Smart Strategies for Uncertain Times Enterprise Performance Management

Transcription

1 Smart Strategies for Uncertain Times Enterprise Performance Management

2 The Recession Has Many Faces Source:

3 Smart Companies Capitalize on the Downturn "This is not the time for tech companies to be cutting back this is the time to be hitting the accelerator. Peter Thiel, Facebook board member and investor, BusinessWeek, November 2008 A downturn is a terrible thing to waste. It's easier for everyone to understand the need for the change when things are tough and the risks are lower. - Frank Blake, CEO Home Depot, Wall Street Journal, June 2008

4 High-Impact Strategies Conserve CASH Drive Down COST OF GOODS SOLD Get Closer to CUSTOMERS Manage RISK & PERFORMANCE Increase PRODUCTIVITY & CONTAIN HR COSTS

5 Management Excellence: The Next Competitive Edge Competitive Advantage Smart Deep Insight Agile Decisive Action Aligned Across the extended enterprise MANAGEMENT EXCELLENCE Cost Lean and Mean Quality Six Sigma, TQM Speed Real-time, JIT OPERATIONAL EXCELLENCE Time Copyright 2008, Oracle and / or its affiliates. All rights reserved. - Internal Use Only

6 Hackett Value Grid the Foundation for How Hackett Defines World-Class Performance Hackett Value Grid (Finance example) EFFECTIVENESS Industry relative total excess return Operating profit volatility Cost of capital Days sales outstanding Days payables outstanding Days Inventory on-hand Quality metrics Accuracy of forecasts and analysis Functional role in strategic decision making Percent of time analytic focus in on proactive decision making EFFICIENCY Overall function cost as a % of revenue Process cost as a % of revenue Technology cost per function FTE Staffing levels by process Cycle times and iterations Unit cost of transactions Utilization of self-service for inquiry Application complexity Automation of transactions Reliance on spreadsheets Percent of business reports distributed electronically Source: CFO Challenges and Opportunities in the Flat World, Hackett Group, November 2007

7 World Class Finance Organizations Out Perform Peers in Both Effectiveness and Efficiency Finance cost is 50.8% lower than peer Require 54.2% fewer FTEs Spend 40.0% less time collecting and compiling versus analyzing data Have 65.7% fewer errors in customer invoices Have DSO that is 21.2 days shorter Operates with 44% fewer compliance staff and with 47% lower audit fees Source: CFO Challenges and Opportunities in the Flat World, Hackett Group, November 2007

8 World Class Finance Performance Beyond Efficiency Effectiveness Can Be the Real Payoff $3, Receivables $1,329 Million of EBITDA $3,102 Inventory $798 Peer Group World-Class Peer Group Top Performers Enterprise Performance Management (EPM) World-class EPM organizations deliver 2.4 times the equity market returns of industry-peer companies Working Capital Top performing organizations are able to free up $2.9 billion more in working capital than the typical Global 1000 organization Talent management A strong correlation of $462 million in additional EBITDA for companies with top-performing talent management programs versus their industry peers Source: CFO Challenges and Opportunities in the Flat World, Hackett Group, November 2007

9 Today s Reality: Management Activities Are Fragmented VARIANCE ANALYSIS ANALYZE PERFORMANCE SCORECARDS OPERATIONAL PLANNING FINANCIAL REPORTING SIX SIGMA GOAL SETTING FINANCIAL MODELING Lack of business alignment Low predictability in performance Inconsistency in business decisions ROLLING FORECAST MONITOR RESULTS Is this the best way to work in difficult times?

10 Strategy to Success: Oracle s Framework for Achieving Management Excellence

11 The 7 Imperatives To Deal With The Crisis Get insight and share it 2. Monitor continuously 3. Plan flexibly 4. Rethink strategy 5. Invest and divest wisely 6. Build trust 7. and do all this in concert

12 Get insight and share it Imperative #1 1

13 Get insight and share it Imperative #1 Without current insight nothing will work, fast feedback and alignment is the key to all imperatives. Business Intelligence is not only for top management, but for all Provide finance professionals with operational insight, to improve predictability Provide all managers with financial insight, to improve accountability Make external reporting a competitive advantage Record to Report is the management process for providing strategic, financial and operational feedback to all stakeholders inside and outside the organization, to understand how a business is performing.

