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Three capabilities to fuel today’s dynamic planning and forecasting

Three capabilities to fuel today’s dynamic planning and forecasting

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IntroductionThe current business environment is still characterized by skittishness, tenuous demand and sporadic growth. It’s no surprise then, that 60 percent of CFOs plan to make major changes to critical finance practices and processes, according to the 2010 IBM Global CFO Study.¹ In fact, 70 percent of CFOs claim to be taking a more prominent role in decision-making beyond the traditional role of finance.

Yet many CFOs admit to significant gaps in their ability to deliver on this expanded agenda, particularly in their ability to measure and monitor business performance. The IBM study found that those companies that invest in capabilities to expand their business insight are better able to anticipate and react to the unpredictable external forces affecting the economy.

Broadly defined, these are capabilities that enable organizations to 1) analyze business performance and the factors that affect it; 2) model business strategies and processes by deploying a common analytical and planning platform; and 3) contribute to and report on a common set of business objectives with tools and workflow.

Planning and analysis solutions based on IBM Cognos software are uniquely suited to provide these capabilities. The components of Cognos software support timely, reliable forecasts and plans with key analysis, modeling, reporting and participation (or contribution) capabilities, paving the way for intelligent choices and optimized business outcomes.

Figure 1: Today’s dynamic planning solutions include analytics to validate plan assumptions, modeling to facilitate rapid adoption of best practices such as driver-based planning and rolling forecasts, and collaborative capabilities — with reporting — in familiar interfaces to develop high participation, timeframe-appropriate plans.

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AnalyzeArmed with robust analytics blended with planning, companies can validate their planning assumptions, share plans with others for confirmation and provide a fact-based approach to the planning process before setting planning assumptions. This type of environment also provides a dynamic approach to forecasting and re-forecasting. Prior to forecasting (or re-forecasting), you can share new discoveries as well as prototype plans with your core planning team who, in turn, can explore performance gaps at various levels of granularity, validate the company’s drivers or define scenarios across dimensions such as organization, product family and channel mix. This approach facilitates, for example, teams and individuals comparing targets with current and historical actuals and with external benchmarks.

Faster cycles of analysis translate into more opportunities to identify and assess strategic alternatives for the organization. By spending less time on laborious tasks such as cross-checking data, companies can devote more of their energy and thought to evaluating alternative scenarios, performing what-if analysis, identifying the best choices for action and driving superior execution of strategies.

By running special planning sessions with peers and management, key thinkers in your organization can test numbers to build a set of “best case” through “worst case” scenarios, which is often a critical activity these days. McKinsey & Company described the expanding role of alternative plans at some leading companies:

“Executives at some forward-thinking companies… have not only formally developed concrete macroeconomic and business scenarios, including some considered extreme, but also modeled the implications of each scenario for their own businesses and customers, as well as for competitors. At the end of the process, these companies adopted a single budget. But they supplemented it with concrete alternative financial statements and business plans based on plausible future scenarios.”²

Three capabilities to fuel today’s dynamic planning and forecasting

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Planners can perform activities during planning cycles or on an ad hoc basis with these planning and analysis solutions:

• IBMCognos®Insight,apersonalanalyticssolutionforthedesktop.This solution empowers business users to interact and explore data, build scenario models and share insights and plans without IT assistance. Users can share or report on the results of their analysis in various ways:

– Publish in a tailored dashboard in Cognos Business Insight for broad distribution.

– Publish the material to be read as a report in IBM Cognos Business Intelligence.

– Email the findings in a file to team members. – Move the prototype of a plan to the modeling environment for enrichment and inclusion in expanded planning activities.

• MicrosoftExcelinterfaceandExcelformattingontheweb. All planners and stakeholders with this client can read, write, perform “what-if” analysis and report with Microsoft Excel sheets (slices of the spreadsheets), right on the web.

IBMCognossoftwareLet’s look at the key facets of analysis available with planning and analysis solutions based on Cognos software:

• Multidimensional analysis. A planning team can compare and manipulate data across multiple dimensions and perspectives. The team can compare historical actuals with current targets and external benchmarks to quickly establish the targets’ viability and consistency.

• Drill down into operational and financial data. Explore actual data to fully test assumptions in minutes. Drill down through increasing levels of detail and view by dimensions such as sales per region or by product.

• On-demand scenario analysis Flexible analytics allow users to examine scenarios from best case to worst case, combine scenarios, perform sensitivity analysis, identify risks and then immediately share the impact with team members.

• Predictive analytics with IBM SPSS solutions. Improve the thoroughness of your plans and their revisions, as well as your competitive positioning by pre-populating plans with statistically significant forecasts for a baseline guide. Then triangulate using your bottom-up plans, top-down objectives and statistical forecasts to create up-to-date risk-adjusted forecasts.

