Last year we shared a roadmap of the journey to powering profitable decision making.
This illustration lays out the fundamental stages of that process, moving from the basic needs for a business to survive through a growth phase and on to occupying a space where the organisation is achieving full potential – powering profitable decision making.
This journey has not changed, but in the current climate, the lower levels are no longer sufficient for survival – it’s crucial for businesses to move through these stages towards a position that will allow them to succeed and thrive despite the challenging circumstances.
In a recent article – Planning for Uncertainty – McKinsey shared their 5 steps for achieving focus around planning:
- get a clear view of the company’s starting position;
- build a fact base and use it to develop a range of scenarios;
- align your financial plan with the ‘direction of travel’;
- determine best actions and moves; and, finally,
- identify the ‘trigger points’ that will require the business to adjust and adapt forecasts and financial plans at speed.
These steps can be overlaid onto the progressions within the journey to profitable decision making – there are clear parallels here.
Level 1 → Level 2
The transition from merely verifying the accuracy of the data to achieving a single version of the truth. This is a crucial foundation for any business and calls for automation – shifting from a disparate collection of individuals manipulating separate spreadsheets to a central repository for data where everyone has access to the same information. When it comes to data gathering and use, cleanliness and timeliness are next to godliness!
Level 2 → Level 3
This involves the transition from siloed, finance-based activity that is purely an exercise for the board, towards a business-wide approach. Gartner have coined the term Extended Planning and Analytics (xP&A) to describe this way of working that sees the finance team engaging with the wider business on broader planning and performance management initiatives.
xP&A refers to any extension into an area of the organisation that produces business plans, including sales, marketing and HR. Gartner predict that by 2024, 70% of all new financial planning and analysis projects will have a widened scope beyond the finance department. For this to be successful, your FP&A team need to develop both the capacity to engage the rest of the business and the skillset to make the numbers accessible and user-friendly in order to tell a story to capitalise on that engagement.
Level 3 → Level 4
Expanding from collaboration to providing insight; raw data becomes valuable information. At this level of operation, shared understanding of the numbers develops into the capability to identify risks. This allows the team to carry out what-if analysis on elements external to the core business plan, exposing both risks and opportunities.
Level 4 → Level 5
A joined-up and entrepreneurial organisation with a business-wide fluency in the numbers. Your FP&A team remain the owners and gatekeepers of the financial plan but there is strong cross-business engagement. This drives a more enterprising use of the numbers and resulting insights which stimulates creativity and, ultimately, powers profitable decision making. This connected approach ensures that FP&A are more engaged in decision-analysis than number crunching and can actively guide business leaders with valuable insight.
You may have felt the need to batten down the hatches in the turbulent period we’ve experienced since March but with this crisis guaranteed to stretch into the medium-term at least, it is now time to consolidate and strengthen your position to enable growth and success. As McKinsey have suggested:
For those finance functions and FP&A teams that have not explored automation and other time-saving technologies, the crisis may be a jumping off point to do so — freeing up members of the financial-planning team to serve as strategy partners and value managers rather than report generators.
Getting started on your journey to profitable decision making is more accessible than you might realise – the foundations of a strong system for your FP&A activities can be achieved within the capability of Planning Analytics on Demand. Take this opportunity drive more strategic planning and get in touch today to discover exactly how valuable Planning Analytics could be to you.
Simon Bradshaw
I have worked in finance and business systems development since 2001 and am an associate member of the Chartered Institute of Management Accountants. In 2016 I became a founding member of Spitfire Analytics, a consultancy specialising in IBM Planning Analytics. We are committed to building long-term relationships across all industries. I focus on my CPD through CIMA and IBM badges, ensuring I am always abreast of best practice and developments within the industry.
Linkedin Email