14 Customer Successes World s leading aluminum producer Global consolidation across 58 LOB, 5 days Global forecasting, reporting for 1,000+ users World-class fast close Access to huge volumes of transaction data Provide researchers, authorities, and government officials with an interest in Denmark s energy grid with easy-to-use BI Manages multiple acquisitions per year Financial consolidations on top of SAP Monthly close process down from 5 days to 2 or 3.

15 Get insight and share it Business Intelligence Challenge Management Lacks Information Information Not Timely Existing Tools Difficult to Use Different Versions of the Truth Solution Oracle Business Intelligence Oracle Essbase Drives Pervasive Insights Benefit More informed management decisions Self-service access by users, less burden on IT Increased user adoption, lower training costs Consistent views of data and business definitions Lower cost of ownership

16 Monitor Continuously Imperative #2 2

17 Monitor Continuously Imperative #2 Analyze to Adjust is the management process for analyzing trends and deviations -- and their root cause -- from an organization s goals in order to take corrective actions. Monitor operations closely to immediately spot deviations Working capital Expenses Headcount Link KPIs in a cause-and-effect chain to create leading indicators Embed business intelligence in operational processes Turn analysis into immediate action to make necessary changes

18 Customer Successes Sales Analytics to 1,700+ financial consultants 5-9% of analytic alerts result in new opportunities 2,400 hours/week time saved Sales, Service, Marketing analytics to 1,250+ employees Enhanced sales productivity, increased customer responsiveness Financial analytics installed in just a few weeks Global view to detail in 4 clicks Proactive management of costs, revenues and shareholder value

19 Continuously Monitor Results Business Intelligence Challenge Untimely, static management reporting Limited cause and effect analysis No visibility into LOB profitability Different versions of the truth Solution Oracle Business Intelligence Applications Improve business agility Benefit Real-time, personalized management reporting Enhanced visibility into KPI s across functions Rapid root-cause and variance analysis Seamless link with operational systems Better, faster business decisions

20 Plan Flexibly Imperative #3 3

21 Plan Flexibly Imperative #3 Plan to Act optimizes capital and resource allocations across the organization in order to effectively execute its strategy. This process involves budgeting, planning and forecasting. Throw away your old plans, throw away your new plans Instead, focus on rolling forecasts Connect Financial and Operational Plans Use benchmarks to assess relative performance Don t stick to the plan, stick to reality

22 Adopt Rolling Forecasts Fact: 70% of CFOs today can t forecast more than one quarter out. CFO Magazine, December 2008

23 Customer Successes 6mo rolling forecast by retailer per item Match purchasing with forecast High ratings from retailers Close partnership with BestBuy Centralized rolling forecast 2 days P&L reporting Instant online access Aligned with corporate goals 4.5 weeks for first budget Reorg down to 24 hours Detailed budget 700 accounts Phase 2 budget to 60,000 people Multidimensional analysis Detailed competitive benchmark for 32 countries Sales analysis down not only by model but by sales channel, fuel type, chassis type, etc.

24 Align Product Allocation Decisions with Business Priorities Seagate is the worldwide leader in the design, manufacture and marketing of hard disk drives Before After Hundreds of Excel templates with little consistency across planners Lack of visibility and coordination in demand-supply alignment Lack of business and financial impact analysis Limited scalability to handle growing business volume & complexity Consistent data and planning models shared across all planners Proactive management of supply hotspots in response to demand variability Responsive decisions based on operational and financial impact analysis 40% gain in planner productivity leading to staffing efficiencies 24

25 Take a Flexible Approach to Planning Integrated Business Planning Challenge Long annual budgeting process Reliance on spreadsheets Static budgets are quickly obsolete Operational and financial plans not aligned Solution Oracle Integrated Business Planning Improve business predictability and align resources Benefit Shorter budgeting and planning cycles Improved accuracy of plans and forecasts Dynamic, driver-based plans and updated forecasts Alignment of demand, supply and finances Reduced risk

26 Rethink Strategy Imperative #4 4

27 Rethink Strategy Imperative #4 Use scenario analysis to prepare for different future realities Use financial modeling to find cost saving opportunities Use profitability management to focus on profitable customers, products, markets and activities Rethinking strategy is about modeling and simulation Design to Decide is the strategy formulation management process for designing the business infrastructure and partner network to deliver value to customers in the most profitable way.

