The Perils of Planning—and the Promise of a New Approach

(Guest blogger Matthew Schwenderman is a principal with Deloitte Consulting LLP, a Workday Services Partner, and leads the Performance Management Technology practice.)

The ability to make critical decisions regarding your organization’s future has never been simple or linear. But in today’s complex and often volatile business environment, the ability to plan and predict results is even more challenging. It’s also never been more critical to success.

Multiple forces—from disruptive technologies to globalization to increased competition—are changing the operating environment and putting greater pressure on organizations to make faster and smarter decisions about the future. To meet these growing demands, business leaders are requiring more insight, accuracy, and speed from their planning methods to help steer their organizations forward.

For many finance organizations, carrying out this mandate is no easy task. Traditional planning approaches have mainly focused on developing annual plans and quarterly forecasts, and only a small portion of daily planning activity ends up supporting forward looking decision-making. The rest of it is often spent explaining what happened in the past.

Finance also faces technology and system hurdles, making it difficult to evolve how they plan and forecast. Data is often spread across disparate systems with different data models, which leads to it being out-of-sync or contradictory. Because of disagreement around the numbers, or how to resolve variances, vital conversations get stuck at a standstill. What ends up happening is that people, often a company’s most valuable asset, end up spending more effort on routine tasks like data collection and entry and less on meaningful analysis.

One of the biggest differentiators for organizations is how well and how quickly they harvest data and information. The “first-knower” advantage provided by data translates into a “first-mover” advantage in the marketplace when an organization is able to make timely adjustments to achieve business goals.

The traditional approach to planning and forecasting does not support the collaborative and continuous way businesses run today. Businesses need a new model for enterprise planning, not just a tuned-up version of the old.

What’s the difference? A shift from annual planning and budgeting to dynamic planning and forecasting, an approach that supports the reality of today’s business environment and helps businesses better adapt to change, avoid pitfalls, and identify new opportunities.

Dynamic planning is centered on being more predictive and strategic, with plans and forecasts focused on specific key drivers important to an individual business. Planning is also more continuous, with organizations doing perpetual predictive modeling and forecasting on those key drivers on a more-frequent basis. For example, a retail organization might make more frequent changes in allotments to buyers based on real-time store-level forecasts at the SKU level, which can help them better plan and make adjustments to meet their business goals.

This new model for planning is the mountain that finance organizations need to summit. But getting there takes more than will—it will require a technology backbone that makes it possible. For one thing, organizations need to move toward the creation of integrated systems that can provide unified and real-time inputs of large data sets. Those organizations that can link forecasting, planning, and general ledger systems have an opportunity to streamline the planning process, ensure data integrity, and provide tighter governance and control.

Organizations are beginning to realize the promise of “digital finance” and drive to the benefits available by modernizing their core systems.  New planning systems that leverage cloud, in-memory, and advanced analytics are enabling more sophisticated predictive modeling using real-time data for faster and accurate forecasting. These innovations are also helping to create a more democratized and controlled way of sharing budgets and plans to gather input, collaborate, and more quickly arrive at the detailed operational and financial insights they have long sought. The results include abilities such as granular exception management, exponentially faster transaction and business intelligence processing for moment-in-time close and performance analysis, real-time mining of organizational data in support of business strategy, and a deeper awareness of the data patterns and trends that can unlock repetitive reporting, customer engagement, and data visualization.

Organizations that take advantage of these advancements in technology can lay a foundation designed to unlock finance talent, time, and resources. One that can let them build out vital capabilities like predictive analytics and modeling. And, one that could finally make it a reality for finance to focus on the higher-value activity it has always had the ability to deliver, and that drives the business forward.