Did Somebody Say Strategy?

The Art and Science of Forecasting

The July/Aug issue of CFO magazine has a comprehensive article on forecasting that we highly recommend - read Imperfect Futures

It covers a variety of topics including:

• External drivers
• Top-down meets bottom-up
• Forecast Scenarios
• SaaS tools
• Risk integration (eg: optimized hedging strategies)
• Creating more accountability in the forecast
• Prediction Markets (see our post on AMR Research)

Speaking of prediction markets, CFO magazine makes available a free community to try out Crowdcast prediction markets - sign up at http://cfo.com/predictionmarket

It lets you place "bets" on a variety of topics including:

• Capital Markets (# IPOs this quarter for example)
• Economic Indicators (eg: home sales, unemployment rates)
• Topical (when will BofA pay back TARP funds, Emmy for best comedy series, etc)

Here are my current bets

Looks like I’m a bit of a contrarian and slightly optimistic!

A variety of resources

I thought I’d share some resources I use around the web and in print...enjoy:

1. Just found this guy, “Oz” from GA, : http://www.mootbox.com/  “80% Business & Finance Matter, 20% Assorted Randomness” Twitter: twitter.com/osize  - lots of good business book reviews
2. Nutshell Mail : http://nutshellmail.com - delivers  a summary of your facebook, twitter, and e-mail activity to your inbox at predetermined times (a personal aggregator)
3. Cathy Smith - http://www.linkedin.com/pub/cathy-kinneavy-smith/8/1/55a  excellent feature article writer/editor, hire her to do your profiles (business, government, non-profit)
4. http://www.ted.com/index.php   TED - brilliant ideas shared succinctly in video
5. The DFJ Entrepreneurial Thought Leaders Seminar (ETL) weekly seminar audio podcast, Entrepreneurial Thought Leaders
6.  Driven to Perform: Risk-Aware Performance Management From Strategy Through Execution , new book from SAP on GRC and Enterprise Performance Management (more detail in future blog)
7. http://www.missioncontrol.com/ the future of productivity!
8. http://mayogenuine.com/blog/about/ executive coaching: high performance, high integrity, and fun!
9. Imagination Cubed online drawing collaborative online chalk board from GE (free!)
10. What are you thinking?  http://www.managingthought.com/  and upgrade your conversation.

Some of our top Business Intelligence tweets

Properly done BI or dashboard requirements interviews should leave person wanting to keep going, not looking at their watch.  @markmadsen Exactly! that's why we created the Periodic Table of Business: http://tinyurl.com/c459rw

@rondimon you have an interesting approach in yours Periodic Table of Business @marcusborba - Thanks! We use it for Business Intelligence requirements, metrics audits, and Business/IT alignment. http://tr.im/iEqZ

Creating the future: Royal Bank of Canada CEO:http://tr.im/inmX and 3 Laws of Performance:http://tr.im/innh - what's possible?

@marcusborba - Many thanks for the review of the article at http://tr.im/icGJ

From @LTucci - Gartner: IT budgets in 2009 are like a ‘ham and cheese sandwich’ - http://tr.im/i8Vp

RT @cfocoach: CFO's role in navigating the downturnhttp://tinyurl.com/dn2l6t #cfo reduce working capital by tightening up management.

RT @samuelchall ... lots of goodies in the First Oracle Enterprise Performance Management Index -http://tr.im/i22d

Wow - Rohm and Haas implements open source dashboard, saves at least $2M on SAP (BO) costs - http://tr.im/hZ78

Key Performance Indicators (KPIs) for Human Resources has been our most popular blog entry lately: http://tr.im/hSEM

RT @ericbryn: Excellent tips on setting Key Performance Indicators for your company http://bit.ly/FRqz - also seehttp://tr.im/hPI5 #KPI

What IT really needs is more business direction -http://tr.im/hPGS - this usually results in Business Intelligence initiatives #KPI

The future financial system

Today’s WSJ had an entire pull-out section dedicated to the Future of Finance

https://futurefinance.wsj.com/ .  These are the findings from last week’s Future of Finance Initiative meetings in DC.

