I will conclude this blog). Forecasts of demand (e.g., sales volume and mix) that IBP forces to be consistent as a single source are combined with identified projects, initiatives, and core process improvement actions to achieve the linked strategic objectives.

Several critical steps take place next. KPIs are selected to monitor the progress towards accomplishing each strategic objective, and aspired targets are set for each KPI. At this point, however, the formulated strategy is still just a hypothesis. The CFO’s finance function should next ideally validate if the combinations of spending (i.e., for demand-driven production and the strategy, risk-mitigation, and capital projects) will meet the expected enterprise profits desired by the executives. IBP enables the integration to perform this financial validation test.

IBP reconciles aspirations with reality

When the financial validation step just mentioned is taken, typically the desired profit level will not be attained, and wishful thinking will not solve this. Now the fun part begins. With next-generation budgeting, forecasting, and planning tools, revised plans and changes in assumptions can be made. Analysts can determine where productivity improvements are needed and where customer product mix and volume needs to be changed. And those are only two revisions of many options.

This type of analysis cannot be done with spreadsheets or operational transaction-based software. It cannot be done if silo systems operate in isolation of each other, including disparate data sources. IBP enables timely modeling, what-if scenario analysis, and sensitivity analysis to link the resulting revised strategy to the budget. And of course, budgets become obsolete soon after they are created, so driver-based rolling financial forecasts with updates to all the variables, especially the forecasts, has become the new norm for the CFO’s financial function.

What lies ahead?

Have I yet mentioned business analytics and big data? No, but I will now. Earlier I wrote that strategy diagrams and KPIs should be enabled with software, not in PowerPoints and cumbersome table reports. With IBP, for example, correlation analysis can be applied to prior period KPIs and measure the explanatory value that KPIs have on other KPIs they contribute to and influence. This validates the quality of the KPIs selected. If the correlation is low then select better KPIs that as their target levels are achieved, via aligned employee behavior, the result will then be the strategy execution better matching the formulated strategy the executive team is seeking. Strategy execution then becomes a scientific laboratory, as well as it should.

And with in-memory chip computer power, vast amounts of big data can be modeled at substantial levels of detail.

As I wrote in my initial blog for this IBP blog series, IBP is no longer a “nice-to-have” but rather a critical “must have.” I’ll be continuing this discussion in my next blog on this topic, in which I shall look at on product, channel and customer profitability analysis.

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.

Want more future-focused management strategies? See 3 Steps for Taking Advantage of Business Networks.

Comments

How Does Integrated Business Planning Support Strategy Execution?

Chris Grundy

In my initial blog in this series related to integrated business planning (IBP), I described IBP as seamlessly integrating user interfaces and workflows. IBP links strategic, operational, and financial objectives and plans to improve employee alignment with the executive team’s strategy Group Of Business People In Conference Room, Businesswoman Pointing At Presentation Board --- Image by © Eric Audras/PhotoAlto/Corbisand financial performance.

I further referenced how the CFO’s financial function is increasingly contributing its skills and capabilities beyond financial reporting to performing as a strategic advisor and facilitator. In this blog I will discuss issues, needs and solutions related to strategy execution and how IBP is part of the solution.

Measurements are key to aligning employees with the strategy

My career spans 40 years, and I began it as a headquarters strategic planner in the early 1970s for a large U.S. conglomerate with more than 50 divisions. In those days we created forms at headquarters and annually mandated the divisions to complete them as a first draft. They were ten-year strategic plans, and after they were completed we would skeptically interrogate the divisions’ staffs about their plans as if we were law enforcement officers.

That was then, and today is now. That method for strategic planning is archaic and no longer applicable. Why? With today’s increasing volatility, uncertainty, Internet-led communications, and globalization removing trade barriers each new day requires frequent strategic adjustments to anticipate continually changing customer needs, disruptive new technologies, and counter-tactics by competitors.

To complicate matters the frustration that executives have is comparatively less with their strategy formulation, which many executives are reasonably good at, and more with strategy execution. Organizations struggle with aligning the behavior and priorities of their managers and employee teams with the leadership’s usually well-formulated strategy. Organizations strain to determine what correct performance measures, popularly referred to as key performance indicators (KPIs), to select and assign to managers to hold them responsible and accountable including setting target levels for the KPIs. They strain to determine if they can even afford the executive team’s strategy!

To further complicate matters, measurements are not about just monitoring the dials of a strategic balanced scorecard and its cascaded performance measures displayed in operational dashboards. The challenge is with moving the dials. This involves selecting the projects and initiatives as well as the core processes to improve with actions to achieve the organization’s strategic objectives.

IBP provides the capabilities to integrate strategic, operational, and financial objectives and plans. It resolves issues arising when non-integrated plans are produced in silos (e.g., operations, sales, and marketing). When plans are not integrated it is likely the financial projections will be imperfect. Quite simply, they are not in sync.

One aspect of IBP is it links the strategy to the budget, which is rarely the case given the way organizations typically create budgets with rolled-up consolidations of cost center spreadsheets. IBP provides modeling tools to test and validate reality with illusion.

Key concepts with targets, forecasts, and plans

Before describing how IBP supports strategy execution, some key concepts are needed.

Targets are what we would like to happen; these are initially created by producing a forecast. A forecast is what we believe will happen. And plans are then what we intend to do to with actions and changes to strive to achieve our targets.

Affordable strategy execution begins with the executives defining a set of causally linked strategic objectives. A one-page strategy map diagram is today commonly accepted as the means to do this. Today’s software technology replaces PowerPoint strategy diagrams for this, and much more (a topic with which I will conclude this blog). Forecasts of demand (e.g., sales volume and mix) that IBP forces to be consistent as a single source are combined with identified projects, initiatives, and core process improvement actions to achieve the linked strategic objectives.

Several critical steps take place next. KPIs are selected to monitor the progress towards accomplishing each strategic objective, and aspired targets are set for each KPI. At this point, however, the formulated strategy is still just a hypothesis. The CFO’s finance function should next ideally validate if the combinations of spending (i.e., for demand-driven production and the strategy, risk-mitigation, and capital projects) will meet the expected enterprise profits desired by the executives. IBP enables the integration to perform this financial validation test.

IBP reconciles aspirations with reality

When the financial validation step just mentioned is taken, typically the desired profit level will not be attained, and wishful thinking will not solve this. Now the fun part begins. With next-generation budgeting, forecasting, and planning tools, revised plans and changes in assumptions can be made. Analysts can determine where productivity improvements are needed and where customer product mix and volume needs to be changed. And those are only two revisions of many options.

This type of analysis cannot be done with spreadsheets or operational transaction-based software. It cannot be done if silo systems operate in isolation of each other, including disparate data sources. IBP enables timely modeling, what-if scenario analysis, and sensitivity analysis to link the resulting revised strategy to the budget. And of course, budgets become obsolete soon after they are created, so driver-based rolling financial forecasts with updates to all the variables, especially the forecasts, has become the new norm for the CFO’s financial function.

What lies ahead?

Have I yet mentioned business analytics and big data? No, but I will now. Earlier I wrote that strategy diagrams and KPIs should be enabled with software, not in PowerPoints and cumbersome table reports. With IBP, for example, correlation analysis can be applied to prior period KPIs and measure the explanatory value that KPIs have on other KPIs they contribute to and influence. This validates the quality of the KPIs selected. If the correlation is low then select better KPIs that as their target levels are achieved, via aligned employee behavior, the result will then be the strategy execution better matching the formulated strategy the executive team is seeking. Strategy execution then becomes a scientific laboratory, as well as it should.

And with in-memory chip computer power, vast amounts of big data can be modeled at substantial levels of detail.

As I wrote in my initial blog for this IBP blog series, IBP is no longer a “nice-to-have” but rather a critical “must have.” I’ll be continuing this discussion in my next blog on this topic, in which I shall look at on product, channel and customer profitability analysis.

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.

Want more future-focused management strategies? See 3 Steps for Taking Advantage of Business Networks.

Comments

Konstanze Werle

About Konstanze Werle

Konstanze Werle is a Director of Industries Marketing at SAP. She is a content marketing specialist with a particular focus on the travel and transportation, engineering and construction and real estate industries worldwide. Her goal is to help companies in these industries to simplify their business by sharing latest trends and innovation in their industry.

How Does Integrated Business Planning Support Strategy Execution?

Chris Grundy

In my initial blog in this series related to integrated business planning (IBP), I described IBP as seamlessly integrating user interfaces and workflows. IBP links strategic, operational, and financial objectives and plans to improve employee alignment with the executive team’s strategy Group Of Business People In Conference Room, Businesswoman Pointing At Presentation Board --- Image by © Eric Audras/PhotoAlto/Corbisand financial performance.

I further referenced how the CFO’s financial function is increasingly contributing its skills and capabilities beyond financial reporting to performing as a strategic advisor and facilitator. In this blog I will discuss issues, needs and solutions related to strategy execution and how IBP is part of the solution.