28 Different Ways to Rethink Strategy Financing and Cost Reduce debt and other liabilities Secure access to lines of credit, Investigate alternative sources of capital Eliminate non-core activities Revive efficiency initiatives deemed controversial before Pricing Offer low-price versions of existing products Unbundle services Focus on full pricing where brand value is important Consider creative pricing strategies such as results-based or subscription pricing Top Line Focus Adopt aggressive customer retention programmes Analyze marketing spend to align with immediate revenue generation Focus on customer profitability Create generous terms (service, financing, returns) for immediate deciders and customers paying full-price all focus heavily on analysis, what-if modeling and simulation Loosely based on: Seize Advantage in a Downturn, Harvard Business Review, february 2009

29 Customer Successes Survive a financial crisis Lost investment-grade credit rating, credit rating back to investment grade $4 Billion debt restructuring Simulate capital structure and cash flow 3% accuracy in net income projection Model New Economic Views 10,000 students, 1,200 faculty Test permutations of enrollment strategy; out-of-state vs in-state, class number, retention data Overall view of balance sheet based on enrollment, research programs, inflators, cost of capital Integrate data with strategic plans Copyright 2008, Oracle and / or its affiliates. All rights reserved. - Internal Use Only

30 Rethink Strategy Financial Modeling Challenge Solution Benefit Missed market opportunities Limited cost benefit analysis All scenarios not considered Not enough focus on cash flow Oracle Hyperion Strategic Finance Improve Strategic Decision- Making Fully assess and consider alternative strategies Improve speed and accuracy of financials models and plans Understand full impact of mergers, acquisitions, divestitures in financials Optimize capital structure

31 Invest and Divest Wisely Imperative #5 5

32 Invest and Divest Wisely Imperative #5 Investigate to Invest is the management process for identifying, evaluating and creating the most attractive market opportunities that generate the highest returns. Do not divest purely trying to match needed cost saving, such as headcount Identify portfolio of best product-market-channel combinations Divest on activities that do not contribute to sustainable competitive advantage Use divestments for new investments

33 Accenture Managing for High Performance in an Uncertain Economy Outlook Point of View October 2008, No. 3 The winning companies did not just cut costs during the downturn; they cut the right costs. And they diverted resources to activities with the best chance of creating value [ ] Top performers in general know how their products and services stack up against those of the competition, why customers prefer doing business with them and exactly what the company has to do to turn a profit.

34 Customer Successes Accelerate assessment and integration of acquisitions Test scenarios for their impact on performance Set earnings guidance for Wall Street 3-month strategic planning cycle 5-year plan for earnings and share price Simulations on store openings and closures Increase the probability of project success Advanced financial modeling of strategic projects Model technical risk and cost uncertainty

35 Invest and Divest Wisely Predictive Modeling Challenge Missed market opportunities Valuable resources not fully utilized Suppliers have too much leverage Limited benchmarking vs. industry peers Solution Oracle Crystal Ball Reduce Risk and Uncertainty Benefit Fully assess all market opportunities Match market potential with resources Improve probability of success Increase bargaining power with suppliers Balance risk and reward

36 Build Trust Imperative #6 6

37 Build Trust Imperative #6 Deal with increased pressure on regulatory reporting Gain to Sustain ensures that the business gains all the necessary contributions from its stakeholders to drive business performance, while meeting the required stakeholder expectations. Tighten grip on outsourced activities, share cost pressure with partners and suppliers Be transparent to regain access to capital, and improve customer loyalty Focus on creating stakeholder value, not only shareholder value

