Enhanced business performance

763 views
660 views

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
763
On SlideShare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
23
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • [SCRIPT] It is in the midst of this period of severe economic and transformational change that IBM conducted the CFO study to determine how CFOs can make the enterprise smarter in an era of increased uncertainty. We set out to examine the impact of the new economic environment on the CFO ’ s role, by asking three basic questions: What Finance model achieves the optimal mix of capabilities needed to help the enterprise outperform? What can CFOs do to enable timely and informed decision-making? And how can CFOs help the enterprise anticipate and shape its environment? I think you will see, as we go through the findings, that we have been fortunate to obtain very good data and conduct some pretty robust analysis which has allowed us to answer these question very well. In addition, I believe there are other related questions that come up from a contextual perspective that we were able to examine including: Are CFOs are playing a much more influential role at the enterprise level? Are their Finance organizations prepared for these expanded responsibilities and demands? What are the key characteristics that enable certain Finance organizations to outperform against this expanded set of responsibilities and demands? How are leading CFOs helping their enterprises make smarter decisions in an environment of unrelenting uncertainty? We surveyed over 1,900 CFO’s and Senior Finance executives for our study. This is, as far as we can tell, the largest known study of its kind on the planet. Nearly 1,500 of these interviews where conducted in 60-minute face-face interviews, and the balance through online surveys, conducted in collaboration with the Economist Intelligence Unit (EIU). There is strong representation across all geographies, company sizes and industries. Perhaps most important to this study is the seniority and scope of responsibility of our participants. 78% of participants were senior Finance Executives such as CFOs, Deputy CFO’s and Directors, Over 57% representing their Enterprise. This senior level and Enterprise representation lends strong credibility to the assertion that our findings carry the perspective of the most senior finance executives in companies around the world.
  • Given the environment, past, present and anticipated, CFO ’ s believe that external pressures (economic, industry, regulatory, etc) will increase over the next three years. While the ability to attract and retain talent falls fifth on the list in terms of key challenges, there is an interesting story between this response and another question. During the height of the crisis when the survey was conducted, clearly the emphasis on cost reduction would suggest hiring and retention would not be top of mind, particularly on an enterprise wide basis . But when we asked CFO ’ s to tell us their most important initiatives to build their finance teams of tomorrow - 81% of CFOs are concerned with attracting and retaining talent, for Finance. So clearly when it comes to their own finance team, they have a much greater concern about talent. The reason for this is somewhat obvious, – in the broader enterprise wide context cost reduction pressures suggest this is less important, when reducing employee costs is paramount. Whereas in the context of improving Finance ’ s own ability to deliver analysis, decision support, and partnering, this is of great concern to CFO ’ s. Other top concerns looking forward clearly point to ongoing pressure to reduce costs and need for faster decision making , while the increased government hand in business, and continued pressure investors and shareholders continues to drive the demand for transparency . Approximately 60% of our participants indicated they have to make major changes to respond to these pressures and challenges. Therefore it is generally recognized that the status quo or business as usual for Finance and the Enterprise is not longer enough. CFO ’ s and their finance organizations have no choice but to respond and change. As we will see, the reason for that sentiment is pretty clear when we look at the CFO ’ s agenda. <<END>>
  • [SCRIPT] We asked CFO ’ s to tell us how prominent a role they play in Enterprise level decision making. On average, over 70% of CFO ’ s believe they have at least an advisory or decision making role on the entire Enterprise Agenda presented here, as opposed to having no role, or being an an informer. In the midst of the crisis through today, CFOs are being called into more frequent boardroom and executive level discussions around demand and price pressures, supply chain concerns, impacts to revenue and margins, and liquidity/capital structure concerns. And the frequency and pace of strategic and tactical discussions continues at an elevated pace today, very much highlighting the importance of the CFO ’ s role in providing insights, explanations and alternatives for the financial consequences and options of enterprise-wide strategy, issues and actions. As a consequence CFO ’ s say they and their Finance organization are taking a much more prominent