- Be big with the traditional goal of becoming a major player, like most oil companies strive to be.
- Be first by following your vision, just like the majority of cutting-edge technology companies.
- Be fast by changing, as needed—something successful fashion retailers are good at.
- Be an orchestrator by shaping your market the way the more successful social media companies do.
- Be viable by reinventing yourself like some of the early cellphone manufacturers and unlike many financial institutions.
- Separate your FP&A and external reporting cycles Although senior executives and boards need to adhere to quarterly and annual financial reporting, that does not mean that financial planning and forecasting cycles should follow this rule. In fact, if you are trying to be agile or first to market, planning and forecasting needs to become more iterative with rapid rolling reforecasts that can be completed in a matter of days—something we have previously written about here.
- Balance accuracy against cycle times In unpredictable or dynamically changing times, the over-zealous pursuit of pinpoint accuracy in planning sometimes can be detrimental since adding extensive detail in account planning typically extends cycle times more than improving accuracy. A better approach may be to build dynamic planning and forecasting models that incorporate external business drivers. Such models tend to be more accurate and considerably faster to reforecast, giving the right level of FP&A process that an agile or first-mover company needs. In addition, because these plans contain operational data alongside the more traditional line item data, driver-based models provide deeper insight into costs, which benefit any companies struggling to survive while they renew themselves.
- Work towards integrated business planning Developing dynamic planning models inevitably leads to linking outputs of sales and operational planning with financial planning to deliver “integrated business planning.” In the past, this faced a lot of resistance as large volumes of customer and product-level data overburdened legacy planning systems. However, the advent of scalable, real-time planning platforms, such as Anaplan, that allow enterprise data to be seamlessly share between models makes this long-held vision a practical reality. And remember that it doesn’t have to happen all at once—the “app” concept of today means that companies can start with one area and gradually connect plans across the business; in other words, think “gradual” integrated business planning.
- Allow for local flexibility Developing an FP&A process that is better aligned with your company’s strategy and the predictability and malleability of your markets will bring considerable benefits. However, various business units may well operate in different subsidiary or geographic markets that are more or less predictable and malleable than the industry at large. Such businesses need to be allowed the freedom to tailor planning models and cycles to their own specific requirements. New apps on the market today are letting companies take this “distributed” approach that truly allows for planning at different levels of detail across local, regional, and corporate business units, with reconciliation of rollups at corporate.
1Reeves, Martin; Haanaes, Knut; Sinha, Janmejaya. Your Strategy Needs a Strategy: How to Choose and Execute the Right Approach. HBR Press: 2015.