Before the Strategy Maps, metric stop lights, and planning/forecasting models, organizations focus on setting their strategy. Of course the meaning of strategy means something different for every organization (Mintzberg's 5P's of Strategy).
However having a formal process is key. Even more important is executing on the strategy. While talking with Simon Tucker (CEO) and Ron Dimon (COO) of Business Foundation, they share how they work directly with senior executives using a tangible, interactive methodology to help management execute on their strategy.
And these guys have experience to share previously holding senior level mgmt positions at CSG, Adaytum, Hyperion and Deloitte. So I want to share their insights because I believe they are onto something that can help many organizations.
Question 1: Hi Simon and Ron. Why do you feel organizations need the Business Foundation methodology?
Answer: Hi Tom, thanks for taking the time to talk with us. Many organizations, in our experience, have a major disconnect between their strategic objectives and what they actually measure, monitor, and plan for. They need a way to see what the true drivers of value are, spread-out across the entire enterprise. They’re tired of all the information silos they’ve built and use us to help them create and validate a roadmap to bring together the people, processes and technologies that will deliver improved performance.
Question 2: How does your previous experience at Deloitte and Hyperion support executive teams when discussing strategy?
Answer: Our company has experience dealing with C-level executives across almost every industry: from Retail, Manufacturing, and High-Tech through Non-Profits, Higher Ed, and Government. And it’s very interesting – even though strategies are certainly tied to industries, we’ve found identical problems across all industries, including things like lack of visibility into areas of the business that matter, a lack of understanding how pulling a lever in one area of the business affects outcomes in another area, and one of the big ones, not having a common business language which hinders making repeatable, fact-based decisions.
Question 3: Do organization need help bridging the gap between business and IT, seriously?
Answer: We hear it all the time! IT uses us to drive-out requirements from business functions (Marketing, Sales, Operations, HR, and so on) since we’re able to have the strategy & business conversation, and the business functions use us to help IT understand their problems and the impact those problems have on performance and results. There is much debate these days about the alignment gap between IT and the business; there are dozens of books that try to address this gap (“I.T. Wars” by Scott, “The IT Value Stack” by McCormack, and “Geek Gap” by Pfleging to name just a few). A lot of people talk about it, we actually have a proven methodology to bridge the gap.
We become IT’s “True North” – the long-term solution vision into which they are implementing short term initiatives, and each of our recommendations is validated and justified by the sponsoring business unit, so the entire business has a common solution vision (not one for IT and one Marketing and one for HR and so on).
Question 4: Would you agree, executing on strategy should include processes AND technology?
Answer: Definitely. In fact, when we connect strategy to execution, we focus on the intersection of people (and their role in the organization), process, technology, and data. We also add another dimension of strategic ‘enablers’ to the conversation. This includes the concepts of depth (how far down into the details do you need visibility), horizontal alignment (among the business functions), accountability, and compliance.
Question 5: Without giving away your corporate IP, how do you have conversations on strategy with senior executives? Any special tools?
Answer: That's what makes us unique. In two hours, with no PowerPoint, no laptops or projectors, we have a very rigorous interaction with one or two executives at a time (sometimes we can make three work). The interaction is a business conversation that takes what's already in the executive’s head, his or her unique perspective on the business and what drives value, and puts it all onto one sheet of paper. The 'special tool' is the sheet of paper. We start with our Periodic Table of Business™ database (with over 1,500 KPIs, metrics, measures, and processes – organized by industry and business function) which generates a baseline picture of the business as a matrix: functions and layers. We then tailor the sheet to fit the individual client before we get into the first meeting. So the executive sees their company laid out in a way that makes documenting what’s in their head very simple. And it invariably leads to new insights for the executive. We even had one CEO tell us "it was like being on the psychiatrist’s couch for 2-hours!"
Question 6: Can you help explain why there are so many acronyms for performance management (i.e. BPM, EPM, CPM, xPM)?
Answer: Lee Geishecker of AMR Research coined the term "Corporate Performance Management" in 2001 when she was with Gartner. It was the confluence of business planning with reporting, business intelligence, balanced scorecards and other areas. Hyperion, right after the Arbor acquisition, adopted this concept by bringing together their analytic applications (planning and financial consolidation) with their OLAP engine (Essbase) and later Business Intelligence (from the Brio acquisition). They chose the term "Business Performance Management" to extend the concept out of head-office ("corporate") and into the lines of business. It's a bit unfortunate that there was confusion between that BPM and the existing Business Process Management acronym. Cognos was hot on Hyperion’s heels and kept Gartner's CPM acronym. From there evolved Deloitte's IPM (Integrated Performance Management) and others. Today Oracle and SAP have decided on Enterprise Performance Management to extend the scope even further. To avoid the confusion, we’ve been calling it xPM, the "x" can be any letter you want – the acronym isn’t as important as the value proposition of end-to-end management of performance and getting from strategy to sustainable, predictable execution.
Question 7: Would you say "what-if" modeling is part of Business Intelligence or do you see "what-if" analysis done differently in organizations?
Answer: Business Intelligence has traditionally meant operational and financial monitoring and analysis. xPM (or EPM, BPM, CPM if you like) includes the "what if" modeling component and blends it with BI. So now what matters is that you can model an infinite number of scenarios (what happens to cross-sell and cash flow if I divest this business? What happens to customer acquisition rate if I invest more in sales training?). We see some organizations limited in their what-if modeling and analysis by their systems – some use their ERP for this and get stopped very quickly. This is where xPM on top of ERP makes sense.
But even more importantly, are they modeling and analyzing the right things in the first place? Companies should be modeling and analyzing the key drivers of the business that can deliver the most material margin, revenue, cash flow, market share, or whatever their strategic imperatives dictate.
Question 8: I've seen many organizations with planning cycles that execute on the plan but don't take the time to reforecast. I think you would call this the opposite of "The Learning Organization"?
Answer: Close. It goes beyond re-forecasting. We think organizational learning happens when you not only go back and re-forecast (and/or use a rolling forecast), but you also capture the underlying drivers that caused the shortfall or exceeding of the target. Then make sure those drivers are plugged into your models along with the assumptions and constraints for each driver. Making your models smarter and connecting them to your plans and forecasts gives you better predictability (forecast accuracy, for example) in the business.
Question 9: Would you recommend your methodology for high growth industries and organizations that constantly go through change for competitive adjustments?
Answer: Yes, certainly. The companies that get the most value from our method are those that want to make sure they're measuring, monitoring and planning for things that can have the most impact in their business. They want to leverage their investments in IT, ERP, and performance management systems. They want a way to prioritize initiatives that are in line with their strategy. It's always about the right balance. For high-growth industries, it’s about the balance between expanding scope, geographies, and markets without sacrificing quality, margin, and cash flow. For companies that need to be agile enough to respond to competitive pressures, it's about the balance between innovation (pricing, product, and business model innovation) and standardization (in processes, systems, and brand).
We also recommend our method for organizations that are facing increased pressure from the recent economic downturn. You may not be immune to changes in the economy, but you can strive to outperform your competitors. So are you modeling price and price mix? Are you forecasting average selling price? Are you performing profitability analysis by customer and product? And of all your IT initiatives, which should have the highest priority?
Question 10: Excellent talking with you both Simon and Ron. Do you have any additional links or information about Business Foundation you want to share?
Answer: Thanks for taking an interest in our company, Tom. Readers can find out about us at Business Foundation and can read about our take on xPM, strategy to execution, IT/business alignment, and other topics on our blog (http://businessfoundation.typepad.com/).