role in enterprise decision making, as a normal ongoing part of their job. Not surprisingly given the economic circumstances, Enterprise Cost Reduction is one of the key areas CFO ’ s have been called upon for Advice or Decision making, but across the board, CFO ’ s were generally united that they are playing a much stronger role on all these topics. The Board, Executive Suite and business lines are turning to the CFO and Finance analysts for leadership, guidance and answers. From our examination of the comments and quotes from the interviews, it is important to note here that CFO ’ s are not suggesting they are taking the CEO ’ s role as primary decision maker, rather CFO ’ s indicated that in this environment they have been called upon more than ever to help answer the tough questions and their input, guidance and voice has carried more weight than ever. Those with the strongest capabilities and the best track record were the ones most comfortable with this elevated role. The opposite is true of the other 30%, where there is a level of discomfort in providing much more than a taillights view of conditions. Given the increased role and additional demands from across the enterprise, CFO ’ s and finance must be in a position to execute with great effectiveness across a large agenda of Financial Compliance and Enterprise Focused activities. Finance needs to be running well, optimized, efficient. The day to day tactics of paying the bills, collecting cash and closing the books should not be an inhibitor to Finance playing a more expansive partnering role, yet when these day to day processes don ’ t work well, extra resources are consumed to get things done, and more importantly, in many cases, the data coming from broken and fragmented financial processes lead to broken and fragmented analytical information – hence impacting finance ’ s ability to provide strong governance, leadership and direction, with speed, accuracy and agility. <<END>>
  • So we had hoped with these initial findings that we would find, on average, Finance organizations that are performing better than in past, given the elevated role and increased challenges over the past several years. However the study reveals, on average, the opposite. Most finance organizations have a significant gap in effectiveness across the entire Finance agenda, not just in the broader enterprise areas, but also in Core Finance – the day to day running of the finance operation. 1) Similar to past years studies – our findings indicate that everything is important and importance is increasing dramatically, particularly in enterprise focused activities 2) Trending over past years the effectiveness gap is widening. However effectiveness has been largely flat and the increasing gaps are being driven by increasing importance, so as the CFO and finance take on more, it implies that effectiveness must improve to keep up. 3) First time this year, we asked CFO’s to force rank their top 3 priorities, and all 3 are Enterprise Focused. Why is this important? – it speaks to a shift to more enterprise focus. Just looking at relative importance over these categories, one might conclude that running Core Finance well is equally important to CFO’s, however the force ranking reveals the opposite. <<END>>
  • So we had hoped with these initial findings that we would find, on average, Finance organizations that are performing better than in past, given the elevated role and increased challenges over the past several years. However the study reveals, on average, the opposite. Most finance organizations have a significant gap in effectiveness across the entire Finance agenda, not just in the broader enterprise areas, but also in Core Finance – the day to day running of the finance operation. 1) Similar to past years studies – our findings indicate that everything is important and importance is increasing dramatically, particularly in enterprise focused activities 2) Trending over past years the effectiveness gap is widening. However effectiveness has been largely flat and the increasing gaps are being driven by increasing importance, so as the CFO and finance take on more, it implies that effectiveness must improve to keep up. 3) First time this year, we asked CFO’s to force rank their top 3 priorities, and all 3 are Enterprise Focused. Why is this important? – it speaks to a shift to more enterprise focus. Just looking at relative importance over these categories, one might conclude that running Core Finance well is equally important to CFO’s, however the force ranking reveals the opposite. <<END>>
