Capitalizing on analytics in finance: Creating trusted insights for the enterprise

2015 IBM Corporation

Capitalizing on analytics in finance:Creating trusted insights for the enterprise

October 2015


Finance organizations are clearly interested and investing in analytics

Question: In the last 5 years, has your organization implemented any analytics solutions (i.e., software, services) to support typical financial processes?Question: In the next 5 years, does your organization plan to implement any analytics solutions (i.e., software, services) to support typical financial processes?Source: IBM Center for Applied Insights survey of 337 Finance executives across industries, July 2015

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9 in 10 finance organizations have implemented analytics solutions to support their financial processes in the last five years

Even morefinance organizations expect to implement analytics solutions to support their financial processes in the next five years


However, adoption is happening in pockets and is not pervasive across Finance activities

Question: Please indicate whether you have adopted analytics for the following finance related activities?Source: IBM Center for Applied Insights survey of 337 Finance executives across industries, July 2015

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Management reporting

Profitability/margin analysis

Financial planning

Expense management

Revenue forecasting

Procurement

Cash forecasting

Order-to-cash

Finance process optimization

Mergers and acquisitions

Have implemented analytics

Chart1

0.180.82

0.210.79

0.240.76

0.290.71

0.320.68

0.340.66

0.340.66

0.350.65

0.370.63

0.40.6

Have implemented analytics

Have not implemented analytics

Sheet1

Have implemented analyticsHave not implemented analytics

Mergers and acquisitions18%82%

Finance process optimization21%79%

Order-to-cash24%76%

Cash forecasting29%71%

Procurement32%68%

Revenue forecasting34%66%

Expense management34%66%

Financial planning35%65%

Profitability/margin analysis37%63%

Management reporting40%60%

To resize chart data range, drag lower right corner of range.


And Finance organizations are still primarily using analytics to look backward, rather than to anticipate and prescribe future actions

Question: Please indicate, by percentage (totaling 100%), the amount each type of analytics is currently used to support your financial processes?Source: IBM Center for Applied Insights survey of 337 Finance executives across industries, July 2015

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Type of analytics currently used to support financial processes

Predictive PrescriptiveDescriptive

Chart1

0.50.30.2

Descriptive

Predictive

Proscriptive

Sheet1

DescriptivePredictiveProscriptive

50%30%20%



With investment in analytics poised to double in the near term, how can Finance better capitalize on these new capabilities?

Question: Please indicate whether you have adopted or will adopt analytics for the following finance related activities?Source: IBM Center for Applied Insights survey of 337 Finance executives across industries, July 2015

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Adoption of analytics

Already implemented

Will implement within the next 2 years



Financial planning

Expense management

Revenue forecasting

Procurement

Cash forecasting

Order-to-cash



Chart1

0.180.320.5

0.210.520.27

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0.290.480.23

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0.340.480.18

0.340.470.19

0.350.480.17

0.370.460.17

0.40.440.16

Already implemented

Will implement within the next 2 years

All others

Sheet1

Already implementedWill implement within the next 2 yearsAll others

Mergers and acquisitions18%32%50%

Finance process optimization21%52%27%

Order-to-cash24%46%30%

Cash forecasting29%48%23%

Procurement32%38%30%

Revenue forecasting34%48%18%

Expense management34%47%19%

Financial planning35%48%17%

Profitability/margin analysis37%46%17%

Management reporting40%44%16%



To answer that question, we looked at the most effective Finance organizations

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Question: How effective is your Finance organization in the following areas? 1 Least effective to 5 Most effectiveSource: IBM Center for Applied Insights survey of 337 Finance executives across industries, July 2015

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On average, these leaders were most effective across the 10 finance-focused activities holistically

Cash forecasting

Expense management


Financial planning


All others72%

Most effective Finance

organizations28%


Order-to-cash

Procurement


Revenue forecasting

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0.28

0.72

Column1

Sheet1

Column1

Most effective finance organizations28%

All others72%



Why pay attention to enterprises with the most effective Finance organizations? They report better financial performance

Question: Please indicate how the revenue growth of your enterprise (or budget growth for public sector) compares to that of your industry peers over the last 3 years.1 We significantly underperform industry to 5 We significantly outperform industryQuestion: Please indicate how your enterprises profitability (or efficiency for public sector) compares to that of your industry peers over the past 3 years.1 We significantly underperform industry to 5 We significantly outperform industrySource: IBM Center for Applied Insights survey of 337 Finance executives across industries, July 2015

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Outperform on revenue growth