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Figure 2: In the modeling environment, a business user can easily add a dimension to a cube.

Planningrecommendationsfortoday’seconomy Analysts at APQC recommend that companies think like the mayor of a city about to be hit by a major storm, by addressing these imperatives:³

• Moveintoadaptivemodeinanemergency.

• Trackandcommunicatethelikelytrajectoryofthethreat.

• Takedownpreconceivedscenarioanalyses.

• Activatecontingencyplanstominimizeriskofdamage.

• Transformfinanceintoa“dangercontrolcenter”.

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ModelWith modeling via planning and analysis solutions, an organization can facilitate the rapid adoption of best practices such as driver-based planning and rolling forecasts by building and revising models in hours or days, not months. Business units and Finance can adapt the solution to their company’s planning and forecasting processes to meet diverse forecasting needs across the organization. The all-important business drivers are tied to forecasts and made visible to all stakeholders, not hidden away in a drawer somewhere.

Cross-functional planning processes rely on complex logic and dependencies. Enter the Cognos solution and its advanced modeling capabilities with which you can quickly deliver or enhance sophisticated, linked models. The models accurately reflect your business in all its complexity and detail, in a business-friendly guided development environment. You then have more time to focus your skills on actually evaluating information instead of worrying about the accuracy and timeliness of the data.

Rather than forcing you into a solution that might not fit your business model, the Cognos planning solution easily adapts to your organization’s environment — even as your business grows and changes. You can create your own business rules and structures and modify the model as your organization evolves. Guided design includes defining new dimensions, building multi-dimensional cubes, largely with a simple point–and-click, creating or modifying calculations, importing data from multiple sources, and mapping it to the model with drag-and-drop gestures.

In addition, you can import data definitions from sources such as enterprise resource planning (ERP) and general ledger systems to accelerate the process further. Powerful modeling capabilities in the Cognos solutions give planners the ability to balance all of the organization’s resources and initiatives by providing the flexibility to build, link and assess alternative business scenarios and assumptions:

• Expressive,linkedmodels. Cross-functional planning processes rely on complex logic and dependencies. Built-in modeling capabilities let you speed the development of sophisticated models that “express” or reflect the uniqueness of your business situation. All plans from across the organization can be developed by each department individually, and then linked together to model the entire company’s plans. This approach enables a company to start with the planning solution in one or two departments or business units and then expand it company wide, according to drivers and initiative priorities.

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• Rapiddevelopmentandconsolidation. Planning and analysis solutions based on Cognos software enable companies to build a model in days — not months. And you can consolidate the plan with a keystroke. Planners can import data definitions from other systems to further accelerate the process. Sample cubes and plans speed planning, forecasting, and reporting.

• Spreadingor“breakback.” This unique capability automatically spreads high-level targets across any profile — previous-period actuals or projected seasonality, for example — and across multiple dimensions, such as products, customers, territories or time periods, without the need to define special business rules.

• Administration. You can work more efficiently because you administer models, data and business rules with utilities and tools, using guided application deployment.

• OwnershipbyFinance. Planning and analytics solutions powered by IBM Cognos software do not require mastery of a sophisticated programming language. Control of the application remains with Finance and with planning professionals — not IT technicians.

Figure 3: Organization-wide planning requires connecting financial and operational planning processes in a single, dynamic system. With planning and analysis solutions based on Cognos software, users can connect strategy execution to the resource allocation and planning process via linked models that readily share dimensions and data.

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• Datamanagement. Central management of business models, hierarchies, rules, calculations and data means that data shared among departments is consistent and linked. Dependences between operational and financial data are not tacit or hidden, but recorded and visible to all affected users.

• Metadatamanagement. Cognos planning and analytics solutions offer centralized metadata management that provides a common platform of consistent information that can be shared across your organization. The IBM Cognos Framework Manager metadata model can represent both relational and dimensional data, and create a dimensional representation for relational data sources. Rather than updating information in several places, you make the change once and the new data automatically populates all cubes that refer to that component.

• Deployingtheapplications.The business-user modeling environment also provides a process for deploying managed planning models, with a broad array of application styles and interfaces through Cognos Insight and Excel-based Websheets.

ContributeWith capabilities for contribution, your organization can develop timeframe-appropriate plans and ensure high participation while working with large data volumes. Planning and analysis solutions based on Cognos software offer the Cognos Insight, web, Microsoft Excel and Managed Contribution interfaces for a broad range of users and they can be defined as either distributed or centralized. Contribution capabilities also include:

• Richworkflow. To manage key planning processes effectively, IBM Cognos solutions offer workflow features such as version tracking, email alerts and real-time responsiveness – across all your territories, business functions, and units.