  • [SCRIPT] Our analytical framework this year is build around these two dimensional capabilities. We began our exploration of the factors and drivers of better Finance capabilities by defining a discrete set of characteristics for our framework this year. Our analysis compared over 30 responses to survey questions against objective financial performance of our participants - specifically 5 year compounded annual growth rate of EBITDA – (That is Earnings before interest, taxes, depreciation and amortization). Why EBITDA? We asked participants to tell us their top two most important financial metrics in the study, and EBITDA was the most frequently cited metric. We performed a multiple discriminant analysis – or a multiple regression, looking for correlation between the Financial performance metric and the responses. From this MDA we found 7 factors that most highly correlated financial performance with responses to study questions. This is an important point – we did not make up the factors which define the framework for our analysis, the data led us to them. If you are familiar with our 2005 and 2008 studies you will recognize many of these criteria. Those in green define Finance efficiency and are the same criteria that correlated highly for the Integrated Finance organization from our 2008 study. These factors measure the degree to which the organization has defined, mandated, enforced and adopted process and information standards across the enterprise, from their corporate philosophy on information standards to the degree to which enabling factors have been adopted enterprise-wide. Those in blue define Business Insight. The participants level of satisfaction with their analytical capabilities, the effectiveness of their people and their deployment of common analytical platforms, such as a common planning system. When you bring these two dimensions together, a 2x2 quadrant emerges, defining 4 finance profiles. The Value Integrator is high on both dimensions, top right of the quadrant – having strong business insight coupled with finance operations that are efficient, as described earlier – running well, optimized. The Scorekeeper , opposite the Value Integrator, is the least matures of the four profiles and is low on both dimensions – this profile is more the traditional controllership oriented finance organization, primarily focused on accounting operations, controls, closing the books, managing the audit and supporting regulatory and statutory compliance. There is either no mandate or a lack of capability for finance to do much more than that. The Disciplined operator is more like the IFO from the 2008 study – has built a strong foundation of finance controls, standard processes and data – however has yet to deploy more mature analytical capabilities and partner with the business. But for all intents and purposes, the Disciplined Operator is driving more out of finance with less. The Constrained Advisor is the opposite of the Disciplined Operator – having done more to deploy greater planning and analytical capabilities, these finance organizations have the best intentions in mind, but are constrained in terms of their execution capabilities. This is largely due to the fact that they still have issues with process and data standards and commonality, leading to fragmented data and having to do drive their analytics through brute force. As a consequence, they continue to be challenged by several things, including 1) Challenges around the accuracy of their analysis 2) They cannot produce these results timely/quickly, and so consequently they are “ constrained ” So how are our 1,900 participants distributed across these profiles? Approximately 23% are Value Integrators, 12% are constrained advisors – clearly the minority group. The remaining 65% are roughly split between Scorekeeper (33%) and Disciplined Operator (32%). We suspect the reason that there are so few Constrained advisors, relatively speaking, is that they have recognized the challenges and issues associated with trying to produce robust analysis in the midst of “ Structural Complexity ” – in other words without having first established a set of common process and data standards within which to operate. <<END>>
  • [SCRIPT] Back in the introduction we showed that Value Integrators outperform all other participants. Here we want to answer the question do they outperform each of the other profiles as consistently? Our analysis of the financial performance by profile reveals this is indeed the case. On all financial measures we examined, the Value Integrators outperform, on average, the Constrained Advisors, Scorekeepers or Disciplined Operators, by group. <<END>>
  • As we developed our analysis three key themes emerged, 1) delivering efficiency through standards matters more than ever – good internal finance operations governed by process and data standards lead to better practices and better performance. 2) business insight drives performance improvement beyond finance – even without standards, deploying better analytical capabilities, albeit not optimally or efficiently, does reward finance organizations with stronger business insight. 3) the Value Integrator theme – the greatest rewards come from doing both well – the combination of strong business insight and efficient finance operations yields the greatest results We will start now by exploring in more detail the first theme, on Finance efficiency <<END>>