Their top 20 principles for rebuilding the financial system:

(quoted verbatim, except for parenthesis)

1. Strengthen Underwriting Standards
2. Bolster FDIC
3. Regulatory Overhaul
4. Create a New Clearinghouse (for credit-default-swaps, overnight financing, and interest rate swaps)
5. Raise Capital Requirements (no mention of Basel II)
6. Enhance Collateral
7. Smarter Securitization
8. Rating Agency Reform
9. Consistent Regulatory System
10. Constrain Leverage
11. Let TARP Capital be Repaid
12. Executive Compensation (limit government involvement)
13. Transparency Before Regulation
14. Price and Volume Transparency
15. Fed Should be Systemic Risk Regulator
16. Ensure Success of Public-Private Partnerships
17. Accounting Rules (no mention of IFRS)
18. New Resolution Authority for Non-banks
19. Auditors Enforce Consistent Marks
20. Limit Foreclosures”

And the blog from the event is here: 

http://blogs.wsj.com/deals/2009/03/25/perspectives-from-the-future-of-finance-initiative/

Dashboards and Scorecards, similarities and differences

My friend Toby Hatch of Oracle (formerly of Hyperion and Sapling) has been doing scorecards for a LONG time.  She came up with this a few years ago and I've found it useful as a way to look at the differences:

Management Excellence

Oracle’s EPM Strategy group has recently introduced the domain of ‘management excellence.’  This is taking the ideas of operational excellence (process, efficiency, etc.) into management.

There are several pieces they have published on the the topic including:

• Introduction and overview of management excellence
• Organizing for Management excellence, Part 1
• Organizing for Management excellence, Part 2

The first article appears in the first issue of the “Journal of Management Excellence,” a new quarterly publication that has been a dream of Frank Buytendijk’s for a while now.

Certainly the evolution of Enterprise Performance management will take us into better/deeper systems integration, but, more importantly, it will focus on processes.  Just as transactional systems have focused on transactional processes, such as Order-to-Cash, Procure-to-Pay and so on, EPM systems will focus on those management processes that move organizations from strategy to execution in a repeatable, sustainable way.

They define the overall management process as Strategy-to-Success (or “S2S”) and use it as the framework to address each step of the value chain in an organization.  They include the following areas in the S2S chain:

• Stakeholder environment
• Market model (combining competitive intelligence with business intelligence)
• Business model (including scenario analysis)
• Business Plan (with an emphasis on rolling forecasts)
• Business Operations (including benchmarking, cross-domain analysis and master data management)

All of which lead-to and are driven by business results, with corresponding performance indicators on scorecards and dashboards.

We will see more of this on EPM maturity models and client’s roadmaps.

Drive Business Performance (Book Review)

I finally read Drive Business Performance: Enabling a Culture of Intelligent Execution (Microsoft Executive Leadership Series) by Bruno Aziza and Joey Fitts.

Bottom line: this is a very good book on the business benefits and high-level “how to” of enterprise performance management (EPM).

While the authors refer to this domain simply as ‘performance management’ (more on this here), it’s not to be confused with the annual Human Resources review process, but rather all of the people, process, and technology involved in sustainably executing your strategy.

This book is not too technical nor too theoretical. It has the right balance of business perspective, systems enablement, and process maturity to give a good overview of the promise of EPM and strategy execution. It makes liberal use of case studies, examples and stories to illustrate points and give more depth to the insights.

