Agenda Item 11: Enterprise Performance Reporting - Second ...
LEADING EDGE ENTERPRISE PERFORMANCE MANAGEMENT & REPORTING€¦ · Enterprise Performance...
Transcript of LEADING EDGE ENTERPRISE PERFORMANCE MANAGEMENT & REPORTING€¦ · Enterprise Performance...
LEADING EDGEENTERPRISEPERFORMANCEMANAGEMENT& REPORTINGHOW TO TRANSFORM YOUR ORGANISATION’S PERFORMANCE MANAGEMENT AND REPORTING CAPABILITIES INTO AN INTEGRATED, END-TO-END, PROCESS.
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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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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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
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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
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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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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.