  • [SCRIPT] The study revealed the three most prevalent steps companies take with finance efficiency. Process Ownership The adoption of process ownership is 145% greater for companies with Finance efficiency, and this one of the most prevalent findings. It stands to reason that establishing a process owner and arming them with the authority or “teeth” to enforce standards should influence adoption and implementation of common processes and consequently leads to streamlining finance processes. It is widely recognized that common processes, properly and optimally designed, lead to improved efficiency, in Finance and any other business process elsewhere, for that matter. This is like having a single conductor for the symphony, with all members of the orchestra playing from the same sheet of music, as opposed to the horn section playing from one sheet of music and the string section playing from another. And the impact of process ownership on standards in finance is compelling, based on our findings – as illustrated on the right hand chart on this page. The implementation of Process Ownership has a dramatic impact on standardizing processes enterprise wide - 208% better for companies that have adopted process ownership enterprise wide, compared to others. Standardizing processes naturally influences the degree of data commonality in the process as well, so we see a strong impact on common data definitions as well Common Technology Platform The second most prevalent finding is the implementation of a common ledger and accounting transaction applications, and it ’ s impact on the adoption of standards, enterprise wide. Here we see 47% more adoption, on average for enterprises with high finance efficiency, compared to others. And this too stands to reason. Coupled with process ownership, institutionalizing processes in a common financial system helps enforce and sustain the process and data standards that lead to better finance efficiency. The impact on standards adoption is startling here as well, as illustrated on the chart to the right – with 3 times better impact on common processes, 1.5 times better adoption of a common chart of accounts, and 125% better adoption of common data definitions – all factors that help mitigate structural complexity. Optional comments – provocative … For years there has been a debate about whether or not companies that invest in modern ERP systems get a return on investment. Commenting on that for a moment, the reason it has been difficult is that it ’ s hard to link the intangible benefits of improved finance controls, processes and standards to tangible economic benefit. I believe we have taken a step towards demonstrating the beginning of an answer to that in this years study. There is a demonstrable relationship between the adoption of common ledger and accounting transaction applications and improvement in standards adoption. Further, we have already demonstrated the prevalence of standards adoption and it ’ s relationship to finance efficiency, which in turn is correlated to better financial performance. Alternative Delivery Models The third most prevalent accelerator contributing to improved Finance Efficiency is the adoption of alternative delivery models for transactional activities. Recall that on average companies still spend nearly 50% of their time on low value added transactional activities – suggesting that a more efficient operating model, leveraging economies of scale helps finance to do more with less. This drives down the workload associated with transaction processing and frees up resources to focus on analytics and higher value added activities, at the end of the day. Now this too stands to reason, because a properly designed Shared services center or well managed outsource service provider will drive the economies of scale, cost reduction and greater efficiency suggested by the model. Moving to such an alternative delivery model, like common financial applications, institutionalizes and enforces common processes and data, and hence improves standards adoption enterprise wide, leading to Finance efficiency. THEME 1 Conclusion So Efficiency through standards matters more than ever – why? Companies with more efficient finance operations have improved effectiveness against their core finance agenda, making them more smooth running, optimized.. Not distracted by issues with the day to day tactical tasks of finance, having mitigated, to great degree , the structural complexity which is an inhibitor to finance efficiency. We have demonstrated both the financial and non-financial benefits of having Finance efficiency and we have highlighted three of the most prevalent things these companies have done to improve. Let ’ s now turn out attention to Business Insight, the second dimension of this year ’ s study framework. <<END>>
  • [SCRIPT] Providing business insight drives performance improvement beyond Finance. Even absent good Finance operations, or efficiency (theme #1) there are still demonstrable benefits to driving better analytical capabilities as suggested by our study. We will follow a similar logic-line here, looking first at financial and non-financial benefits of having better business insight, then some of the most prevalent things companies have done to increase their capabilities here. We developed a maturity model for analytical capabilities suggesting that basic planning and forecasting capabilities, like basic finance operations, such as closing the books quickly and running on a general ledger, instead of on spreadsheets, is a basic necessity for better business management practices. As such our business insight analysis uses as a baseline the deployment of this most basic or fundamental capability – planning and forecasting. This is to keep the analysis clear and straightforward, but