Some highlights:

• Fact-based, data-driven decision making (p.12)
• Strategic, Operational, and Tactical Decisions (p28)
• The Foundation for Decisions: information & trust (p32)
• Competitive Benchmarking (p16)
• The ‘right’ metrics (p49, 69)
• Line of Sight visibility (p.93)
• Accountability Mapping (p 226) and also how difficult it is to visualize and map metric relationships (p. 69) - of course this area is of special interest to me since it’s what we do
• A very good “uber” model for determining where to focus your efforts (p.254)

They also follow-up the book with more information on their companion website at http://www.cultureofperformance.com

A few things could be improved (perhaps for the second edition):
- There is a disconnect early on in the book between modeling and planning. Financial Modeling is lumped together with scenario planning later on (p. 195, 212, 217) and is probably collapsed early on with “Plan.” But the distinction is important enough that they should be “un-collapsed” and addressed separately in the model from the start. There was an attempt at this on pages 38 & 39, but I think it was buried and not highlighted. On page 38 in figure 2.2 they say Planning answers the question “What do we want to see happen” and at the top of page 39, under Plan capabilities, they say it addresses “how to model what should happen.” I think it would be more helpful to say that:
         Modeling (financial & operational) helps answer the question “what do we want to happen” (and includes things like strategic objectives/targes, assumptions & constraints), and
         Planning (financial & operational) helps answer the question “how do we want it to happen” (and includes resource allocation, more specific targets, and accountability down to the planning unit level). This really is an untapped area of EPM that should be on most people’s roadmaps.

- More detail on statutory consolidation and reporting, especially with the emphasis on IFRS vs. US GAAP happening these days would be good (it’s briefly addressed on page 214)

- I’d like to see real examples of competitive benchmarking and how EPM impacts financial performance (eg: Revenue Growth, Operating margin, cash cycle, etc.)

- Perhaps more on the functional issues of performance management, that is, how points of view differ across marketing, sales, finance, operations, and so on. - And, of course, more leadership in the use of the term “Performance Management” versus EPM, BPM, CPM, IPM, etc.

All in all, a very good read and certainly belongs on the bookshelf of any EPM manager and any CIO and CFO....hopefully dog-eared and well-worn.

My Brain is Full! "Performance Leadership" by Frank Buytendijk

Wow.

I consider myself fairly experienced and up-to-speed on enterprise performance management (EPM), enterprise decision management (EDM), and general strategy to execution management systems and processes.  And then I read Frank Buytendijk’s new book Performance Leadership: The Next Practices to Motivate Your People, Align Stakeholders, and Lead Your Industry (McGraw Hill).  There is so much good/new thinking in this book that my brain is now full.

Frank is a VP on Oracle’s EPM strategy team and used to be the lead BI analyst for Gartner, so he’s been at this for some time.  And unlike many long-term practitioners in this industry, Frank has a reputation for creative thinking, being a contrarian, and connecting disparate pieces that would otherwise not be connected.  He was the first person I heard talk of the behavioral elements of performance measurement, of business interface metrics, and of closed-loop management systems.

While many companies are still in the “meat and potatoes” stage of EPM (or Corporate Performance Management and Business Performance Management to some), meaning Planning, Analytics, BI, Management & Statutory reporting, and Balanced Scorecards are disconnected, Frank gives us an aspirational vision of what EPM can be in this new book.  If you work with any sort of industry maturity model to gauge where you stand with EPM, consider Frank’s practices to be on the far right (or top left) of the continuum (or quadrant)!

Here are a few highlights of the content:
- Strategy and Organization Alignment
- Traditional Methodologies (Balanced Scorecard, Beyond Budgeting, DuPont ratio analysis, activity based costing/management, six sigma)
- Driving the right behaviors and balanced metrics
- What’s really behind “one version of the truth”
- Managing with business interface metrics and key risk indicators
- How Stephen Covey has influenced performance leadership
- Performance networks/value mapping
- a new framework for performance leadership

Frank uses a lot of case studies and industry specific scenarios to explain the concepts in the book, and that helps connect his ideas to the real world.  He also gives some specific advice on how to get started on the next phase of your EPM journey.  The first step, he says, is to build and understand your own performance network.  This will show you (and your senior management) what the key drivers of value are in your organization and in your overall ecosystem or supply and demand chain.
This, by the way, is what Business Foundation does.

