The global COVID-19 pandemic has made the need for business agility particularly urgent. In this blog, written prior to the current crisis, Rob Hull takes a close look at how CFOs can emerge from disruption in a position of strength by planning for agility.
Do you want to be disrupted, or do you want to be a disruptor?
I recently had the opportunity to explore this topic with Doug Henschen, vice president and principal analyst at Constellation Research. Together we hosted a webinar for financial planning and analysis leaders and practitioners where we challenged attendees to look closely at the way they plan—and to ask hard questions as they map out their transformation journey from slow, static planning to the kind of planning built for the age of urgency.
Will you be caught off guard, unable to see what’s coming?
We all know how we’d like to answer those questions. But as Henschen notes, being able to deliver answers means addressing every aspect of digital transformation—and understanding everything that must change to achieve business agility. In fact, finance can—and should—play a critical role in the organization’s broader digital transformation efforts. Technology will change your company, but transformation is about more than strategic financial solutions. It’s about people and what it will take for them to elevate the role of finance. “A lot of companies are looking to a new generation of finance people who have a vision for finance as having a more proactive role—a partnership role within the business in adapting to change,” Henschen notes. “It’s not just rearview mirror analysis. And it’s not top down, ‘Here’s your budget, live with it.’ They’re looking for good communicators, people who can partner, people who are adaptable.”
In the webinar, titled “How Forward-Thinking Finance Leaders Plan for Business Agility,” viewable on demand, Henschen draws on recent research conducted by Constellation to outline the critical nature of agility and what it takes to achieve it. In that research, he defined a digital leader as a company that can course-correct and make better, faster decisions based on up-to-the-minute information and planning that’s frequently revised.
This has never been more important. Two decades ago, Henschen reports, the average company joining the S&P 500 was 25 years old. Today it’s less than 10 years old. “We’re seeing these fast-growing disruptors push the stodgy, unresponsive companies out of business,” he notes.
Becoming a disruptor isn’t a switch flip, however. It requires asking first what you want from digital transformation and then making extensive changes to achieve those objectives. Constellation found that most organizations want to transform the customer experience, create a competitive advantage, or establish a data-driven business model. That requires dedicated, sustained effort—and the right tools to enable it.
Driving process and cultural changes
Constellation’s research shows that two-thirds of firms that define and pursue innovation initiatives—of which digital transformation is a big part—see positive returns. These organizations realize successful transformation requires a reboot that goes beyond the keyboard.
“Too many people think of it as a technology shift when it’s really much more of a cultural shift,” Henschen explains. “Process and cultural changes are invariably required to become a truly agile business.”
So what do those changes look like? Process transformation generally involves moving away from “cumbersome budgeting and planning that tends to create a vicious cycle because people don’t want to go through that process again,” says Henschen. “So finance ends up being preoccupied with budgeting and reporting, and then with infrequent planning and analysis.”
The result? Less frequent course correction, and growing variances between reality and aging plans and budgets. What he’s describing is slow, manual, siloed static planning (e. g., an excel report). Hardly the hallmark of a disruptor.
Modern tools for modern processes
Making planning active and more comprehensive, continuous, and collaborative is essential to creating agility, Henschen says. “When I encounter organizations that are having trouble adapting to change, it’s often because they lack modern planning tools,” he notes. “The real laggards are those that rely on spreadsheets and email collaboration.”
To break out of planning processes and cultures that prevent people closest to the business from participating in plans and forecasts, Constellation found that organizations are more successful when they invest in cloud planning software and data connectivity. “With a solid data foundation and good analysis tools, finance and business leaders can quickly understand the market and internal operational trends that are driving and constraining performance.”
Henschen says cloud solutions are a game changer. “The old IT bottlenecks around deployment, customization, and upgrades just aren’t an issue (with cloud planning software),” he says. “But their real key appeal is that a modern platform ties the data, the people, and the plans together, with collaboration and one version of the truth.”
This becomes even more critical as planning moves beyond finance to other parts of the organization. Some organizations, for instance, use multiple ERP systems that serve specific functions in the business. This often results in competing plans and disagreements over whose data is real and what truth you can believe. A strategic financial solution that integrates all data sources and connects people throughout the organization eliminates those obstacles by providing a single source of truth.
Company-wide planning now can give managers throughout the business the ability to immediately understand the implications of their decisions, while taking advantage of modern analytics and advances like machine learning to anticipate the impact of variables such as supply chain disruptions or even weather forecasts on their workforce planning needs. “With a modern financial planning and analysis platform, you can understand current performance—and the products, services, and markets that are driving growth and profits” Henschen says.
For more details—and to learn how some businesses are taking Henschen’s advice to heart as they transform planning around the globe—watch “How Forward-Thinking Finance Leaders Plan for Business Agility.”
There’s an excellent chance you’ll come away with some actionable ideas for a little positive disruption of your own.