in our findings we also discovered that as more sophisticated analytical capabilities deployed, there is an associated increase of benefits increase. For instance, beyond planning, deploying predictive analytics, risk models, etc our data shows that those companies experience even greater benefits. Therefore scenario planning, predictive analytics, and event based automate alerts have an even greater impact on value and capability in finance. But for this theme we will focus just on basic planning and forecasting in order to keep the discussion simpler and clearer. Before we get into the details, I want to remind everyone that the criteria that define strong business insight are People/Talent effectiveness, deployment of a common planning platform and a high level of satisfaction with analytical capabilities. Therefore, by definition, these companies with strong business insight have already progressed up the maturity curve and have in place a common planning platform deployed across more than 50% of their business, with high satisfaction and strong analytical talent in Finance. <<END>>
  • [SCRIPT] So let ’ s talk about the definition of business insight in the context of Decision Support tools, in a little more detail so we are all on the same page with regards to what this means and what we are evaluating in the study. For this study, business insight is defined on a continuum of analytical capabilities that address key questions needed to drive better business management practices. This continuum spans rear view, historical results to forward-looking more predictive capabilities. Rear view leverages historical reporting such as balance sheet, P&L and variance analysis to undertand and explain what happened. Current view leverages historical data and trends and applies those experiences to manage the day to day operations, such as managing cash, collections, monitoring expense reimbursments and supply chain for fraud, and the like. Additionally, to the extent that more predictive capabilities have been designed, more sophistication can be layered into current view tools by anticipating or predicting the likelihood of something happening, for instance by examining employee expense report detail and looking for certain things, like consistently submitting expenses items just below the threshold requiring a receipt … an indication of potential abuse. Forward looking capabilities apply current and historical results to understand the impacts of good and bad performance experiences and use that to understand what will happen next, evaluate the impacts (positive and negative) of these continued trends and evaluating the risks and opportunities associated with them, from revenue, margin, bottomline, employee, market share, customer impact and other perspectives. With that definition established, let ’ s continue the theme discussion. <<END>>
  • [SCRIPT] We discovered in our analysis that the combination of the two capabilities produces the greatest rewards. There is a compounding effect of having strong business insight layered upon a robust foundation of finance efficiency, defined by standard common processes, financial data and good governance. The Value Integrator has the characteristics associated with both strong business insight and finance efficiency. They have leveraged the enablers suggested by the study, improve capabilities on both dimensions. However, what they have done also goes beyond that. As you will see, they have done even more, and they are further rewarded for that. <<END>>
  • [SCRIPT] Looking at the CFO agenda once again, across all the agenda items, Value Integrators as a group expressed a much higher level of effectiveness against these agenda items than each of the other profiles. On average, across the entire agenda, Value Integrators are 60% more effective across the entire agenda, Constrained advisors 33% and Disciplined Operators almost 20% better, compared to Scorekeepers. There are several outliers where the Value Integrator has significant advantages that are consistent with what we have found Value Integrators do better or more of, than the rest. The biggest, of course, is the far greater effectiveness in information integration. But other areas of significant improvement include measuring business performance, executing continuous finance improvement, and risk management. Recall again from an earlier slide that the two areas that have increased in importance more than any other in the past five years (or 3 consecutive IBM CFO Studies) are Risk Management and Information Integration. So clearly, Value Integrators have been driving improvements in these areas, consistent with the increase in importance, trying to address the effectiveness or execution gap they had been experiencing. How did we arrive at this comparative analysis? We started by establishing the Scorekeeper as the baseline – their effectiveness on each agenda item was base-lined to a common factor. Against that baseline factor we calculated the relative greater effectiveness of each agenda item, profile by profile. So the comparisons are really against the scorekeeper as a baseline, but with an apples to apples comparison of each of the other profiles against the scorekeeper and each other. <<END>>