Measurements are key to aligning employees with the strategy

My career spans 40 years, and I began it as a headquarters strategic planner in the early 1970s for a large U.S. conglomerate with more than 50 divisions. In those days we created forms at headquarters and annually mandated the divisions to complete them as a first draft. They were ten-year strategic plans, and after they were completed we would skeptically interrogate the divisions’ staffs about their plans as if we were law enforcement officers.

That was then, and today is now. That method for strategic planning is archaic and no longer applicable. Why? With today’s increasing volatility, uncertainty, Internet-led communications, and globalization removing trade barriers each new day requires frequent strategic adjustments to anticipate continually changing customer needs, disruptive new technologies, and counter-tactics by competitors.

To complicate matters the frustration that executives have is comparatively less with their strategy formulation, which many executives are reasonably good at, and more with strategy execution. Organizations struggle with aligning the behavior and priorities of their managers and employee teams with the leadership’s usually well-formulated strategy. Organizations strain to determine what correct performance measures, popularly referred to as key performance indicators (KPIs), to select and assign to managers to hold them responsible and accountable including setting target levels for the KPIs. They strain to determine if they can even afford the executive team’s strategy!

To further complicate matters, measurements are not about just monitoring the dials of a strategic balanced scorecard and its cascaded performance measures displayed in operational dashboards. The challenge is with moving the dials. This involves selecting the projects and initiatives as well as the core processes to improve with actions to achieve the organization’s strategic objectives.

IBP provides the capabilities to integrate strategic, operational, and financial objectives and plans. It resolves issues arising when non-integrated plans are produced in silos (e.g., operations, sales, and marketing). When plans are not integrated it is likely the financial projections will be imperfect. Quite simply, they are not in sync.

One aspect of IBP is it links the strategy to the budget, which is rarely the case given the way organizations typically create budgets with rolled-up consolidations of cost center spreadsheets. IBP provides modeling tools to test and validate reality with illusion.

Key concepts with targets, forecasts, and plans

Before describing how IBP supports strategy execution, some key concepts are needed.

Targets are what we would like to happen; these are initially created by producing a forecast. A forecast is what we believe will happen. And plans are then what we intend to do to with actions and changes to strive to achieve our targets.

Affordable strategy execution begins with the executives defining a set of causally linked strategic objectives. A one-page strategy map diagram is today commonly accepted as the means to do this. Today’s software technology replaces PowerPoint strategy diagrams for this, and much more (a topic with which I will conclude this blog). Forecasts of demand (e.g., sales volume and mix) that IBP forces to be consistent as a single source are combined with identified projects, initiatives, and core process improvement actions to achieve the linked strategic objectives.

Several critical steps take place next. KPIs are selected to monitor the progress towards accomplishing each strategic objective, and aspired targets are set for each KPI. At this point, however, the formulated strategy is still just a hypothesis. The CFO’s finance function should next ideally validate if the combinations of spending (i.e., for demand-driven production and the strategy, risk-mitigation, and capital projects) will meet the expected enterprise profits desired by the executives. IBP enables the integration to perform this financial validation test.

IBP reconciles aspirations with reality

When the financial validation step just mentioned is taken, typically the desired profit level will not be attained, and wishful thinking will not solve this. Now the fun part begins. With next-generation budgeting, forecasting, and planning tools, revised plans and changes in assumptions can be made. Analysts can determine where productivity improvements are needed and where customer product mix and volume needs to be changed. And those are only two revisions of many options.

This type of analysis cannot be done with spreadsheets or operational transaction-based software. It cannot be done if silo systems operate in isolation of each other, including disparate data sources. IBP enables timely modeling, what-if scenario analysis, and sensitivity analysis to link the resulting revised strategy to the budget. And of course, budgets become obsolete soon after they are created, so driver-based rolling financial forecasts with updates to all the variables, especially the forecasts, has become the new norm for the CFO’s financial function.

What lies ahead?

Have I yet mentioned business analytics and big data? No, but I will now. Earlier I wrote that strategy diagrams and KPIs should be enabled with software, not in PowerPoints and cumbersome table reports. With IBP, for example, correlation analysis can be applied to prior period KPIs and measure the explanatory value that KPIs have on other KPIs they contribute to and influence. This validates the quality of the KPIs selected. If the correlation is low then select better KPIs that as their target levels are achieved, via aligned employee behavior, the result will then be the strategy execution better matching the formulated strategy the executive team is seeking. Strategy execution then becomes a scientific laboratory, as well as it should.

And with in-memory chip computer power, vast amounts of big data can be modeled at substantial levels of detail.

As I wrote in my initial blog for this IBP blog series, IBP is no longer a “nice-to-have” but rather a critical “must have.” I’ll be continuing this discussion in my next blog on this topic, in which I shall look at on product, channel and customer profitability analysis.

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.

Want more future-focused management strategies? See 3 Steps for Taking Advantage of Business Networks.

Comments

Angelica Valentine

About Angelica Valentine

Angelica is the Marketing Manager at Wiser. Wiser collects and analyzes online and in-store data with unmatched speed, scale and accuracy. She is experienced in strategy and creation for cross-channel content. Angelica is passionate about growing engagement and conversion rates through excellent content. Her work has also appeared on VentureBeat, Bigcommerce, Retail Touchpoints, and more. She holds a Bachelor’s degree in Sociology from Barnard College of Columbia University in New York City.

How Does Integrated Business Planning Support Strategy Execution?

Chris Grundy

In my initial blog in this series related to integrated business planning (IBP), I described IBP as seamlessly integrating user interfaces and workflows. IBP links strategic, operational, and financial objectives and plans to improve employee alignment with the executive team’s strategy Group Of Business People In Conference Room, Businesswoman Pointing At Presentation Board --- Image by © Eric Audras/PhotoAlto/Corbisand financial performance.

I further referenced how the CFO’s financial function is increasingly contributing its skills and capabilities beyond financial reporting to performing as a strategic advisor and facilitator. In this blog I will discuss issues, needs and solutions related to strategy execution and how IBP is part of the solution.

Measurements are key to aligning employees with the strategy

My career spans 40 years, and I began it as a headquarters strategic planner in the early 1970s for a large U.S. conglomerate with more than 50 divisions. In those days we created forms at headquarters and annually mandated the divisions to complete them as a first draft. They were ten-year strategic plans, and after they were completed we would skeptically interrogate the divisions’ staffs about their plans as if we were law enforcement officers.

That was then, and today is now. That method for strategic planning is archaic and no longer applicable. Why? With today’s increasing volatility, uncertainty, Internet-led communications, and globalization removing trade barriers each new day requires frequent strategic adjustments to anticipate continually changing customer needs, disruptive new technologies, and counter-tactics by competitors.

To complicate matters the frustration that executives have is comparatively less with their strategy formulation, which many executives are reasonably good at, and more with strategy execution. Organizations struggle with aligning the behavior and priorities of their managers and employee teams with the leadership’s usually well-formulated strategy. Organizations strain to determine what correct performance measures, popularly referred to as key performance indicators (KPIs), to select and assign to managers to hold them responsible and accountable including setting target levels for the KPIs. They strain to determine if they can even afford the executive team’s strategy!

To further complicate matters, measurements are not about just monitoring the dials of a strategic balanced scorecard and its cascaded performance measures displayed in operational dashboards. The challenge is with moving the dials. This involves selecting the projects and initiatives as well as the core processes to improve with actions to achieve the organization’s strategic objectives.

IBP provides the capabilities to integrate strategic, operational, and financial objectives and plans. It resolves issues arising when non-integrated plans are produced in silos (e.g., operations, sales, and marketing). When plans are not integrated it is likely the financial projections will be imperfect. Quite simply, they are not in sync.

One aspect of IBP is it links the strategy to the budget, which is rarely the case given the way organizations typically create budgets with rolled-up consolidations of cost center spreadsheets. IBP provides modeling tools to test and validate reality with illusion.

Key concepts with targets, forecasts, and plans

Before describing how IBP supports strategy execution, some key concepts are needed.

Targets are what we would like to happen; these are initially created by producing a forecast. A forecast is what we believe will happen. And plans are then what we intend to do to with actions and changes to strive to achieve our targets.

Affordable strategy execution begins with the executives defining a set of causally linked strategic objectives. A one-page strategy map diagram is today commonly accepted as the means to do this. Today’s software technology replaces PowerPoint strategy diagrams for this, and much more (a topic with which I will conclude this blog). Forecasts of demand (e.g., sales volume and mix) that IBP forces to be consistent as a single source are combined with identified projects, initiatives, and core process improvement actions to achieve the linked strategic objectives.

Several critical steps take place next. KPIs are selected to monitor the progress towards accomplishing each strategic objective, and aspired targets are set for each KPI. At this point, however, the formulated strategy is still just a hypothesis. The CFO’s finance function should next ideally validate if the combinations of spending (i.e., for demand-driven production and the strategy, risk-mitigation, and capital projects) will meet the expected enterprise profits desired by the executives. IBP enables the integration to perform this financial validation test.

