LEADING EDGE ENTERPRISE PERFORMANCE MANAGEMENT & REPORTING€¦ · Enterprise Performance...

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LEADING EDGE ENTERPRISE PERFORMANCE MANAGEMENT & REPORTING HOW TO TRANSFORM YOUR ORGANISATION’S PERFORMANCE MANAGEMENT AND REPORTING CAPABILITIES INTO AN INTEGRATED, END-TO-END, PROCESS.

Transcript of LEADING EDGE ENTERPRISE PERFORMANCE MANAGEMENT & REPORTING€¦ · Enterprise Performance...

Page 1: LEADING EDGE ENTERPRISE PERFORMANCE MANAGEMENT & REPORTING€¦ · Enterprise Performance Management Reporting 2019 ENTERPRISE PERFORMANCE MANAGEMENT’S BIG “BUT” All organisations

LEADING EDGEENTERPRISEPERFORMANCEMANAGEMENT& REPORTINGHOW TO TRANSFORM YOUR ORGANISATION’S PERFORMANCE MANAGEMENT AND REPORTING CAPABILITIES INTO AN INTEGRATED, END-TO-END, PROCESS.

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We help businesses to harness their data and use it to understand, model and predict business performance - delivering improved

engagement, efficiency and profitability.

TABLE OF CONTENTS

Forewordpage 04

The solution lies in datapage 09

Example – Health & fitness industrypage 13

Example – Hotel industrypage 14

The vision’s within reachpage 15

Enterprise Performance Management’s big “BUT”page 06

The evolution of budgeting and forecastingpage 10

Driving informed business decisionspage 15

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Enterprise Performance Management & Reporting 2019

FOREWORD

Here at Altius, we want to transform every organisation’s performance

management and reporting capabilities. We want to move organisations away

from basing critical business decisions and actions on siloed processes and

reports - processes and reports that involve manual entry; are conducted

and analysed independently; and are performed according to a predefined

timetable.

Our vision is to deliver a continuous stream of automated, machine driven

forecast output based on advanced analytics and defined against strategic

goals. We’re talking instantaneous or event based output that is more than just

useful and insightful, and that is delivered directly into the hands of decisions

makers.

It’s a vision that can easily become a reality – a reality for an

organisation just like yours. Let us show you how.

The Altius Performance Management Team

One of our favourite quotes...

“An unsophisticated forecaster uses statistics

as a drunken man uses lamp-posts - for

support rather than for illumination.”

Andrew Lang

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Enterprise Performance Management & Reporting 2019

ENTERPRISE PERFORMANCE MANAGEMENT’S BIG “BUT”

All organisations need the ability to chart

the course of their business and to have

information readily available to allow

informed, timely business decisions. Enterprise

Performance Management (EPM) systems

have been serving this purpose for years.

EPM systems allow financial and non-financial

data to be automatically consolidated,

aggregated and made available for reporting

and analysis. They add value by providing the

ability to understand where your organisation

has been and to predict future performance.

The combination of actual performance

data (e.g. sales units, revenue etc.) and

budget data allows for simple variance

analysis and the ability to course correct.

Having budget and forecast data easily

available and published to management

reports means finance departments

spend less time producing reports

and more time analysing data.

BUT… EPM systems have historically had

their limitations. Traditional ones are mainly

owned by the Finance Department and used

to produce the Financial Budget or Forecast.

Operational Plans and Forecasts are prepared

separately and at best used as validation

points in the financial reviews of the Budget

/ Forecast, at worst completely independent.

They require a substantial amount of time spent

on data entry. Then even more time has to be

spent on collating the budget and forecast

data before it can be effectively analysed,

validated and presented to management.

Usually drivers used in budget and forecast

preparation are debated within organisations

and include some thoughts on future

goals. Data, reports and spreadsheets are

prepared by analysts before the final number

is agreed and included in the budget.

Depending on the organisation’s time scales

and the complexity of the budget, this

can involve a substantial amount of time

and resource. So what’s the solution?

“If you can look into the seeds of time,

and say which grain will grow and which

will not, speak then unto me.” William Shakespeare

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Enterprise Performance Management & Reporting 2019

THE SOLUTION LIES IN DATA

More and more organisations are deploying

modern systems for data analysis. Why?

Because large scale repositories can store vast

quantities of data that can be made available

for real time analysis. And because today’s

data science techniques and visualisation

tools can provide a granular level of detail

and insight that was previously inaccessible.

