Advanced Analytics: CFO’s and FP&A Heads - ignore at your peril
For progressive and competitive organizations of all sizes, accessing smarter, leaner and faster information to drive a successful business strategy can only be achieved with real-time insights into their customer’s needs and buying behaviours.
Identifying and building ‘products of the future’, before you customers even realise the need, can mean the difference between long-term success and overnight failure – Nokia and RIM (Blackberry) are two examples of market leading companies who failed to prepare for the onset of handheld computing, Apple took the reverse approach, the rest is history.
Advances in predictive and analytical software are facilitating a huge competitive advantage for many companies who recognise the value of using big data to look into the future using ‘precognitive’ technology. But, for many organizations, FP&A analytical transformation remains out of reach for reasons including a lack of preparedness and a business culture that’s become risk adverse from the failure of historic technology investments to deliver the transparency needed to drive a successful strategy.
The World Trade Centre, Amsterdam and Cercle de Lorraine Club van Lotharingen, Brussels welcomed some of the brightest minds in Financial Planning & Analysis (FP&A) to discuss that very topic at both cities’ second FP&A Board roundtables, organized by Larysa Melnychuk (MD of the FP&A Trends Group).
Agenda for the evening:
FP&A Analytical Transformation – what does it mean for organizations and are we ready for big data analytics in finance?
Both sessions welcomed Thomas Lundell, Director of FP&A & Business Control (EMEA) at NetApp, creators of innovative storage and data management. Thomas presented NetApp case study "FP&A Transformation: Becoming Agile, Adaptable and Predictive" which detailed his personal and corporate business journey in transforming FP&A through technology investment.
I asked Thomas what he believes to be the major advantage Analytical Transformation can provide for an organization and how do senior FP&A professionals best relay that advantage when trying to secure investment buy-in from organizational heads. Thomas says:
“There are two main advantages to undertaking an Analytical Transformation for FP&A, both of which certainly will secure investment buy-in from leadership.
First, it improves the speed and quality of decision-making. Business is increasingly dynamic and fast moving. Business executives need to make large-scale, complex decisions within reduced time frames. Going through an analytical transformation will enable FP&A to provide both predictive and prescriptive analytics that will enable executives to make better and quicker business decisions.
Second, it enables FP&A to create an integrated business plan that links up all the functions within the organization and that can capture market opportunity in an efficiently coordinated way. By going through an Analytical Transformation, FP&A can move from doing traditional budgeting and forecasting, to creating integrated business plans that link investment allocation with business unit strategy.“
Discussions broached the matter of how analytical technology can tick the wish lists of many Senior FP&A professionals including:
- Fully integrated business planning
- Empowering business partners to become the real owners of their strategic inputs
- Maintaining agile and relevant projections in dynamic, fast-changing markets
- Automate traditional budgeting and forecasting process to free up resources to ‘look into the future’
- Access to real-time data around business ‘Wins’ and ‘Opportunities Lost’
- Long-term business planning
- Risk modelling & mitigation
- Zero-based budgeting
- Converting top-down planning into success
- Driving ‘Stretch’ to facilitate growth
Both groups addressed the readiness of many organizations in embracing the value-add of analytics transformation and the challenges, which continue to obstruct its advancement even within some of the largest, most successful businesses in the world.
- Lack of investment in analytics technology
- Lack of investment in professional development to help attract, develop and retain the best talent with the right mindset
- FP&A staff buried in day-to-day accounting tasks, restrained by legacy processes and systems now ripe for automation
- Rigid business thinking
- Selecting the right data from a huge pool of options
- Absence of a universal business appreciation of technological capabilities
- Encouraging business partners to ‘speak the same language’
- Turing insights into action
Regulatory changes such as the arrival of the International Financial Reporting Standards (IFRS) 9, who’s enforcement has been delayed until 1 January 2018, may also be fostering a reluctance to prepare, even if just as a resistance to the core principles of the new standard.
Access to quality data and the flexibility to make decisions quickly by utilizing that data to predict the future, remains the FP&A holy grail of business strategy.
“Advanced analytics is the extensive use of data, statistical and quantitative analysis, explanatory and predictive models and fact-based management to drive decisions and actions” Thomas H. Davenport (Professor of IT & Management, Harvard)
But analytics tools are only useful if you know where your data is coming from and there is a solid confidence in its integrity. Asking sometimes uncomfortable questions should be a prelude to any investment decision, learning from past mistakes can be illuminating.
How companies chose to use the outputs of analytical technology was another strong discussion point. Process and systems can predict an outcome but the million-dollar question is Why? By understanding why data is showing a particular trend, companies can focus on what the customer wants in the future and how best to deliver the solutions, which provide an organizational competitive edge.
Treating data as a strategic resource is vital for success, how ownership of that data is structured is no less important. Imagining a different world and reorganized business model, which can better meet the demands of a digital age, may for some organizations, prove a prerequisite to the transformation journey for FP&A.
“Part of making good decisions in business is recognizing the poor decisions you’ve made and why they were poor” Warren Buffett
All business partners should have a natural vested interest in their businesses data resources through both individual inputs and strategic output but who should be the custodian of that data? General consensus leans towards those who can apply science to the data. FP&A offers the process, financial acumen, a grounded approach to forecasting and the hard and soft skills required to maximize benefit from a ‘closed loop’ position which benefits the business at large.
Skill gaps twinned with a sometimes mañana approach to the professional development needed to attract and retain the best and brightest FP&A talent continue to hamper advanced thinking. Empowering finance professionals to think outside the box and paint a picture of tomorrow fuels the dynamism, creative thinking and collaboration required to achieve and maintain a competitive advantage.
Creating a common language and understanding through education and training is a great place to start and a critical accompaniment to change management, allowing staff to grow and develop within their new roles and business structures. After all, human collateral will remain our most valuable asset until and if, we achieve singularity!
But given the obvious advantage advanced analytics can bring to a business, I asked Amrish Shah (Snr Finance & Operations Director PvH NL & MEA at PvH Europe BV) what he feels is the main obstacle to investment in analytics technology that senior FP&A professionals are experiencing within their organizations and how do they work to overcome these obstacles:
"……….Tackling the obstacles of organization readiness and risk adverseness to technology investment, both these challenges require a far greater investment in people. With the right experience, mindset and attitude (one of learning and experimentation) both internally and externally and ensuring that information management is seen as a strategic resource that has to be planned for and tackled as such, professional development needs to be on the rolling agenda of every management team and Board".
There is no dispute analytics technology improves the speed and quality of an organization’s decision-making.
Transformational business journeys including the move to advanced analytics are evolving projects that don’t and shouldn’t have a final end point. They need to be agile and operate around new drivers for the future - one size does not fit all. It’s a very personal journey, unique to individual businesses.
FP&A is leading the charge but they should avoid any attempt to make the journey alone. The relationship between senior finance professionals, CTO’s and CIO’S must be at the heart of this process to ensure a holistic view of the business, its needs and and the task at hand. Choosing to ignore or simply delay embracing the value-add analytics technology can bring to your business and its position within the competitor landscape is a no brainer. We simply can’t ignore the march of progress.
Many thanks to sponsors and partners of the FP&A Board events: The Association for Financial Professionals (AFP), provider of international FP&A Certification and finance training. Page Group, global recruitment firm and Tagetik, leading FP&A Technology company.
Copyright © 2017 Association for Financial Professionals, Inc.