IBP reconciles aspirations with reality

When the financial validation step just mentioned is taken, typically the desired profit level will not be attained, and wishful thinking will not solve this. Now the fun part begins. With next-generation budgeting, forecasting, and planning tools, revised plans and changes in assumptions can be made. Analysts can determine where productivity improvements are needed and where customer product mix and volume needs to be changed. And those are only two revisions of many options.

This type of analysis cannot be done with spreadsheets or operational transaction-based software. It cannot be done if silo systems operate in isolation of each other, including disparate data sources. IBP enables timely modeling, what-if scenario analysis, and sensitivity analysis to link the resulting revised strategy to the budget. And of course, budgets become obsolete soon after they are created, so driver-based rolling financial forecasts with updates to all the variables, especially the forecasts, has become the new norm for the CFO’s financial function.

What lies ahead?

Have I yet mentioned business analytics and big data? No, but I will now. Earlier I wrote that strategy diagrams and KPIs should be enabled with software, not in PowerPoints and cumbersome table reports. With IBP, for example, correlation analysis can be applied to prior period KPIs and measure the explanatory value that KPIs have on other KPIs they contribute to and influence. This validates the quality of the KPIs selected. If the correlation is low then select better KPIs that as their target levels are achieved, via aligned employee behavior, the result will then be the strategy execution better matching the formulated strategy the executive team is seeking. Strategy execution then becomes a scientific laboratory, as well as it should.

And with in-memory chip computer power, vast amounts of big data can be modeled at substantial levels of detail.

As I wrote in my initial blog for this IBP blog series, IBP is no longer a “nice-to-have” but rather a critical “must have.” I’ll be continuing this discussion in my next blog on this topic, in which I shall look at on product, channel and customer profitability analysis.

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.

Want more future-focused management strategies? See 3 Steps for Taking Advantage of Business Networks.

Comments

How Does Integrated Business Planning Support Strategy Execution?

Chris Grundy

In my initial blog in this series related to integrated business planning (IBP), I described IBP as seamlessly integrating user interfaces and workflows. IBP links strategic, operational, and financial objectives and plans to improve employee alignment with the executive team’s strategy Group Of Business People In Conference Room, Businesswoman Pointing At Presentation Board --- Image by © Eric Audras/PhotoAlto/Corbisand financial performance.

I further referenced how the CFO’s financial function is increasingly contributing its skills and capabilities beyond financial reporting to performing as a strategic advisor and facilitator. In this blog I will discuss issues, needs and solutions related to strategy execution and how IBP is part of the solution.

Measurements are key to aligning employees with the strategy

My career spans 40 years, and I began it as a headquarters strategic planner in the early 1970s for a large U.S. conglomerate with more than 50 divisions. In those days we created forms at headquarters and annually mandated the divisions to complete them as a first draft. They were ten-year strategic plans, and after they were completed we would skeptically interrogate the divisions’ staffs about their plans as if we were law enforcement officers.

That was then, and today is now. That method for strategic planning is archaic and no longer applicable. Why? With today’s increasing volatility, uncertainty, Internet-led communications, and globalization removing trade barriers each new day requires frequent strategic adjustments to anticipate continually changing customer needs, disruptive new technologies, and counter-tactics by competitors.

To complicate matters the frustration that executives have is comparatively less with their strategy formulation, which many executives are reasonably good at, and more with strategy execution. Organizations struggle with aligning the behavior and priorities of their managers and employee teams with the leadership’s usually well-formulated strategy. Organizations strain to determine what correct performance measures, popularly referred to as key performance indicators (KPIs), to select and assign to managers to hold them responsible and accountable including setting target levels for the KPIs. They strain to determine if they can even afford the executive team’s strategy!

To further complicate matters, measurements are not about just monitoring the dials of a strategic balanced scorecard and its cascaded performance measures displayed in operational dashboards. The challenge is with moving the dials. This involves selecting the projects and initiatives as well as the core processes to improve with actions to achieve the organization’s strategic objectives.

IBP provides the capabilities to integrate strategic, operational, and financial objectives and plans. It resolves issues arising when non-integrated plans are produced in silos (e.g., operations, sales, and marketing). When plans are not integrated it is likely the financial projections will be imperfect. Quite simply, they are not in sync.

One aspect of IBP is it links the strategy to the budget, which is rarely the case given the way organizations typically create budgets with rolled-up consolidations of cost center spreadsheets. IBP provides modeling tools to test and validate reality with illusion.

Key concepts with targets, forecasts, and plans

Before describing how IBP supports strategy execution, some key concepts are needed.

Targets are what we would like to happen; these are initially created by producing a forecast. A forecast is what we believe will happen. And plans are then what we intend to do to with actions and changes to strive to achieve our targets.

Affordable strategy execution begins with the executives defining a set of causally linked strategic objectives. A one-page strategy map diagram is today commonly accepted as the means to do this. Today’s software technology replaces PowerPoint strategy diagrams for this, and much more (a topic with which I will conclude this blog). Forecasts of demand (e.g., sales volume and mix) that IBP forces to be consistent as a single source are combined with identified projects, initiatives, and core process improvement actions to achieve the linked strategic objectives.

Several critical steps take place next. KPIs are selected to monitor the progress towards accomplishing each strategic objective, and aspired targets are set for each KPI. At this point, however, the formulated strategy is still just a hypothesis. The CFO’s finance function should next ideally validate if the combinations of spending (i.e., for demand-driven production and the strategy, risk-mitigation, and capital projects) will meet the expected enterprise profits desired by the executives. IBP enables the integration to perform this financial validation test.

IBP reconciles aspirations with reality

When the financial validation step just mentioned is taken, typically the desired profit level will not be attained, and wishful thinking will not solve this. Now the fun part begins. With next-generation budgeting, forecasting, and planning tools, revised plans and changes in assumptions can be made. Analysts can determine where productivity improvements are needed and where customer product mix and volume needs to be changed. And those are only two revisions of many options.

This type of analysis cannot be done with spreadsheets or operational transaction-based software. It cannot be done if silo systems operate in isolation of each other, including disparate data sources. IBP enables timely modeling, what-if scenario analysis, and sensitivity analysis to link the resulting revised strategy to the budget. And of course, budgets become obsolete soon after they are created, so driver-based rolling financial forecasts with updates to all the variables, especially the forecasts, has become the new norm for the CFO’s financial function.

What lies ahead?

Have I yet mentioned business analytics and big data? No, but I will now. Earlier I wrote that strategy diagrams and KPIs should be enabled with software, not in PowerPoints and cumbersome table reports. With IBP, for example, correlation analysis can be applied to prior period KPIs and measure the explanatory value that KPIs have on other KPIs they contribute to and influence. This validates the quality of the KPIs selected. If the correlation is low then select better KPIs that as their target levels are achieved, via aligned employee behavior, the result will then be the strategy execution better matching the formulated strategy the executive team is seeking. Strategy execution then becomes a scientific laboratory, as well as it should.

And with in-memory chip computer power, vast amounts of big data can be modeled at substantial levels of detail.

As I wrote in my initial blog for this IBP blog series, IBP is no longer a “nice-to-have” but rather a critical “must have.” I’ll be continuing this discussion in my next blog on this topic, in which I shall look at on product, channel and customer profitability analysis.

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.

Want more future-focused management strategies? See 3 Steps for Taking Advantage of Business Networks.

Comments

Uli Muench

About Uli Muench

Uli Muench is Global Vice President of the Automotive Industry Business Unit at SAP.

How Does Integrated Business Planning Support Strategy Execution?

Chris Grundy

In my initial blog in this series related to integrated business planning (IBP), I described IBP as seamlessly integrating user interfaces and workflows. IBP links strategic, operational, and financial objectives and plans to improve employee alignment with the executive team’s strategy Group Of Business People In Conference Room, Businesswoman Pointing At Presentation Board --- Image by © Eric Audras/PhotoAlto/Corbisand financial performance.

I further referenced how the CFO’s financial function is increasingly contributing its skills and capabilities beyond financial reporting to performing as a strategic advisor and facilitator. In this blog I will discuss issues, needs and solutions related to strategy execution and how IBP is part of the solution.

Measurements are key to aligning employees with the strategy

My career spans 40 years, and I began it as a headquarters strategic planner in the early 1970s for a large U.S. conglomerate with more than 50 divisions. In those days we created forms at headquarters and annually mandated the divisions to complete them as a first draft. They were ten-year strategic plans, and after they were completed we would skeptically interrogate the divisions’ staffs about their plans as if we were law enforcement officers.

That was then, and today is now. That method for strategic planning is archaic and no longer applicable. Why? With today’s increasing volatility, uncertainty, Internet-led communications, and globalization removing trade barriers each new day requires frequent strategic adjustments to anticipate continually changing customer needs, disruptive new technologies, and counter-tactics by competitors.