Often when preparing a financial forecast

or plan, reports and key performance

indicators (KPIs) are run out of the analytical

system, reviewed and then transposed as

data entry into the EPM system. At best,

this low value activity requires someone to

perform the analysis and to calculate the

bottom line impact to the organisation.

Imagine the power, the insight and

competitive advantage that could be

achieved if you integrate your advanced

analytics reporting into your EPM system.

That’s our vision - an integrated, end-to-

end, analytical and management reporting

process, starting from the source data

systems, through to advanced analytics and

data science, and into your EPM system.

According to The Hackett

Group’s 2018 Key Issues

Study, finance organisations

expect to see a 1.7 times

increase in the mainstream

use of machine learning over

the next two to three years.

44% already report piloting

or limited adoption of it, and

66% expect to have pilots

or limited adoption by 2021

– that’s a 50% increase.

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Com

plex

ity

Time

SimpleInput

Rolling Forecast /Multi-Year

Driver Based

AutomatedMachine Learning

Enterprise Performance Management & Reporting 2019

THE EVOLUTION OF BUDGETING AND FORECASTING

In order to make the best business decisions,

managers and executives need up-to-date

information at their fingertips. That means

doing away with a budget process that runs

at defined intervals and creating a budget

that runs continuously and automatically as

the business grows and changes. Leading

organisations refer to this as ’Event Based

Planning’ whereby there is no budget or

forecast cycle, the data is just continuously

updated. Organisations still need to plan and

allocate capital and resources for future periods,

but understanding current performance and the

impact against future goals can be automated.

STEP ONE – MOVE TO A ROLLING OR MULTI-YEAR FORECAST

Moving to either a rolling or multi-year forecast

provides a future/forward view of at least

one year ahead. A continuous forecasting

process means a company can avoid creating

a one off (big bang) budget. Continuously

working to refine the forecast for the future

period reduces the peaks of effort loaded

on finance and business resources. It also

improves accuracy as the current position

(in terms of numbers) is continuously

reflected through incremental updates. STEP TWO – MOVE TO A DRIVER BASED PLANNING PROCESS

The second step we typically see is the shift to

a driver based planning process. This is where

a business models the various factors that

influence operational and financial outcomes

and use these to drive the calculations that

automatically produce the forecast. This

approach makes ‘what-if’ scenario modelling

a reality as different scenarios impacting

the key drivers can be considered.

This step is seen as maturing the

understanding of the factors influencing

business performance, and leads to a more

accurate result. It also reduces the effort

involved in delivering the forecast by

virtue of using automated calculations.

The true value of integrated analytics and

EPM systems is that the organisation model

and course is always known. Executives don’t

need to wait until month end or the end of

the budget cycle to fully grasp the future

path of the organisation. In our experience

there is a journey involving three steps

that will enable a company to evolve their

budgeting and forecasting processes. This is

assuming that a company has moved away

from Excel based processes and implemented

an EPM tool. And that’s because some of

the steps require the ability to leverage a

system-based solution to be efficient.

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MachinePrediction

Train &Evolve

Extend& Model

Measure& Action

DATA PLATFORM

EPM

Enterprise Performance Management & Reporting 2019

STEP THREE – MACHINE DRIVEN FORECAST OUTPUT

The third stage in the evolution of budgeting

and forecasting is to take the driver based

models and use machine learning models,

developed through a data science led approach,

to predict the driver’s inputs. In essence, have

a completely machine driven forecast output.

The field of data science is emerging at the

intersection of statistics, computer science

and information technology. Having evolved

from data mining, it is the process of making

discoveries in, and deriving knowledge

from data. By applying this capability to

the process of financial forecasting we are

able to build machine learning models that

further automate the forecasting process,

and drive more accurate predictions.

1. IN THE HEALTH & FITNESS INDUSTRY

In a recent project Altius helped a major

player in the health and fitness industry to

use data science and advanced analytics

to model and predict member attrition.

Our solution predicts which members are

unlikely to renew their membership, allowing

our client to target them with personalised

marketing campaigns. As a result they have

successfully reduced attrition rates.

But imagine the benefits to the business if

that attrition rate output, which is a significant

business driver, could be incorporated into the

EPM solution and linked to other drivers in the

EPM model, to produce accurate net members.

It would easily drive far better insight into the

overall financial picture of the business. That’s

because growing the membership base will

have an impact on factors such as facility usage,

demand for classes, cleaning, maintenance,

consumable costs…and the list goes on.

It simply isn’t enough to understand who

is at risk of non-renewal. The business

needs to understand what it needs to do

if its marketing campaigns are successful.