And in order to at least appear impartial on this review (I used to work with Frank at Hyperion), I had to find a couple of criticisms of the book.  Here they are:
    1.    Frank uses the term “Performance Management” instead of “Enterprise Performance Management” (or “Corporate” or “Business Performance Management”) and here in the U.S., “Performance Management” is still associated with a Human Resources competency or process, so there is still some confusion in the industry.  There’s no doubt what domain he’s talking about, it’s just unfortunate that this book won’t help end the confusion, and
    2.    In table 6.2 on page 85, the first column uses commas for the thousands separator (as in North America), and the second column uses periods (as in Europe).

(It was really hard to come up with that 2nd criticism!)

Oh, and Frank has put up a website here to support the book (read the lost chapters, see a video of his presentation).

Anyone who has or is thinking of having an EPM roadmap for their organization should read this book.  Anyone who has never heard of EPM/CPM/BPM, and wants to get better at executing strategy, on improving collaboration, efficiency, and having their organization survive this downturn, should read this book. 

Social Performance Management and Customer Data: FitBit

I stumbled upon this website over the weekend: FitBit, and wouldn’t have thought about it again until I read this morning’s Wall St. Journal short piece on them and their $2M USD first-round funding led by True Ventures.  When it comes out early next year, it will measure how much you exercise (with some limitations) and how much you sleep (and the quality of your sleep).  It’s unobtrusive and automatically downloads whenever you are within 25 - 50 feet of to your computer.

Imagine the impact on business if enough people used FitBit and the data were aggregated by age, geography, occupation, an so on:

• Health insurers could notice positive and negative demographic trends adjust premiums and preventative care programs accordingly.  “Adult Males in this zip code exercise regularly and get an average of 7.5 hours sleep per night - they get a 10% healthy-lifestyle discount on premiums.”  “Students in this area are sleep deprived, send out sleep-kits/how-to brochures to their parents.”
• Employers could require the use of FitBit and use the aggregated data to negotiate better health care policies for their employees
• Health clubs could include this data in their new-club site selection criteria (open news clubs first in areas of higher or lower activity),
• Mattress resellers could target direct advertising into low/poor sleep areas

I’m sure there are 100’s of applications.

I had a similar conversation with Safeway CIO, David Ching, last year about the possibilities of using and re-selling point of sale purchase information from their loyalty program.  Obviously the main concern is individual privacy, yet if the data is anonymously aggregated, consumers could benefit from targeted discounts and other programs.

For more on the personal benefits of this kind of Business Intelligence, see Frank Buytendijk’s blog entry on “The Best BI Tools in the World”.

The “ah ha” for Performance Management is to take this information we’ve gathered, analyze it to understand the root causes for the performance, debate ways to improve it,  and then plan for better performance in the next cycle (day, week, month, quarter, year), and putting those decisions into our systems and processes.

Business/IT Alignment: Transformational Books

From today’s CIO Insight column: “Five Insightful Transformation Books”
compiled by Brian Watson :

Sustained Innovation: Converging Business and Technology to Achieve Enduring Performance, by Faisal Hoque and Terry Kirkpatrick

Silos, Politics & Turf Wars: A Leadership Fable About Destroying the Barriers that Turn Colleagues into Competitors, by Patrick Lencioni

Connecting the Dots: Aligning Projects with Objectives in Unpredictable Times, by Warren McFarlan and Cathleen Benko

Winning the 3-Legged Race: When Business and Technology Run Together, by Faisal Hoque et al

Many Unhappy Returns: One Man’s Quest to Turn Around the Most Unpopular Organization in America, by Charles Rossotti

For anyone interested in truly aligning IT with the business, and willing to entertain the transformation that that involves,
I would add a few of my own to this list, including:

- The Last Word on Power, by Tracy Goss - business transformation begins with self transformation
- What the CEO wants you to know - business/IT alignment begins with knowing what the business needs
- Leading the Revolution, by Gary Hamel
- The Visionary’s Handbook, by Watts Wacker
- The Art of Possibility, by Ben Zander