To complicate matters the frustration that executives have is comparatively less with their strategy formulation, which many executives are reasonably good at, and more with strategy execution. Organizations struggle with aligning the behavior and priorities of their managers and employee teams with the leadership’s usually well-formulated strategy. Organizations strain to determine what correct performance measures, popularly referred to as key performance indicators (KPIs), to select and assign to managers to hold them responsible and accountable including setting target levels for the KPIs. They strain to determine if they can even afford the executive team’s strategy!

To further complicate matters, measurements are not about just monitoring the dials of a strategic balanced scorecard and its cascaded performance measures displayed in operational dashboards. The challenge is with moving the dials. This involves selecting the projects and initiatives as well as the core processes to improve with actions to achieve the organization’s strategic objectives.

IBP provides the capabilities to integrate strategic, operational, and financial objectives and plans. It resolves issues arising when non-integrated plans are produced in silos (e.g., operations, sales, and marketing). When plans are not integrated it is likely the financial projections will be imperfect. Quite simply, they are not in sync.

One aspect of IBP is it links the strategy to the budget, which is rarely the case given the way organizations typically create budgets with rolled-up consolidations of cost center spreadsheets. IBP provides modeling tools to test and validate reality with illusion.

Key concepts with targets, forecasts, and plans

Before describing how IBP supports strategy execution, some key concepts are needed.

Targets are what we would like to happen; these are initially created by producing a forecast. A forecast is what we believe will happen. And plans are then what we intend to do to with actions and changes to strive to achieve our targets.

Affordable strategy execution begins with the executives defining a set of causally linked strategic objectives. A one-page strategy map diagram is today commonly accepted as the means to do this. Today’s software technology replaces PowerPoint strategy diagrams for this, and much more (a topic with which I will conclude this blog). Forecasts of demand (e.g., sales volume and mix) that IBP forces to be consistent as a single source are combined with identified projects, initiatives, and core process improvement actions to achieve the linked strategic objectives.

Several critical steps take place next. KPIs are selected to monitor the progress towards accomplishing each strategic objective, and aspired targets are set for each KPI. At this point, however, the formulated strategy is still just a hypothesis. The CFO’s finance function should next ideally validate if the combinations of spending (i.e., for demand-driven production and the strategy, risk-mitigation, and capital projects) will meet the expected enterprise profits desired by the executives. IBP enables the integration to perform this financial validation test.

IBP reconciles aspirations with reality

When the financial validation step just mentioned is taken, typically the desired profit level will not be attained, and wishful thinking will not solve this. Now the fun part begins. With next-generation budgeting, forecasting, and planning tools, revised plans and changes in assumptions can be made. Analysts can determine where productivity improvements are needed and where customer product mix and volume needs to be changed. And those are only two revisions of many options.

This type of analysis cannot be done with spreadsheets or operational transaction-based software. It cannot be done if silo systems operate in isolation of each other, including disparate data sources. IBP enables timely modeling, what-if scenario analysis, and sensitivity analysis to link the resulting revised strategy to the budget. And of course, budgets become obsolete soon after they are created, so driver-based rolling financial forecasts with updates to all the variables, especially the forecasts, has become the new norm for the CFO’s financial function.

What lies ahead?

Have I yet mentioned business analytics and big data? No, but I will now. Earlier I wrote that strategy diagrams and KPIs should be enabled with software, not in PowerPoints and cumbersome table reports. With IBP, for example, correlation analysis can be applied to prior period KPIs and measure the explanatory value that KPIs have on other KPIs they contribute to and influence. This validates the quality of the KPIs selected. If the correlation is low then select better KPIs that as their target levels are achieved, via aligned employee behavior, the result will then be the strategy execution better matching the formulated strategy the executive team is seeking. Strategy execution then becomes a scientific laboratory, as well as it should.

And with in-memory chip computer power, vast amounts of big data can be modeled at substantial levels of detail.

As I wrote in my initial blog for this IBP blog series, IBP is no longer a “nice-to-have” but rather a critical “must have.” I’ll be continuing this discussion in my next blog on this topic, in which I shall look at on product, channel and customer profitability analysis.

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.

Want more future-focused management strategies? See 3 Steps for Taking Advantage of Business Networks.

Comments

How Does Integrated Business Planning Support Strategy Execution?

Chris Grundy

In my initial blog in this series related to integrated business planning (IBP), I described IBP as seamlessly integrating user interfaces and workflows. IBP links strategic, operational, and financial objectives and plans to improve employee alignment with the executive team’s strategy Group Of Business People In Conference Room, Businesswoman Pointing At Presentation Board --- Image by © Eric Audras/PhotoAlto/Corbisand financial performance.

I further referenced how the CFO’s financial function is increasingly contributing its skills and capabilities beyond financial reporting to performing as a strategic advisor and facilitator. In this blog I will discuss issues, needs and solutions related to strategy execution and how IBP is part of the solution.

Measurements are key to aligning employees with the strategy

My career spans 40 years, and I began it as a headquarters strategic planner in the early 1970s for a large U.S. conglomerate with more than 50 divisions. In those days we created forms at headquarters and annually mandated the divisions to complete them as a first draft. They were ten-year strategic plans, and after they were completed we would skeptically interrogate the divisions’ staffs about their plans as if we were law enforcement officers.

That was then, and today is now. That method for strategic planning is archaic and no longer applicable. Why? With today’s increasing volatility, uncertainty, Internet-led communications, and globalization removing trade barriers each new day requires frequent strategic adjustments to anticipate continually changing customer needs, disruptive new technologies, and counter-tactics by competitors.

To complicate matters the frustration that executives have is comparatively less with their strategy formulation, which many executives are reasonably good at, and more with strategy execution. Organizations struggle with aligning the behavior and priorities of their managers and employee teams with the leadership’s usually well-formulated strategy. Organizations strain to determine what correct performance measures, popularly referred to as key performance indicators (KPIs), to select and assign to managers to hold them responsible and accountable including setting target levels for the KPIs. They strain to determine if they can even afford the executive team’s strategy!

To further complicate matters, measurements are not about just monitoring the dials of a strategic balanced scorecard and its cascaded performance measures displayed in operational dashboards. The challenge is with moving the dials. This involves selecting the projects and initiatives as well as the core processes to improve with actions to achieve the organization’s strategic objectives.

IBP provides the capabilities to integrate strategic, operational, and financial objectives and plans. It resolves issues arising when non-integrated plans are produced in silos (e.g., operations, sales, and marketing). When plans are not integrated it is likely the financial projections will be imperfect. Quite simply, they are not in sync.

One aspect of IBP is it links the strategy to the budget, which is rarely the case given the way organizations typically create budgets with rolled-up consolidations of cost center spreadsheets. IBP provides modeling tools to test and validate reality with illusion.

Key concepts with targets, forecasts, and plans

Before describing how IBP supports strategy execution, some key concepts are needed.

Targets are what we would like to happen; these are initially created by producing a forecast. A forecast is what we believe will happen. And plans are then what we intend to do to with actions and changes to strive to achieve our targets.

Affordable strategy execution begins with the executives defining a set of causally linked strategic objectives. A one-page strategy map diagram is today commonly accepted as the means to do this. Today’s software technology replaces PowerPoint strategy diagrams for this, and much more (a topic with which I will conclude this blog). Forecasts of demand (e.g., sales volume and mix) that IBP forces to be consistent as a single source are combined with identified projects, initiatives, and core process improvement actions to achieve the linked strategic objectives.

Several critical steps take place next. KPIs are selected to monitor the progress towards accomplishing each strategic objective, and aspired targets are set for each KPI. At this point, however, the formulated strategy is still just a hypothesis. The CFO’s finance function should next ideally validate if the combinations of spending (i.e., for demand-driven production and the strategy, risk-mitigation, and capital projects) will meet the expected enterprise profits desired by the executives. IBP enables the integration to perform this financial validation test.

IBP reconciles aspirations with reality

When the financial validation step just mentioned is taken, typically the desired profit level will not be attained, and wishful thinking will not solve this. Now the fun part begins. With next-generation budgeting, forecasting, and planning tools, revised plans and changes in assumptions can be made. Analysts can determine where productivity improvements are needed and where customer product mix and volume needs to be changed. And those are only two revisions of many options.

This type of analysis cannot be done with spreadsheets or operational transaction-based software. It cannot be done if silo systems operate in isolation of each other, including disparate data sources. IBP enables timely modeling, what-if scenario analysis, and sensitivity analysis to link the resulting revised strategy to the budget. And of course, budgets become obsolete soon after they are created, so driver-based rolling financial forecasts with updates to all the variables, especially the forecasts, has become the new norm for the CFO’s financial function.

What lies ahead?

Have I yet mentioned business analytics and big data? No, but I will now. Earlier I wrote that strategy diagrams and KPIs should be enabled with software, not in PowerPoints and cumbersome table reports. With IBP, for example, correlation analysis can be applied to prior period KPIs and measure the explanatory value that KPIs have on other KPIs they contribute to and influence. This validates the quality of the KPIs selected. If the correlation is low then select better KPIs that as their target levels are achieved, via aligned employee behavior, the result will then be the strategy execution better matching the formulated strategy the executive team is seeking. Strategy execution then becomes a scientific laboratory, as well as it should.

