DRIVING BUSINESS GROWTH
WITH FINANCE-LED, INTEGRATED
BUSINESS PLANNING
INTRODUCTION
As Richard Dobbs and his co-authors pointed out in a Harvard Business
Review article1 published in October 2015, “Although we can expect
global revenues to grow by 40 percent or more over the next decade,
increased competition from the Far East and disruptors invading traditional markets will cause global profit margins to drop by a couple of
percentage points.”
Good or bad, disruption has become a common business term that has
threatened many traditional organizations. Companies such as Uber,
Spotify, and Airbnb are disruptors—using digital technology to create
new business models to upset the value inherent in existing markets.
The phrase “the new normal” has been used to describe the business
environment created by this uncertainty, volatility, and disruption. But
companies may see this as “the new abnormal,” presenting organizations
with new challenges to deliver the predictable and sustainable returns
that investors expect.
“Finance has the opportunity to be
the enterprise information navigator.
However, finance leaders can’t
come to the table with old tools. We
need new ways of defining business
intelligence in a data-driven world
where business users expect and
demand near real-time information.”
ALLAN HACKETT, CO-FOUNDER,
THE HACKETT GROUP
In this new market, every business function will be tested, with finance
facing a kaleidoscope of different growth rates, regulations, reporting,
currencies, and tax practices. It will be a major test to manage their
financial and nonfinancial performance across all parts of the enterprise.
To achieve this, planning needs to become a continuous process that
spans departmental boundaries and enables managers to collectively
realign resources to market changes. This strategy will provide the
business a full understanding of how the changes it makes will impact
future financial results.
In order to grow in this rapidly changing economy, companies face the
need for innovation—not just in products, but also in their business
models and strategies. Organizations must streamline disparate sales
1 “The Future and How to Survive It,” Richard Dobbs, Tim Koller, and Sree Ramaswamy, Harvard Business Review, October 2015.
HARVARD B U S I N E S S R E V I E W A N A LY T I C S E RV I C E S
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“I think our challenges were common
among many companies that have
outgrown their traditional planning
solution or Excel® model. We
were providing analysis that was
not real-time. There were issues
with collaboration across the
organization in the team. Data was
not transparent across companies.”
JARED WATERMAN, VICE PRESIDENT,
FINANCIAL PLANNING
AND ANALYSIS, PANDORA
and operational planning with traditional financial planning and analysis (FP&A) by using technology to connect people, data, and processes
across the organization. These shifts in strategy will deliver a more holistic way to view and manage the business, providing the agility needed
to create and sustain a competitive advantage. This new way of doing
things has been called integrated business planning—something that
every business can greatly benefit from achieving.
WHAT BLOCKS BETTER PLANNING?
As organizations look for new ways to plan and forecast, technology is
often one of the strategies they use to achieve a new way to plan and
forecast. They know that traditional budgeting is time consuming and
costly and keeps them from adjusting quickly to shifts in the business
environment. Forecasting is difficult at best—and often comes too late.
For instance, a recent Ventana Research survey found that 43 percent of
organizations remain at a basic, tactical level in their planning process,
with only 11 percent operating at the highest innovative level where their
companies could be agile and responsive to the marketplace.
Chief financial officers and their teams find themselves buried in the
demands of basic finance, such as cost control, budgeting, and reporting. This limits their ability to become the strategic business partners
they want to and know they need to be. This is unfortunate as CFOs are
in a unique position to understand the levers that drive their business—
and make it possible for leaders to identify, analyze, and act upon the
vital information.
Although individual departments have a thorough understanding of
their business drivers, the majority of business plans are in spreadsheets
and stand-alone systems, which rarely connect at the enterprise level,
limiting the understanding of how shifting strategies impact functional
units. On top of that, too often, the information held in different systems
is inconsistent, and companies may lack the resources to coordinate,
consolidate, and share it in a timely manner.
Bart Hughes of Deloitte Consulting LLP sees more and more companies
recognizing that planning must become a “near-real-time endeavor”
rather than a near-static annual budget exercise that often fails to connect
all the activities of the organization. To overcome this near-static annual
budgeting exercise, companies must strive to achieve integrated business
planning. Hughes defines integrated business planning as “repeatable,
functional, and cross-functional activities connecting strategic plans,
financial plans, and operational execution plans.”
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D R I V I NG B U S I NE S S GROWT H WI T H F I N A N C E - L E D, I N T EGR AT E D BU S I N E S S P L A N N I NG
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