1.4X more

Outperform on profitability

1.7X more

Most effective Finance organizations

All others


All others

Chart1

0.620.38

0.880.12

Outperform

Do not outperform

Sheet1

OutperformDo not outperform

All others62%38%

Most effective finance organizations88%12%


Chart1

0.530.47

0.90.1

Outperform

Do not outperform

Sheet1

OutperformDo not outperform

All others53%47%

Most effective finance organizations90%10%



And the most effective Finance organizations are spreading that effectiveness across the rest of the enterprise

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Effectiveness at activities outside of Finance

2.6X

2.0X

2.3X

2.3X

2.0X

2.3X

2.5X


All others

Supply chain analytics

Customer analytics

Enterprise risk management

Pricing and promotion optimization

Fraud, waste and abuse

New products/services identification

Workforce analytics

Question: How effective is your Finance organization in the following areas? 1 Least effective to 5 Most effectiveSource: IBM Center for Applied Insights survey of 337 Finance executives across industries, July 2015

Chart1

0.30.74

0.320.74

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All others

Most effective finance organizations

Sheet1

All othersMost effective finance organizations

Workforce analytics30%74%

New products/services identification32%74%

Fraud, waste and abuse37%75%

Pricing and promotion optimization33%76%

Enterprise risk management35%80%

Customer analytics40%82%

Supply chain analytics32%84%



So what are the most effective Finance organizations doing differently?

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Investing in analytics more consistently across their business and applying advanced analytics

Collaborating across the C-suite regarding analytics

Utilizing analytical applications and cloud to deliver their analytics


These organizations are ahead in implementing analytics more consistently across their business

Question: Please indicate whether you have adopted or will adopt analytics for the following finance related activities?Question: Please indicate whether you have adopted or will adopt analytics for each of the following activities?Source: IBM Center for Applied Insights survey of 337 Finance executives across industries, July 2015

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Already implemented analyticsBeyond Finance

Already implemented analyticsFinance-focused activities


1.3X

1.4X

1.2X

1.3X

1.3X

2.2X

1.6X

2.1X

1.6X

1.3X

1.9X

1.8X

1.8X

2.1X

1.9X

1.4X

All others

Customer analytics

Sales performance

Pricing and promotion optimization

Enterprise risk management

Supply chain analytics

Fraud, waste and abuse

Workforce analytics

New products/services identification

Financial planning

Revenue forecasting


Expense management

Procurement


Order-to-cash


Chart1

0.140.29

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0.30.43

0.320.43

All others


Sheet1


Mergers and acquisitions14%29%

Order-to-cash21%33%

Finance process optimization16%35%

Procurement30%38%

Expense management31%41%

Profitability/margin analysis35%42%

Revenue forecasting30%43%

Financial planning32%43%


Chart1

0.140.2

0.170.32

0.160.33

0.190.34

0.190.35

0.20.37

0.330.43

0.290.45

All others


Sheet1


New products/services identification14%20%

Workforce analytics17%32%

Fraud, waste abuse16%33%

Supply chain analytics19%34%

Enterprise risk management19%35%

Pricing and promotion optimization20%37%

Sales performance33%43%

Customer analytics29%45%



And compared to their peers, they lean more heavily on predictive and prescriptive analytics

Question: Please indicate, by percentage (totaling 100%), the amount each type of analytics is currently used to support your financial processes?Source: IBM Center for Applied Insights survey of 337 Finance executives across industries, July 2015

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Type of analytics currently used to support financial processes

1.3X more

Predictive Prescriptive

Predictive Prescriptive


All others

Descriptive

Descriptive

Chart1

0.530.290.18

0.40.330.27

Descriptive

Predictive

Prescriptive

Sheet1

DescriptivePredictivePrescriptive

All others53%29%18%

Most effective finance organizations40%33%27%



The most effective Finance organizations also have CFOs who collaborate on analytics more closely with their C-suite peers

Question: How closely do you collaborate with each of the following roles in terms of analytics? 1 No collaboration at all to 5 Very close collaborationSource: IBM Center for Applied Insights survey of 337 Finance executives across industries, July 2015

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Finance collaboration across the C-suite on analytics


All others

1.4X

2.2X

1.5X

1.5X

2.1X

Chief Information Officer(CIO)

Chief Marketing Officer(CMO)

Chief Supply Chain Officer (CSCO)

Chief Sales Officer(CSO)

Chief Human Resources Officer (CHRO)

Chart1

0.360.77

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All others


Sheet1


Chief Human Resources Officer (CHRO)36%77%

Chief Sales Officer (CSO)51%77%

Chief Supply Chain Officer (CSCO)52%80%

Chief Marketing Officer (CMO)39%86%

Chief Information Officer (CIO)64%92%



These organizations are also heavier users of analytical tools and are less dependent on spreadsheets compared to their peers