And with in-memory chip computer power, vast amounts of big data can be modeled at substantial levels of detail.

As I wrote in my initial blog for this IBP blog series, IBP is no longer a “nice-to-have” but rather a critical “must have.” I’ll be continuing this discussion in my next blog on this topic, in which I shall look at on product, channel and customer profitability analysis.

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.

Want more future-focused management strategies? See 3 Steps for Taking Advantage of Business Networks.

Comments

Shawn Slack

About Shawn Slack

Shawn Slack is the Director of Information Technology and Chief Information Officer for the City of Mississauga.

How Does Integrated Business Planning Support Strategy Execution?

Chris Grundy

In my initial blog in this series related to integrated business planning (IBP), I described IBP as seamlessly integrating user interfaces and workflows. IBP links strategic, operational, and financial objectives and plans to improve employee alignment with the executive team’s strategy Group Of Business People In Conference Room, Businesswoman Pointing At Presentation Board --- Image by © Eric Audras/PhotoAlto/Corbisand financial performance.

I further referenced how the CFO’s financial function is increasingly contributing its skills and capabilities beyond financial reporting to performing as a strategic advisor and facilitator. In this blog I will discuss issues, needs and solutions related to strategy execution and how IBP is part of the solution.

Measurements are key to aligning employees with the strategy

My career spans 40 years, and I began it as a headquarters strategic planner in the early 1970s for a large U.S. conglomerate with more than 50 divisions. In those days we created forms at headquarters and annually mandated the divisions to complete them as a first draft. They were ten-year strategic plans, and after they were completed we would skeptically interrogate the divisions’ staffs about their plans as if we were law enforcement officers.

That was then, and today is now. That method for strategic planning is archaic and no longer applicable. Why? With today’s increasing volatility, uncertainty, Internet-led communications, and globalization removing trade barriers each new day requires frequent strategic adjustments to anticipate continually changing customer needs, disruptive new technologies, and counter-tactics by competitors.

To complicate matters the frustration that executives have is comparatively less with their strategy formulation, which many executives are reasonably good at, and more with strategy execution. Organizations struggle with aligning the behavior and priorities of their managers and employee teams with the leadership’s usually well-formulated strategy. Organizations strain to determine what correct performance measures, popularly referred to as key performance indicators (KPIs), to select and assign to managers to hold them responsible and accountable including setting target levels for the KPIs. They strain to determine if they can even afford the executive team’s strategy!

To further complicate matters, measurements are not about just monitoring the dials of a strategic balanced scorecard and its cascaded performance measures displayed in operational dashboards. The challenge is with moving the dials. This involves selecting the projects and initiatives as well as the core processes to improve with actions to achieve the organization’s strategic objectives.

IBP provides the capabilities to integrate strategic, operational, and financial objectives and plans. It resolves issues arising when non-integrated plans are produced in silos (e.g., operations, sales, and marketing). When plans are not integrated it is likely the financial projections will be imperfect. Quite simply, they are not in sync.

One aspect of IBP is it links the strategy to the budget, which is rarely the case given the way organizations typically create budgets with rolled-up consolidations of cost center spreadsheets. IBP provides modeling tools to test and validate reality with illusion.

Key concepts with targets, forecasts, and plans

Before describing how IBP supports strategy execution, some key concepts are needed.

Targets are what we would like to happen; these are initially created by producing a forecast. A forecast is what we believe will happen. And plans are then what we intend to do to with actions and changes to strive to achieve our targets.

Affordable strategy execution begins with the executives defining a set of causally linked strategic objectives. A one-page strategy map diagram is today commonly accepted as the means to do this. Today’s software technology replaces PowerPoint strategy diagrams for this, and much more (a topic with which I will conclude this blog). Forecasts of demand (e.g., sales volume and mix) that IBP forces to be consistent as a single source are combined with identified projects, initiatives, and core process improvement actions to achieve the linked strategic objectives.

Several critical steps take place next. KPIs are selected to monitor the progress towards accomplishing each strategic objective, and aspired targets are set for each KPI. At this point, however, the formulated strategy is still just a hypothesis. The CFO’s finance function should next ideally validate if the combinations of spending (i.e., for demand-driven production and the strategy, risk-mitigation, and capital projects) will meet the expected enterprise profits desired by the executives. IBP enables the integration to perform this financial validation test.

IBP reconciles aspirations with reality

When the financial validation step just mentioned is taken, typically the desired profit level will not be attained, and wishful thinking will not solve this. Now the fun part begins. With next-generation budgeting, forecasting, and planning tools, revised plans and changes in assumptions can be made. Analysts can determine where productivity improvements are needed and where customer product mix and volume needs to be changed. And those are only two revisions of many options.

This type of analysis cannot be done with spreadsheets or operational transaction-based software. It cannot be done if silo systems operate in isolation of each other, including disparate data sources. IBP enables timely modeling, what-if scenario analysis, and sensitivity analysis to link the resulting revised strategy to the budget. And of course, budgets become obsolete soon after they are created, so driver-based rolling financial forecasts with updates to all the variables, especially the forecasts, has become the new norm for the CFO’s financial function.

What lies ahead?

Have I yet mentioned business analytics and big data? No, but I will now. Earlier I wrote that strategy diagrams and KPIs should be enabled with software, not in PowerPoints and cumbersome table reports. With IBP, for example, correlation analysis can be applied to prior period KPIs and measure the explanatory value that KPIs have on other KPIs they contribute to and influence. This validates the quality of the KPIs selected. If the correlation is low then select better KPIs that as their target levels are achieved, via aligned employee behavior, the result will then be the strategy execution better matching the formulated strategy the executive team is seeking. Strategy execution then becomes a scientific laboratory, as well as it should.

And with in-memory chip computer power, vast amounts of big data can be modeled at substantial levels of detail.

As I wrote in my initial blog for this IBP blog series, IBP is no longer a “nice-to-have” but rather a critical “must have.” I’ll be continuing this discussion in my next blog on this topic, in which I shall look at on product, channel and customer profitability analysis.

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.

Want more future-focused management strategies? See 3 Steps for Taking Advantage of Business Networks.

Comments

Daniel Schmid

About Daniel Schmid

Daniel Schmid was appointed Chief Sustainability Officer at SAP in 2014. Since 2008 he has been engaged in transforming SAP into a role model of a sustainable organization, establishing mid and long term sustainability targets. Linking non-financial and financial performance are key achievements of Daniel and his team.

How Does Integrated Business Planning Support Strategy Execution?

Chris Grundy

In my initial blog in this series related to integrated business planning (IBP), I described IBP as seamlessly integrating user interfaces and workflows. IBP links strategic, operational, and financial objectives and plans to improve employee alignment with the executive team’s strategy Group Of Business People In Conference Room, Businesswoman Pointing At Presentation Board --- Image by © Eric Audras/PhotoAlto/Corbisand financial performance.

I further referenced how the CFO’s financial function is increasingly contributing its skills and capabilities beyond financial reporting to performing as a strategic advisor and facilitator. In this blog I will discuss issues, needs and solutions related to strategy execution and how IBP is part of the solution.

Measurements are key to aligning employees with the strategy

My career spans 40 years, and I began it as a headquarters strategic planner in the early 1970s for a large U.S. conglomerate with more than 50 divisions. In those days we created forms at headquarters and annually mandated the divisions to complete them as a first draft. They were ten-year strategic plans, and after they were completed we would skeptically interrogate the divisions’ staffs about their plans as if we were law enforcement officers.

That was then, and today is now. That method for strategic planning is archaic and no longer applicable. Why? With today’s increasing volatility, uncertainty, Internet-led communications, and globalization removing trade barriers each new day requires frequent strategic adjustments to anticipate continually changing customer needs, disruptive new technologies, and counter-tactics by competitors.

To complicate matters the frustration that executives have is comparatively less with their strategy formulation, which many executives are reasonably good at, and more with strategy execution. Organizations struggle with aligning the behavior and priorities of their managers and employee teams with the leadership’s usually well-formulated strategy. Organizations strain to determine what correct performance measures, popularly referred to as key performance indicators (KPIs), to select and assign to managers to hold them responsible and accountable including setting target levels for the KPIs. They strain to determine if they can even afford the executive team’s strategy!

To further complicate matters, measurements are not about just monitoring the dials of a strategic balanced scorecard and its cascaded performance measures displayed in operational dashboards. The challenge is with moving the dials. This involves selecting the projects and initiatives as well as the core processes to improve with actions to achieve the organization’s strategic objectives.

IBP provides the capabilities to integrate strategic, operational, and financial objectives and plans. It resolves issues arising when non-integrated plans are produced in silos (e.g., operations, sales, and marketing). When plans are not integrated it is likely the financial projections will be imperfect. Quite simply, they are not in sync.