  • [SCRIPT] For the Scorekeeper – weaker in both dimensions – the first question to ask is – do you have a mandate to move beyond the traditional controllership role of finance of 10-15 years ago? Is there support across the Executive suite to drive significant transformation? – because transforming Finance will invariably drive required transformation in the business to be successful. Are there demands being placed upon finance that Finance is not equipped to address? If so, then the right place to start is getting Core Finance running well first – so move north and drive towards becoming a Disciplined Operator . If there ’ s pressure to get this done quickly, consider taking advantage of vast improvements in the new methods that have been developed to transition to a Shared Service Center or engaging an Outsource service provider. Compared to even 3-4 years ago, the methods and practices for transforming to shared services or outsourcing can now accelerate the process considerably – what used to take 5-7 years for a large Global Enterprise, can now be done in 4 years or less – start to finish, with dramatic improvements across not only Finance, but great benefits to Finance ’ s constituents. Attempting to move diagonally to a Value Integrator, tackling both Finance Efficiency and Business Insight simultaneously is generally recognized to be too large and risky a set of initiatives, with too much disruption across the Enterprise – therefore not advised. Another suitable path is to advance analytical capabilities, or move toward constrained advisor. Some benefits can be gained by applying the same process and data standards to planning and forecasting as have proven to be successful in transforming core finance functions. However you cannot escape touching on some key finance issues along the path of maturing Business Insight capabilities. Absent standardized financial data and automation of the data layer, business analytics cannot be as robust efficient and timely, and introduce variability that will drive questions around the accuracy of the results. Planning and forecasting models and variance analysis may continue to propagate multiple versions of financial truth – so you have to address some elements of the Finance efficiency dimension along the path of imprpoving business insight. Frequently, while going down this path, greater visibility into the root causes of Finance Structural complexity problems are revealed, underlying root cause issues related to process and source system data issues appear, that must also be fixed to realize the business insight improvements. This is the challenge faced by the Constrained Advisor, as described earlier. Attempting to deploy more robust analytical capabilities without addressing the structural complexities in Core finance process and data that might drive questionable analytical results. This is why, in our opinion, the Constrained Advisor is in the minority across our sample population – having taken this path, there has been a recognition that success hinges upon addressing some of the structural complexities in Finance first or risk failure of the analytics improvement initiative or path. For the Disciplined operator, the path forward is a little more obvious. Having already built a fairly strong foundation for Core Finance, adopting process and data standards, in turn likely addressing some of these root cause issues around structural complexity, building the business insight capabilities are less fraught with risk, more likely to be successful. Integrate financials with analytical systems, integrate financial and non-financial data, through a common data layer. Challenges do remain, namely to properly define the performance management and analytical framework that best conveys the true drivers of bsiness performance. Then, however, the specifics around what financial and non-financial data, external market data and risk factors are needed is the next step. The real challenge here is getting alignment and agreement on these performance factors, across the busineses and then deploying this vertically into the organization , from top to bottom, and using it to influence value creation and risk mitigation behaviors. <<END>>
  • Enhanced business performance

    1. 1. The New Value Integrator
    2. 2. Global CFO Study 2010 Geography Sector Enterprise Size (US$) Title Scope of Role Asia Pacific, 27% EMEA, 42% Americas, 31% Public, 13% Communications, 13% Industrial, 25% Distribution, 28% Financial Services, 20% BU / Program Area, 5% Country, 27% Region, 11% Enterprise / Global, 57% Others, 8% SVP / Controller / Treasurer, 14% CFO / Deputy CFO / Director, 78% <=$500MM, 25% $501MM to $1B, 15% >$1B to $5B, 28% >$5B to $10B, 11% >$20B, 14% >$10B to $20B, 7% Others, 1% Largest CFO-level study of its kind 1,900 participants in 81 countries 88 NZ/Australia
    3. 3. Increased pressure Industry / Sector Changes Over the Next Three Years As a result of these factors, ~60% of Finance organizations believe that they have to make major changes to respond.
    4. 4. Role of finance Elevated Role of Finance Role of Finance in Driving Decisions Across the Enterprise 89% 88% 84% 83% 79% 78% 78% 72% Over 70% of CFOs believe they have an advisory or decision making role on the Enterprise agenda.