Having a clear, timely and up-to-date

understanding of the revenue profile can help

management understand the true impact

of actions and factors on profitability.

In the case of our health club client, analytical

models can easily profile equipment usage and

predicted asset maintenance or replacement.

Linking the revenue analytics with the usage

and cost analytics within the EPM system gives

a live view into organisational profitability and

also helps to minimise any potential disruption.

Revenue profiling could be run as often

as necessary, with management being

alerted directly if there are any changes.

In the event of the system predicting a

downturn in revenue, additional capital and

funds can be directed towards marketing

and sales efforts as a direct result.

Systems support is required to build out driver

based models that allow for more accurate

forecasting and also unlock the potential for

the use of machine learning. The key is to only

focus on priority areas. It is worth flagging

that machine learning doesn’t completely

replace human intuition, but gives a starting

point based on a scientific output. It provides

another benchmark/baseline that can be

proved using historical and actual data.

The future is as important as the present, and

it plays a crucial role in underpinning the

outlook and direction of the business. Advanced

software has expanded the complexity and

scope of forecasts to include predictions,

to enable today’s businesses to be able to

reforecast quickly and accurately and be better

positioned to respond to market change.

LET’S LOOK ATSOME EXAMPLES...

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Enterprise Performance Management & Reporting 2019

And all this can happen seamlessly with the

analytical system and data science algorithms

doing all the hard work. There’s no need for

analysts to be involved in collating data,

building and driving spreadsheets or simply

transposing data. Forecast data can be

generated then overlaid with business goals

and values that drive the business targets.

EXAMPLE 2. IN THE HOTEL INDUSTRY

The hotel industry is a prime example of an

industry with a huge opportunity to maximise

its revenue and cash flow by having integrated

data analytics, data science and EPM systems.

DRIVING INFORMED BUSINESS DECISIONSOur vision doesn’t involve inundating

management with reams of reports and

interesting data. Having a single set of

integrated systems, data and processes

means that the correct data can arrive at

the right time, enabling management to

make informed decisions. Distinguishing

interesting data from useful data is key.

Practically this means having the back-end

technical systems integrated in a way that

the output of advanced analytics and data

science can be easily understood against

strategic imperatives. A data science algorithm

that gives a future revenue forecast is

interesting. A report showing the same revenue

forecast, but how that affects the rest of the

organisation’s finances is useful. A system

showing the same output, but allowing further

modelling to be made to inform the best

course of action is what we’re aiming for.

THE VISION’S WITHIN REACHHistorically integrating these systems and

processes meant a large scale development

effort. Not today. With modern technical

systems, the cost to implement and the total

cost of ownership is substantially less than it

was even a few years ago. It is wholly within

reach to have a fully linked set of analytics

and performance management systems

and processes in a short time frame.

Your biggest challenge isn’t going to be

technical, it’s going to be cultural. Executives

and staff must trust the analytics and

systems output and be ready to increase

the pace of review and decisions. Lagging

organisations have quarterly review

cycles to adjust their course. Leading

organisations have near instantaneous

insight and can adjust as necessary.

With full systems integration, a hotel chain

could allow the data analytics and data

science algorithms to change hotel pricing in

near real time in order to optimise revenue.

The resulting change in revenue can be

brought into EPM to give a full view of

anticipated cash flow for the organisation.

Within the EPM tool, additional scenarios such

as hotel refurbishment and the anticipated

change in cash flow can be modelled. Capital

expenditure planning and modelling the effect

on group level performance is one of the

key features of any EPM system. In the hotel

industry, appropriate allocation of capital

resources towards refurbishment and asset

renewal means that an organisation can achieve

optimal cash flow and revenue efficiency.

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© Copyright 2019 Altius Ltd.

+44 (0)1483 [email protected] @altiusbi www.altius.co.uk

ABOUT ALTIUSWith offices in the UK, Netherlands and India, Altius helps organisations to harness data and use it to understand, model and predict business performance. Combining our business knowledge with advanced technology and architecture skills, alongside project management and business change capabilities, Altius delivers real-time, reliable and actionable data-driven business insights direct to decision makers.

Altius’s management intelligence and data analytics solutions are proven to drive improved end-user engagement, business efficiency and profitability. Its tailored information managed services extend beyond a traditional helpdesk offering, encompassing configuration and management of cloud infrastructure, through management of applications and critical business processes to the provision of fully outsources data services.

If you would like to discuss how Altius can help you extract value from your data to help improve business performance, please get in touch.