38 There Is Ample Room For Improvement To which stakeholders does your organization proactively provide business intelligence? Senior management 84.5% Middle management 54.7% All employees Shareholders Customers 14.3% 10.6% 22.4% To Be Expected 67% of respondents will increase providing insights to stakeholders. Suppliers Activist groups 6.9% 1.6% 41% of respondents plan to increase stakeholder reporting. Source: CFO Europe Research Services, The Story Behind The Numbers, 2007, sponsored by Oracle Other, please specify 2.9% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

39 Customer Successes All KPIs available on City s web site Alignment of KPIs across 40+ city services Based on continuous improvement Deliver BI to 1M merchants about marketing performance Ability to understand what ads are successful, and where to run them Ensure customer satisfaction via reporting Supported reporting solution with fewer than 10 IT staff Received high customer service ratings in 14 categories Unified system for financial and sustainability reports Automated calculation of emissions Critical data disclosed at the same time schedule

40 Build Trust Financial Consolidation & External Reporting Challenge Long period-end reporting cycle Limited visibility into operations New stakeholder information requirements Adopting to new global reporting standards Solution Oracle Hyperion Financial Management Accelerate reporting cycles and improve transparency Benefit More timely and accurate financial reporting Improve transparency into financial and operating results Meet new stakeholder needs for environmental, social reporting Easily support new regulatory requirements i.e. IFRS

41 And Do All This In Concert Imperative #7 7

42 In Search of Management Excellence: An IT Focus on Processes, 2009 According to the research, companies that implement structured management processes report that they have better internal information (72 percent versus 38 percent) to make better informed decisions versus companies that use customized or ad-hoc processes.

43 Structured Management Processes Improve Performance Management Effectiveness Structured planning leads to better business Performance, CIO2CFO report, 2009

44 Integrating Key Management Processes Oracle EPM System EXTERNAL REPORTING STRATEGIC & PREDICTIVE MODELING INTEGRATED BUSINESS PLANNING PROFITABILITY & COST MANAGEMENT SCORECARDING, MONITORING & ANALYSIS FINANCIAL & MGMT REPORTING BI TOOLS & BI APPLICATIONS, REAL-TIME MONITORING OLAP, DATA WAREHOUSE, DATA MINING DATA INTEGRATION, APPLICATION MANAGEMENT & MASTER DATA MANAGEMENT

45 Oracle Enterprise Performance Management, Fusion Edition EPM WORKSPACE Desktop Web Search Office Alerts Mobile PERFORMANCE MANAGEMENT APPLICATIONS Strategy Management Business Planning Profitability Management Financial Reporting & Compliance BI APPLICATIONS Sales Svcs. BI Applications Mktg. Contact Order Center Mgmt. Supply Chain HR Finance Essbase BUSINESS INTELLIGENCE FOUNDATION Common Enterprise Information Model BI Server Predictive Analytics FUSION MIDDLEWARE / NetWeaver / WebSphere /.Net SOA Data Quality Data Integration MDM Identity Management Content Management Business Process Management OLTP & ODS Systems Data Warehouse Data Mart OLAP SAP, Oracle, Siebel, PeopleSoft, Custom Excel XML Business Process 45

46 Management Excellence Delivered

47 Leverage IT to Win in the Downturn Except in the most dire circumstances, turning off technology investments during a downturn is counterproductive. McKinsey, Managing IT in a Downturn, September 2008 Companies who excelled through the last downturn reserved at least 5-7% of their IT spend for innovation. CIO Executive Board, October 2008

48 Further Reading Management Excellence White Papers: How Tomorrow's Leaders Will Get Ahead The Metrics Reloaded From Strategy to Success Techniques and Technologies Profit Online Podcast Beyond Competitive Advantage: EPM and Management Excellence Publications Journal of Management Excellence, Issue 1-4

49 Oracle Enterprise Performance Management drives Management Excellence making organizations Smart Agile Aligned Copyright 2008, Oracle and / or its affiliates. All rights reserved. - Internal Use Only