One aspect of IBP is it links the strategy to the budget, which is rarely the case given the way organizations typically create budgets with rolled-up consolidations of cost center spreadsheets. IBP provides modeling tools to test and validate reality with illusion.

Key concepts with targets, forecasts, and plans

Before describing how IBP supports strategy execution, some key concepts are needed.

Targets are what we would like to happen; these are initially created by producing a forecast. A forecast is what we believe will happen. And plans are then what we intend to do to with actions and changes to strive to achieve our targets.

Affordable strategy execution begins with the executives defining a set of causally linked strategic objectives. A one-page strategy map diagram is today commonly accepted as the means to do this. Today’s software technology replaces PowerPoint strategy diagrams for this, and much more (a topic with which I will conclude this blog). Forecasts of demand (e.g., sales volume and mix) that IBP forces to be consistent as a single source are combined with identified projects, initiatives, and core process improvement actions to achieve the linked strategic objectives.

Several critical steps take place next. KPIs are selected to monitor the progress towards accomplishing each strategic objective, and aspired targets are set for each KPI. At this point, however, the formulated strategy is still just a hypothesis. The CFO’s finance function should next ideally validate if the combinations of spending (i.e., for demand-driven production and the strategy, risk-mitigation, and capital projects) will meet the expected enterprise profits desired by the executives. IBP enables the integration to perform this financial validation test.

IBP reconciles aspirations with reality

When the financial validation step just mentioned is taken, typically the desired profit level will not be attained, and wishful thinking will not solve this. Now the fun part begins. With next-generation budgeting, forecasting, and planning tools, revised plans and changes in assumptions can be made. Analysts can determine where productivity improvements are needed and where customer product mix and volume needs to be changed. And those are only two revisions of many options.

This type of analysis cannot be done with spreadsheets or operational transaction-based software. It cannot be done if silo systems operate in isolation of each other, including disparate data sources. IBP enables timely modeling, what-if scenario analysis, and sensitivity analysis to link the resulting revised strategy to the budget. And of course, budgets become obsolete soon after they are created, so driver-based rolling financial forecasts with updates to all the variables, especially the forecasts, has become the new norm for the CFO’s financial function.

What lies ahead?

Have I yet mentioned business analytics and big data? No, but I will now. Earlier I wrote that strategy diagrams and KPIs should be enabled with software, not in PowerPoints and cumbersome table reports. With IBP, for example, correlation analysis can be applied to prior period KPIs and measure the explanatory value that KPIs have on other KPIs they contribute to and influence. This validates the quality of the KPIs selected. If the correlation is low then select better KPIs that as their target levels are achieved, via aligned employee behavior, the result will then be the strategy execution better matching the formulated strategy the executive team is seeking. Strategy execution then becomes a scientific laboratory, as well as it should.

And with in-memory chip computer power, vast amounts of big data can be modeled at substantial levels of detail.

As I wrote in my initial blog for this IBP blog series, IBP is no longer a “nice-to-have” but rather a critical “must have.” I’ll be continuing this discussion in my next blog on this topic, in which I shall look at on product, channel and customer profitability analysis.

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.

Want more future-focused management strategies? See 3 Steps for Taking Advantage of Business Networks.

Comments

Michael Laprocido

About Michael Laprocido

Mike Laprocido serves as a Strategic Industry Advisor for SAP. He is responsible for developing thought leadership and driving SAP solution adoption in the chemical and oil and gas industries. With over three decades in various executive roles at BP Oil, BP Chemicals, Kuraray America, Panda Energy and IBM prior to joining SAP, Mike has gained a broad and deep industry knowledge base that he leverages to help his clients to innovate and transform their business through the application of digital technology.

How Does Integrated Business Planning Support Strategy Execution?

Chris Grundy

In my initial blog in this series related to integrated business planning (IBP), I described IBP as seamlessly integrating user interfaces and workflows. IBP links strategic, operational, and financial objectives and plans to improve employee alignment with the executive team’s strategy Group Of Business People In Conference Room, Businesswoman Pointing At Presentation Board --- Image by © Eric Audras/PhotoAlto/Corbisand financial performance.

I further referenced how the CFO’s financial function is increasingly contributing its skills and capabilities beyond financial reporting to performing as a strategic advisor and facilitator. In this blog I will discuss issues, needs and solutions related to strategy execution and how IBP is part of the solution.

Measurements are key to aligning employees with the strategy

My career spans 40 years, and I began it as a headquarters strategic planner in the early 1970s for a large U.S. conglomerate with more than 50 divisions. In those days we created forms at headquarters and annually mandated the divisions to complete them as a first draft. They were ten-year strategic plans, and after they were completed we would skeptically interrogate the divisions’ staffs about their plans as if we were law enforcement officers.

That was then, and today is now. That method for strategic planning is archaic and no longer applicable. Why? With today’s increasing volatility, uncertainty, Internet-led communications, and globalization removing trade barriers each new day requires frequent strategic adjustments to anticipate continually changing customer needs, disruptive new technologies, and counter-tactics by competitors.

To complicate matters the frustration that executives have is comparatively less with their strategy formulation, which many executives are reasonably good at, and more with strategy execution. Organizations struggle with aligning the behavior and priorities of their managers and employee teams with the leadership’s usually well-formulated strategy. Organizations strain to determine what correct performance measures, popularly referred to as key performance indicators (KPIs), to select and assign to managers to hold them responsible and accountable including setting target levels for the KPIs. They strain to determine if they can even afford the executive team’s strategy!

To further complicate matters, measurements are not about just monitoring the dials of a strategic balanced scorecard and its cascaded performance measures displayed in operational dashboards. The challenge is with moving the dials. This involves selecting the projects and initiatives as well as the core processes to improve with actions to achieve the organization’s strategic objectives.

IBP provides the capabilities to integrate strategic, operational, and financial objectives and plans. It resolves issues arising when non-integrated plans are produced in silos (e.g., operations, sales, and marketing). When plans are not integrated it is likely the financial projections will be imperfect. Quite simply, they are not in sync.

One aspect of IBP is it links the strategy to the budget, which is rarely the case given the way organizations typically create budgets with rolled-up consolidations of cost center spreadsheets. IBP provides modeling tools to test and validate reality with illusion.

Key concepts with targets, forecasts, and plans

Before describing how IBP supports strategy execution, some key concepts are needed.

Targets are what we would like to happen; these are initially created by producing a forecast. A forecast is what we believe will happen. And plans are then what we intend to do to with actions and changes to strive to achieve our targets.

Affordable strategy execution begins with the executives defining a set of causally linked strategic objectives. A one-page strategy map diagram is today commonly accepted as the means to do this. Today’s software technology replaces PowerPoint strategy diagrams for this, and much more (a topic with which I will conclude this blog). Forecasts of demand (e.g., sales volume and mix) that IBP forces to be consistent as a single source are combined with identified projects, initiatives, and core process improvement actions to achieve the linked strategic objectives.

Several critical steps take place next. KPIs are selected to monitor the progress towards accomplishing each strategic objective, and aspired targets are set for each KPI. At this point, however, the formulated strategy is still just a hypothesis. The CFO’s finance function should next ideally validate if the combinations of spending (i.e., for demand-driven production and the strategy, risk-mitigation, and capital projects) will meet the expected enterprise profits desired by the executives. IBP enables the integration to perform this financial validation test.

IBP reconciles aspirations with reality

When the financial validation step just mentioned is taken, typically the desired profit level will not be attained, and wishful thinking will not solve this. Now the fun part begins. With next-generation budgeting, forecasting, and planning tools, revised plans and changes in assumptions can be made. Analysts can determine where productivity improvements are needed and where customer product mix and volume needs to be changed. And those are only two revisions of many options.

This type of analysis cannot be done with spreadsheets or operational transaction-based software. It cannot be done if silo systems operate in isolation of each other, including disparate data sources. IBP enables timely modeling, what-if scenario analysis, and sensitivity analysis to link the resulting revised strategy to the budget. And of course, budgets become obsolete soon after they are created, so driver-based rolling financial forecasts with updates to all the variables, especially the forecasts, has become the new norm for the CFO’s financial function.

What lies ahead?

Have I yet mentioned business analytics and big data? No, but I will now. Earlier I wrote that strategy diagrams and KPIs should be enabled with software, not in PowerPoints and cumbersome table reports. With IBP, for example, correlation analysis can be applied to prior period KPIs and measure the explanatory value that KPIs have on other KPIs they contribute to and influence. This validates the quality of the KPIs selected. If the correlation is low then select better KPIs that as their target levels are achieved, via aligned employee behavior, the result will then be the strategy execution better matching the formulated strategy the executive team is seeking. Strategy execution then becomes a scientific laboratory, as well as it should.

And with in-memory chip computer power, vast amounts of big data can be modeled at substantial levels of detail.

As I wrote in my initial blog for this IBP blog series, IBP is no longer a “nice-to-have” but rather a critical “must have.” I’ll be continuing this discussion in my next blog on this topic, in which I shall look at on product, channel and customer profitability analysis.

