We explained extended planning & analysis in more detail in our last blog post. Today we highlight the most common mistakes on the way to fully integrated business planning:
Mistake #1: "We currently only want to introduce ONE tool for a very specific purpose, e.g. project controlling."
We hear this statement often, and the approach is not entirely wrong. The step-by-step approach to fully integrated corporate planning is certainly advisable. But here, too, a well thought-out strategy and a definition of goals are required. Many specialized tools are not expandable and ultimately represent a patchwork quilt in the company that causes more trouble and work than it saves. Unfortunately, it is often too late when many realize that expandability is an essential selection criteria. Therefore tip no. 1: When purchasing the first solution, you should choose (controlling) software that can be flexibly expanded. Each module must be usable on its own, have the flexibility to adapt to company specifics and enable the solution to be rolled out to other areas of the company. This is exactly when you follow the xP&A concept – that is, extended planning and analysis with 100% reliable, up-to-date information about all departments.
Even if you are looking for a special solution for areas of the company that you do not primarily associate with controlling – such as S&OP, projects, sales, marketing, HR – take generalist solutions into consideration based on the arguments above.
Mistake #2: "My self-made Excel solution works well and I don't want to get used to new software."
We have already seen many very sophisticated Excel solutions in companies, and in fact many analyzes can certainly be done in spreadsheet programs.
So what’s the downside? This is certainly due to the trustworthiness of the data, since files, corrections, data imports etc. are sent back and forth and an unbelievable number of versions and spreadsheets are created. So you can never really rely on the results of the analyzes and planning attempts. This is exactly where the management’s mistrust often lies. In addition, the data preparation and processing takes so long that ad-hoc analyzes or current management questions often cannot be covered in a timely manner. With controlling software, the time saved by automating routine activities is around 60%. The time gained can be used for value-adding work, e.g. in-depth analyzes and concentration on the preparation of decisions.
Our customers are not primarily concerned with releasing employees through technological support, but rather relieving them of repetitive, time-consuming activities and using their core competencies. This in turn saves external consultants and analysts as well as change managers.
Mistake #3: "As an S&OP manager or project controller, I don't have to be connected to data from the HR department or the sales team."
In smaller companies, the managing director or the management team watch over the strategic company goals. In medium-sized and large companies there is already a tendency towards departmental thinking, and this often results in conflicting goals. While the sales team wants or has to sell a lot, the procurement department may be plagued with delivery problems and production cannot produce optimally due to capacity bottlenecks and missing parts. It would make much more sense if everyone pulled together, which makes an integrated control solution easier.
Once you see the big picture, you never want anything else. Workflows lead from strategic company goals to operationalization and show dependencies. Conflicts of goals are analyzed and resolved through initiatives. Interface management as well as communication and collaboration are optimized using seamlessly integrated tools (e.g. MS Teams or Planner).
Let’s look at the EXAMPLE of the dependencies between departments based on the human ressources:
- Using precise forecasts (including AI-supported), future demand is calculated taking into account numerous internal and external influencing factors. Are the production capacities sufficient to meet the expected demand, or is there even an excess of capacity and what are the associated costs? With the help of a professional controlling solution, such management questions can be answered effortlessly and on a daily basis.
- The HR department must take care of the required capacity (personnel search) and qualifications (upskilling, reskilling, fluctuation) of the team.
- As part of project (program) controlling, resources that are required in several projects must be distributed sensibly according to strategic specifications and guidelines. If there are bottlenecks, projects must be prioritized or postponed. The construction of new plants or buildings can also be monitored accordingly (e.g. with construction cost controlling)
- Scenario analyzes and what-if simulations help to evaluate measures on the company’s results. Which initiatives should be set? Here, suggestion systems can help to set the right incentives and, for example, bring production forward or reduce excess capacity by taking vacations for employees.
- Discount campaigns when sales are too low often also have an effect, which in turn brings marketing and sales on board. Speaking of the sales department – here you could still check whether the insufficient capacity utilization in production was due to too high sales forecasts and which sales employees over or underperformed
This list of connections could be continued indefinitely …
Mistake # 4: "The budget is more important than the forecast."
As before, budget preparation takes too long for most companies and ties up too many internal resources. Even if the average duration of the budgeting process has decreased from 5-6 months to approx. 3 months, average (rolling) forecasts of 2 weeks on average require much less time and resources. The forecast process can be made so agile using modern technologies that the management receives reliable forecasts on a monthly basis without “paralyzing” several departments.
Fast, forward-looking and agile decisions are essential for corporate success, especially in disruptive times. By networking all data in the company, the digital transformation brings planning, analysis, simulation and forecasting to a level that takes decision-making processes to the next level. All departments in the company interact and ensure the implementation of the corporate strategy. Nevertheless, flexibility remains for short-term changes and adjustments to market developments.
Mistake #5: "Before we have fully completed the digitization and ERP update in the company, we cannot introduce any controlling software."
Definitely no. We worked in numerous projects parallel to the ERP implementation and provided a sophisticated system for controlling and management. If you wait for the perfect moment, it can take longer – especially in times of crisis, the wheat is separated from the chaff.
We had both winners and losers in the crisis, who just introduced a controlling tool during the crisis – and it was good for both. While the winners had S&OP and project optimization topics, companies with decreasing sales were supported with in-depth analysis and restructuring measures that ensured their survival. Scenario analyzes, which allow you to determine the effects on the income statement, balance sheet and cash flow, make it easier to make decisions in difficult times. smartPM not only offers the technically excellent implementation of the controlling technology, but also business advice and a lot of experience from other projects.
Efficient corporate planning or xP&A requires digitization. Many case studies demonstrate the often arduous journey to fully integrated business planning, but the reward is regularly greater. Reliable decisions, massive time and cost savings, proactive corporate management and happier employees who can finally use their skills properly again.
Mistake # 6: "Machine learning is just a trend - our forecasts are now also working well."
Yes, that may be true for many companies and methods of AI should not be made into hype. As long as they are integrated in the controlling tool and there is no additional effort for the user, ML algorithms can be very helpful and lead to extremely precise forecasts – especially with a lot of data and many influencing factors on the variable to be forecast. The integration of classic and new statistical applications should in any case be part of the software and usable as an integrative part. Basic statistical knowledge is certainly not bad here, but not absolutely necessary.
Since we at smartPM.solutions work with several manufacturers of controlling software technologies and are certified on Jedox, Unit4 Prevero / FP&A and Microsoft and are at the highest partner level, we have a good command of the possibilities of AI integration. Our own application design and data science department is constantly improving the tools for the user. Our experience shows that ML algorithms already make a major contribution to improving data quality. The quality of the forecasts can also be greatly improved with the sensible use of AI. By evaluating the error values, suggestion systems help you choose the right forecasting method.
If you are serious about the topic and would like to benefit from the experience from many projects, we will arrange a free and non-binding expert interview for you today!