Note: 1% of All others selected Other for deliveryQuestion: For the activities where you have already (or soon will) have implemented analytics, please indicate how those analytics are being conducted..Source: IBM Center for Applied Insights survey of 337 Finance executives across industries, July 2015

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Spreadsheet Analytical application ERPEnterprise performance managementCash forecastingFinancial planningManagement reportingProfitability/margin analysisRevenue forecasting

Cost and efficiency managementExpense managementFinance process optimizationProcurement

Revenue managementMergers and acquisitionsOrder-to-cash

Analytics delivery for finance-focused activities

22%

28%

49%

56%

29%

16%

25%

11%

22%

11%

52%

61%

23%

28%

44%

73% 16%

33%

Most effective Finance organizations All others


And when it comes to the delivery platform for analytics, the most effective Finance organizations are ahead on use of cloud

Question: Approximately what percentage of your finance analytics are delivered via cloud solutions?Source: IBM Center for Applied Insights survey of 337 Finance executives across industries, July 2015

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Finance analytics delivered via cloud solutions

20%All Others

33%Most effective Finance organizations

65%more

Chart1

33

67

Column1

Sheet1

Column1

3333

6767

Chart1

Sheet1

Column1

2020

8080

Chart1

20

80

Column1

Sheet1

Column1

2020

8080


Analytics use is rising among Finance organizations. Where should you focus to capitalize on these new capabilities?

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Move to advanced tools and forward-looking analyses

Move away from relying on spreadsheets or manual processes to gather data

Decide where you can be more predictive and prescriptive

Be strategic and pervasive with your approach

Build the business case for analytics within finance and across the organization and determine the key business issues you are trying to address

Establish an integrated data strategy (both financial and operational data)

Collaborate closely with C-suite peers

Identify which leaders you must work with to advance such analytics and share information and insights across the enterprise

Focus on specific areas of collaboration (e.g., risk, customer, workforce, sales, supply chain, etc.)


APPENDIX

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We surveyed 337 Finance executives / decision makers to understand their usage and adoption of analytics

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Source: IBM Center for Applied Insights survey of 337 Finance executives across industries, July 2015

IBM Confidential

Chart1

71

21

5

3

Geography

Sheet1

Geography

North America71

Europe21

Asia Pacific5

Latin America3


Chart1

32

28

26

8

6

Sector

Sheet1

Sector

Distribution32

Industrial28

Financial services26

Public (no gov't)8

Communications6


Chart1

17

10

13

27

16

17

Enterprise size (revenues)

Sheet1

Column1Enterprise size (revenues)

Greater than $20B17

$10B to $20B10

$5B to $10B13

$1B to $5B27

$501M to $1B16

Less than $500M17


Chart1

34

17

23

26

Employees

Sheet1

Column1Employees

Greater than 10,00034

5,000 to 9,99917

2,500 to 4,99923

1,000 to 2,99926


Chart1

64

25

11

Scope of responsibility

Sheet1

Scope of responsibility

Corporate level64

Major subsidiary/division25

Mid-sized subsidiary/division11


Chart1

23

28

37

12

Title

Sheet1

Title

C-level23

SVP/VP28

Director37

Controller12


Capitalizing on analytics in finance:Creating trusted insights for the enterpriseFinance organizations are clearly interested and investing in analyticsHowever, adoption is happening in pockets and is not pervasive across Finance activitiesAnd Finance organizations are still primarily using analytics to look backward, rather than to anticipate and prescribe future actionsWith investment in analytics poised to double in the near term, how can Finance better capitalize on these new capabilities?To answer that question, we looked at the most effective Finance organizationsWhy pay attention to enterprises with the most effective Finance organizations? They report better financial performanceAnd the most effective Finance organizations are spreading that effectiveness across the rest of the enterpriseSo what are the most effective Finance organizations doing differently?These organizations are ahead in implementing analytics more consistently across their businessAnd compared to their peers, they lean more heavily on predictive and prescriptive analyticsThe most effective Finance organizations also have CFOs who collaborate on analytics more closely with their C-suite peersThese organizations are also heavier users of analytical tools and are less dependent on spreadsheets compared to their peersAnd when it comes to the delivery platform for analytics, the most effective Finance organizations are ahead on use of cloudAnalytics use is rising among Finance organizations. Where should you focus to capitalize on these new capabilities?APPENDIXWe surveyed 337 Finance executives / decision makers to understand their usage and adoption of analytics

Capitalizing on analytics in finance: Creating trusted insights for the enterprise

Data & Analytics

Transcript of Capitalizing on analytics in finance: Creating trusted insights for the enterprise