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.

Want more future-focused management strategies? See 3 Steps for Taking Advantage of Business Networks.

Comments

Hack the CIO

By Thomas Saueressig, Timo Elliott, Sam Yen, and Bennett Voyles

For nerds, the weeks right before finals are a Cinderella moment. Suddenly they’re stars. Pocket protectors are fashionable; people find their jokes a whole lot funnier; Dungeons & Dragons sounds cool.

Many CIOs are enjoying this kind of moment now, as companies everywhere face the business equivalent of a final exam for a vital class they have managed to mostly avoid so far: digital transformation.

But as always, there is a limit to nerdy magic. No matter how helpful CIOs try to be, their classmates still won’t pass if they don’t learn the material. With IT increasingly central to every business—from the customer experience to the offering to the business model itself—we all need to start thinking like CIOs.

Pass the digital transformation exam, and you probably have a bright future ahead. A recent SAP-Oxford Economics study of 3,100 organizations in a variety of industries across 17 countries found that the companies that have taken the lead in digital transformation earn higher profits and revenues and have more competitive differentiation than their peers. They also expect 23% more revenue growth from their digital initiatives over the next two years—an estimate 2.5 to 4 times larger than the average company’s.

But the market is grading on a steep curve: this same SAP-Oxford study found that only 3% have completed some degree of digital transformation across their organization. Other surveys also suggest that most companies won’t be graduating anytime soon: in one recent survey of 450 heads of digital transformation for enterprises in the United States, United Kingdom, France, and Germany by technology company Couchbase, 90% agreed that most digital projects fail to meet expectations and deliver only incremental improvements. Worse: over half (54%) believe that organizations that don’t succeed with their transformation project will fail or be absorbed by a savvier competitor within four years.

Companies that are making the grade understand that unlike earlier technical advances, digital transformation doesn’t just support the business, it’s the future of the business. That’s why 60% of digital leading companies have entrusted the leadership of their transformation to their CIO, and that’s why experts say businesspeople must do more than have a vague understanding of the technology. They must also master a way of thinking and looking at business challenges that is unfamiliar to most people outside the IT department.

In other words, if you don’t think like a CIO yet, now is a very good time to learn.

However, given that you probably don’t have a spare 15 years to learn what your CIO knows, we asked the experts what makes CIO thinking distinctive. Here are the top eight mind hacks.

1. Think in Systems

A lot of businesspeople are used to seeing their organization as a series of loosely joined silos. But in the world of digital business, everything is part of a larger system.

CIOs have known for a long time that smart processes win. Whether they were installing enterprise resource planning systems or working with the business to imagine the customer’s journey, they always had to think in holistic ways that crossed traditional departmental, functional, and operational boundaries.

Unlike other business leaders, CIOs spend their careers looking across systems. Why did our supply chain go down? How can we support this new business initiative beyond a single department or function? Now supported by end-to-end process methodologies such as design thinking, good CIOs have developed a way of looking at the company that can lead to radical simplifications that can reduce cost and improve performance at the same time.

They are also used to thinking beyond temporal boundaries. “This idea that the power of technology doubles every two years means that as you’re planning ahead you can’t think in terms of a linear process, you have to think in terms of huge jumps,” says Jay Ferro, CIO of TransPerfect, a New York–based global translation firm.

No wonder the SAP-Oxford transformation study found that one of the values transformational leaders shared was a tendency to look beyond silos and view the digital transformation as a company-wide initiative.

This will come in handy because in digital transformation, not only do business processes evolve but the company’s entire value proposition changes, says Jeanne Ross, principal research scientist at the Center for Information Systems Research at the Massachusetts Institute of Technology (MIT). “It either already has or it’s going to, because digital technologies make things possible that weren’t possible before,” she explains.

2. Work in Diverse Teams

When it comes to large projects, CIOs have always needed input from a diverse collection of businesspeople to be successful. The best have developed ways to convince and cajole reluctant participants to come to the table. They seek out technology enthusiasts in the business and those who are respected by their peers to help build passion and commitment among the halfhearted.

Digital transformation amps up the urgency for building diverse teams even further. “A small, focused group simply won’t have the same breadth of perspective as a team that includes a salesperson and a service person and a development person, as well as an IT person,” says Ross.

At Lenovo, the global technology giant, many of these cross-functional teams become so used to working together that it’s hard to tell where each member originally belonged: “You can’t tell who is business or IT; you can’t tell who is product, IT, or design,” says the company’s CIO, Arthur Hu.

One interesting corollary of this trend toward broader teamwork is that talent is a priority among digital leaders: they spend more on training their employees and partners than ordinary companies, as well as on hiring the people they need, according to the SAP-Oxford Economics survey. They’re also already being rewarded for their faith in their teams: 71% of leaders say that their successful digital transformation has made it easier for them to attract and retain talent, and 64% say that their employees are now more engaged than they were before the transformation.

3. Become a Consultant

Good CIOs have long needed to be internal consultants to the business. Ever since technology moved out of the glasshouse and onto employees’ desks, CIOs have not only needed a deep understanding of the goals of a given project but also to make sure that the project didn’t stray from those goals, even after the businesspeople who had ordered the project went back to their day jobs. “Businesspeople didn’t really need to get into the details of what IT was really doing,” recalls Ferro. “They just had a set of demands and said, ‘Hey, IT, go do that.’”

Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants.

But that was then. Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants. “If you’re building a house, you don’t just disappear for six months and come back and go, ‘Oh, it looks pretty good,’” says Ferro. “You’re on that work site constantly and all of a sudden you’re looking at something, going, ‘Well, that looked really good on the blueprint, not sure it makes sense in reality. Let’s move that over six feet.’ Or, ‘I don’t know if I like that anymore.’ It’s really not much different in application development or for IT or technical projects, where on paper it looked really good and three weeks in, in that second sprint, you’re going, ‘Oh, now that I look at it, that’s really stupid.’”

4. Learn Horizontal Leadership

CIOs have always needed the ability to educate and influence other leaders that they don’t directly control. For major IT projects to be successful, they need other leaders to contribute budget, time, and resources from multiple areas of the business.

It’s a kind of horizontal leadership that will become critical for businesspeople to acquire in digital transformation. “The leadership role becomes one much more of coaching others across the organization—encouraging people to be creative, making sure everybody knows how to use data well,” Ross says.

In this team-based environment, having all the answers becomes less important. “It used to be that the best business executives and leaders had the best answers. Today that is no longer the case,” observes Gary Cokins, a technology consultant who focuses on analytics-based performance management. “Increasingly, it’s the executives and leaders who ask the best questions. There is too much volatility and uncertainty for them to rely on their intuition or past experiences.”

Many experts expect this trend to continue as the confluence of automation and data keeps chipping away at the organizational pyramid. “Hierarchical, command-and-control leadership will become obsolete,” says Edward Hess, professor of business administration and Batten executive-in-residence at the Darden School of Business at the University of Virginia. “Flatter, distributive leadership via teams will become the dominant structure.”

5. Understand Process Design

When business processes were simpler, IT could analyze the process and improve it without input from the business. But today many processes are triggered on the fly by the customer, making a seamless customer experience more difficult to build without the benefit of a larger, multifunctional team. In a highly digitalized organization like Amazon, which releases thousands of new software programs each year, IT can no longer do it all.

While businesspeople aren’t expected to start coding, their involvement in process design is crucial. One of the techniques that many organizations have adopted to help IT and businesspeople visualize business processes together is design thinking (for more on design thinking techniques, see “A Cult of Creation“).

Customers aren’t the only ones who benefit from better processes. Among the 100 companies the SAP-Oxford Economics researchers have identified as digital leaders, two-thirds say that they are making their employees’ lives easier by eliminating process roadblocks that interfere with their ability to do their jobs. Ninety percent of leaders surveyed expect to see value from these projects in the next two years alone.

6. Learn to Keep Learning

The ability to learn and keep learning has been a part of IT from the start. Since the first mainframes in the 1950s, technologists have understood that they need to keep reinventing themselves and their skills to adapt to the changes around them.

Now that’s starting to become part of other job descriptions too. Many companies are investing in teaching their employees new digital skills. One South American auto products company, for example, has created a custom-education institute that trained 20,000 employees and partner-employees in 2016. In addition to training current staff, many leading digital companies are also hiring new employees and creating new roles, such as a chief robotics officer, to support their digital transformation efforts.

Nicolas van Zeebroeck, professor of information systems and digital business innovation at the Solvay Brussels School of Economics and Management at the Free University of Brussels, says that he expects the ability to learn quickly will remain crucial. “If I had to think of one critical skill,” he explains, “I would have to say it’s the ability to learn and keep learning—the ability to challenge the status quo and question what you take for granted.”

7. Fail Smarter

Traditionally, CIOs tended to be good at thinking through tests that would allow the company to experiment with new technology without risking the entire network.