• Applicationtypes. Plans can be established as different application types, depending upon which provides the most appropriate planning:

– Central – for top-down plans, with corporate-level drivers such as a merit increase metric, pricing and cost assumptions

– Approval – workflow with an approval hierarchy and submit/reject activity; developed for input from many planners

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• Responsibilityplanning. Best suited to when the plan is always in use, such as a rolling forecast with frequent changes.

• Managerialreporting. To further align Finance with business units, Cognos planning solutions provide a high-performance environment with many formatting options. All planners and managers can view and share template-based or ad hoc reports, from those with complex measure dimensions (such as Balance Sheet, Cash Flow, Statement of Earnings) to alternate scenarios for forecasts to financial intelligence such as the results of profitability analysis.

• Annotationsupport. Readily enhance your analysis and active contribution with commentary added to cells and to plan inputs.

Instead of frenetic activity by a few people to create a monolithic plan or reforecast, best practices center on smaller but more frequent contributions from a broader group of stakeholders. A few minutes each month from hundreds of contributors can create a far more holistic, rolling business plan, and forecasts that can be built faster, and with greater reliability.

Best practices and faster implementations with IBM Cognos Performance BlueprintsIBM customers benefit from free access to our suite of Performance Blueprints – pre-defined data, process and policy models based on proven best practices in enterprise planning, and financial management and control. By structuring and automating the planning and forecasting processes and thus reducing project implementation time, the following Blueprints for planning and financial analysis enable companies to minimize risk and speed deployments in key planning processes:

• Integratedfinancialplanningandforecasting:This Blueprint assists an organization in connecting operational tactics and financial plans, providing a basis for determining financial objectives and validating bottom-up plans against those objectives.

• Profitabilityanalysis: Uncovers product-level profitability in the context of operational business decisions, moving profitability management from the CFO’s office to the front lines, where key decisions affecting profitability are really made.

• Expenseplanningandcontrol: To help steer a company through the process of establishing a consensus expense forecast, this Blueprint fosters an understanding of the critical business metrics that drive expenses and synchronizes revised expense forecasts with the corporate profit and loss statement.

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• Capitalplanning: Helps align capital planning, depreciation expense projections and other capital spending requirements like dedicated IT time. This Blueprint enables decision makers to reach consensus on a capital plan, while understanding the financial impact of their decisions on both income and cash flow.

• Workforceplanning:Aids in managing headcount for existing, new, and sales employees, managing compensation, benefits and tax expenses, and links salary and headcount projections as drivers for other items on an expense plan.

IBM Cognos Performance Blueprints are available in the Innovation Center for Business Analytics.

Summary: Ready to transform your planning?To thrive in today’s business climate – or even just survive – you can’t afford not to improve the allocation of your resources through better planning, forecasting and reporting. Simply put, planning needs to be a core competence up, down and across the organization.

And when it comes to choosing software for those tasks, enterprise planning and analysis solutions based on IBM Cognos software offer a unique combination of analysis, business-user modeling, reporting, and collaboration. Employees can be empowered to take responsibility for analysis and planning, to make intelligent choices, to uncover hidden business options, increase profits and manage capital more effectively.

Figure 4: The introductory tab of the Workforce Performance Blueprint illustrates the model map and the benefits of the model. Blueprints can be uploaded into Cognos Insight and the modeling environment.

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About IBM Business AnalyticsIBM Business Analytics software delivers data-driven insights that help organizations work smarter and outperform their peers. This comprehensive portfolio includes solutions for business intelligence, predictive analytics and decision management, performance management, and risk management.

Business Analytics solutions enable companies to identify and visualize trends and patterns in areas, such as customer analytics, that can have a profound effect on business performance. They can compare scenarios, anticipate potential threats and opportunities, better plan, budget and forecast resources, balance risks against expected returns and work to meet regulatory requirements. By making analytics widely available, organizations can align tactical and strategic decision-making to achieve business goals. For further information please visit ibm.com/business-analytics

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© Copyright IBM Corporation 2013

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Produced in Canada May 2013

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1 IBM Institute for Business Value, The New Value Integrator: Insights from the Global Chief Financial Officer Study, March 2010

2 Mahmut Akten, Massimo Giordano, and Mari A. Scheiffele, “Just in Time Budgeting for a Volatile Economy,” McKinsey & Company, Spring, 2009

3 “Relevance Revealed: How Are CFO’s Coping with Turbulent Times?” APQC, 2009

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