This is another unfamiliar skill that smart managers are trying to pick up. “There’s a lot of trial and error in the best companies right now,” notes MIT’s Ross. But there’s a catch, she adds. “Most companies aren’t designed for trial and error—they’re trying to avoid an error,” she says.

To learn how to do it better, take your lead from IT, where many people have already learned to work in small, innovative teams that use agile development principles, advises Ross.

For example, business managers must learn how to think in terms of a minimum viable product: build a simple version of what you have in mind, test it, and if it works start building. You don’t build the whole thing at once anymore.… It’s really important to build things incrementally,” Ross says.

Flexibility and the ability to capitalize on accidental discoveries during experimentation are more important than having a concrete project plan, says Ross. At Spotify, the music service, and CarMax, the used-car retailer, change is driven not from the center but from small teams that have developed something new. “The thing you have to get comfortable with is not having the formalized plan that we would have traditionally relied on, because as soon as you insist on that, you limit your ability to keep learning,” Ross warns.

8. Understand the True Cost—and Speed—of Data

Gut instincts have never had much to do with being a CIO; now they should have less to do with being an ordinary manager as well, as data becomes more important.

As part of that calculation, businesspeople must have the ability to analyze the value of the data that they seek. “You’ll need to apply a pinch of knowledge salt to your data,” advises Solvay’s van Zeebroeck. “What really matters is the ability not just to tap into data but to see what is behind the data. Is it a fair representation? Is it impartial?”

Increasingly, businesspeople will need to do their analysis in real time, just as CIOs have always had to manage live systems and processes. Moving toward real-time reports and away from paper-based decisions increases accuracy and effectiveness—and leaves less time for long meetings and PowerPoint presentations (let us all rejoice).

Not Every CIO Is Ready

Of course, not all CIOs are ready for these changes. Just as high school has a lot of false positives—genius nerds who turn out to be merely nearsighted—so there are many CIOs who aren’t good role models for transformation.

Success as a CIO these days requires more than delivering near-perfect uptime, says Lenovo’s Hu. You need to be able to understand the business as well. Some CIOs simply don’t have all the business skills that are needed to succeed in the transformation. Others lack the internal clout: a 2016 KPMG study found that only 34% of CIOs report directly to the CEO.

This lack of a strategic perspective is holding back digital transformation at many organizations. They approach digital transformation as a cool, one-off project: we’re going to put this new mobile app in place and we’re done. But that’s not a systematic approach; it’s an island of innovation that doesn’t join up with the other islands of innovation. In the longer term, this kind of development creates more problems than it fixes.

Such organizations are not building in the capacity for change; they’re trying to get away with just doing it once rather than thinking about how they’re going to use digitalization as a means to constantly experiment and become a better company over the long term.

As a result, in some companies, the most interesting tech developments are happening despite IT, not because of it. “There’s an alarming digital divide within many companies. Marketers are developing nimble software to give customers an engaging, personalized experience, while IT departments remain focused on the legacy infrastructure. The front and back ends aren’t working together, resulting in appealing web sites and apps that don’t quite deliver,” writes George Colony, founder, chairman, and CEO of Forrester Research, in the MIT Sloan Management Review.

Thanks to cloud computing and easier development tools, many departments are developing on their own, without IT’s support. These days, anybody with a credit card can do it.

Traditionally, IT departments looked askance at these kinds of do-it-yourself shadow IT programs, but that’s changing. Ferro, for one, says that it’s better to look at those teams not as rogue groups but as people who are trying to help. “It’s less about ‘Hey, something’s escaped,’ and more about ‘No, we just actually grew our capacity and grew our ability to innovate,’” he explains.

“I don’t like the term ‘shadow IT,’” agrees Lenovo’s Hu. “I think it’s an artifact of a very traditional CIO team. If you think of it as shadow IT, you’re out of step with reality,” he says.

The reality today is that a company needs both a strong IT department and strong digital capacities outside its IT department. If the relationship is good, the CIO and IT become valuable allies in helping businesspeople add digital capabilities without disrupting or duplicating existing IT infrastructure.

If a company already has strong digital capacities, it should be able to move forward quickly, according to Ross. But many companies are still playing catch-up and aren’t even ready to begin transforming, as the SAP-Oxford Economics survey shows.

For enterprises where business and IT are unable to get their collective act together, Ross predicts that the next few years will be rough. “I think these companies ought to panic,” she says. D!


About the Authors

Thomas Saueressig is Chief Information Officer at SAP.

Timo Elliott is an Innovation Evangelist at SAP.

Sam Yen is Chief Design Officer at SAP and Managing Director of SAP Labs.

Bennett Voyles is a Berlin-based business writer.

Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.
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CEO Priorities And Challenges In The Digital World

Dr. Chakib Bouhdary

Digital transformation is here, and it is moving fast. Companies are starting to realize the enormous power of digital technologies like artificial intelligence (AI), Internet of things (IoT) and blockchain. These technologies will drive massive opportunities—and threats—for every company, and they will impact all aspects of business, including the business model. In fact, business velocity has never been this fast, yet it will never be this slow again.

To move quickly, companies need to be clear on what they want to achieve through digital transformation and understand the possible roadblocks. Based on my meetings with customer executives across regions and industries, I have learned that CEOs often have the same three priorities and face the same three challenges:

1. Customer experience – No longer defined by omnichannel and personalized marketing.

Not surprisingly, 92 percent of digital leaders focus on customer experience. However, this is no longer just about omnichannel and personalized marketing – it is about the total customer experience. Businesses are realizing that they need to reimagine their value proposition and orchestrate changes across the value chain – from the first point of interaction to manufacturing, to shipment, to service – and be able to deliver the total customer experience. In some cases, it will even be necessary to change the core product or service itself.

2. Step change in productivity – Transform productivity and cost structure through digital technologies.

Businesses have been using technology to achieve growth for decades, but by combining emerging technologies, they can now achieve a significant productivity boost and reduce costs. For this to happen, companies must first identify the scenarios that will drive significant change in productivity, prioritize them based on value, and then determine the right technologies and solutions. Both Mckinsey and Boston Consulting Group expect a 15 to 30 percent improvement in productivity through digital advancements – blowing the doors off business-as-usual and its incremental productivity growth of 1 to 2 percent.

3. Employee engagement – Fostering a culture of innovation should be at the core of any business.

Companies are looking to create an environment that encourages creativity and innovation. Leaders are attracting the needed talent and building the right skill sets. Additionally, they aim for ways to attract a diverse workforce, improve collaborations, and empower employees – because engaged employees are crucial in order to achieve the best results. This Gallup study reveals that approximately 85 percent of employees worldwide are performing below their potential due to engagement issues.

As CEOs work towards achieving these three desired outcomes, they face some critical challenges that they must address. I define the top three challenges as follows: run vs. innovate, corporate cholesterol, and digital transformation roadmap.

1. Run vs. innovate – To be successful you must prioritize the future.

The foremost challenge that CEOs are facing is how they can keep running current profitable businesses while investing in future innovations. Quite often these two conflict as most executives mistakenly prioritize the first and spend much less time on the latter. This must change. CEOs and their management teams need to spend more time thinking about what digital is for them, discuss new ideas, and reimagine the future. According to Gartner, approximately 50 percent of boards are pushing their CEOs to make progress on digital. Although this is a promising sign, digital must become a priority on every CEOs agenda.

2. Corporate cholesterol – Do not let company culture get in the way of change.

The older the company is, the more stuck it likely is with policies, procedures, layers of management, and risk averseness. When a company’s own processes get in the way of change, that is what I call “corporate cholesterol.” CEOs need to change the culture, encourage cross-team collaborations, and bring in more diverse thinking to reduce the cholesterol levels. In fact, both Mckinsey and Capgemini conclude that culture is the number-one obstacle to digital effectiveness.

3. Digital transformation roadmap – Digital transformation is a journey without a destination.

Many CEOs struggle with their digital roadmap. Questions like: Where do I start? Can a CDO or another executive run this innovation for me? What is my three- to five-year roadmap? often come up during the conversations. Most companies think that there is a set roadmap, or a silver bullet, for digital transformation, but that is not the case. Digital transformation is a journey without a destination, and each company must start small, acquire the necessary skills and knowledge, and continue to innovate.

It is time to face the digital reality and make it a priority. According to KPMG, 70 percent to 80 percent of CEOs believe that the next three years are more critical for their company than the last fifty. And there is good reason to worry, as 75 percent of S&P 500 companies from 2012 will be replaced by 2027 at the current disruption rate.

Download this short executive document. 

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Dr. Chakib Bouhdary

About Dr. Chakib Bouhdary

Dr. Chakib Bouhdary is the Digital Transformation Officer at SAP. Chakib spearheads thought leadership for the SAP digital strategy and advises on the SAP business model, having led its transformation in 2010. He also engages with strategic customers and prospects on digital strategy and chairs Executive Digital Exchange (EDX), which is a global community of digital innovation leaders. Follow Chakib on LinkedIn and Twitter