    5. 5. Expectation gap - global 34% 28% 26% 21% 16% 9% 28% 35% 23% Core Finance Enterprise Focused CFO Agenda: Importance vs. Effectiveness 2 Gap 1 3 Importance Effectiveness Driving integration of information across the enterprise Providing inputs into enterprise strategy Supporting / managing / mitigating enterprise risk Driving enterprise cost reduction Strengthening compliance programs and internal controls Driving Finance function cost reduction Executing continuous Finance process improvements Developing your people in the Finance organization Measuring / monitoring business performance Rank 0% 20% 40% 60% 80% 100% 52% 61% 55% 83% 49% 84% 59% 75% 62% 85% 52% 80% 59% 80% 39% 73% 51% 77%
    6. 6. Expectation gap - A/NZ 34% 28% 26% 21% 16% 9% 28% 35% 23% Core Finance Enterprise Focused CFO Agenda: Importance vs. Effectiveness 1 Gap 1 3 Importance Effectiveness Driving integration of information across the enterprise Providing inputs into enterprise strategy Supporting / managing / mitigating enterprise risk Driving enterprise cost reduction Strengthening compliance programs and internal controls Driving Finance function cost reduction Executing continuous Finance process improvements Developing your people in the Finance organization Measuring / monitoring business performance Rank 0% 20% 40% 60% 80% 100% 42% 38% 26% 27% 8% 7% 24% 29% 35% 50% 57% 60% 84% 59% 88% 68% 76% 57% 47% 85% 56% 83% 32% 74% 51% 77% 92%
    7. 7. Efficiency and Business Insight Corporate philosophy of information standards Standard Chart of Accounts Standard processes Standard data definitions Operational planning and forecasting capability Finance talent development Common planning platform
    8. 8. Quantifiable benefits Efficiency + Business Insight Contributes to Outperformance Return on Invested Capital 5-year average, 2004-2008 Revenue Growth 5-year CAGR, 2004-2008 EBITDA 5-year CAGR, 2004-2008 Finance Efficiency Business Insight 9.8% 14.0% 9.0% 9.3% 3.9% 11.3% -2.1% -0.1% Business Insight 10.2% 12.1% 7.8% 11.6% Value Integrators also have an almost 20% better operating efficiency ratio than all other companies examined
    9. 9. Theme #1 <ul><li>Delivering efficiency through standards matters more than ever </li></ul><ul><li>Providing business insight drives performance improvement beyond finance </li></ul><ul><li>The greatest rewards come from doing both well </li></ul>“ In the next three years, change will drive the criticality of decision support. Therefore, we must find better ways to do transaction support and control activities with improved processes and more automation.” Bob Driessnack CFO, Intermec Inc. “ Finance has undertaken a number of initiatives to underpin growth, in particular the establishment of a shared service center. This has enabled us to respond much more quickly, close in days not weeks, undertake rapid process change and reduce costs.” Richard Yu VP Finance, Aviva-Cofco Life Insurance, Co. Ltd
    10. 10. Business Efficiency Challenges
    11. 11. Efficiency Accelerators
    12. 12. Theme #2 <ul><li>Delivering efficiency through standards matters more than ever </li></ul><ul><li>Providing business insight drives performance improvement beyond Finance </li></ul><ul><li>The greatest rewards come from doing both well </li></ul>“ Business analytics is one of our most critical Finance initiatives. We need to have the right people and tools and stay very close to the business.” Mike Newman CFO, Office Depot “ For multinational companies, regulatory and political changes can happen arbitrarily at any time, significantly impacting the execution of strategy. As a result, planning must be much more scenario-based with the ability to rapidly adapt.” Markus Kistler CFO - North Asia and China, ABB
    13. 13. Business Insight Rear View Forward-Looking View <ul><li>What happened? </li></ul><ul><li>How many, how often? </li></ul><ul><li>Where exactly is the problem? </li></ul><ul><li>Why is this happening? </li></ul><ul><li>What actions are needed? </li></ul><ul><li>What will happen next? </li></ul><ul><li>What if these trends continue? </li></ul><ul><li>What are the risks or opportunities? </li></ul>Key Business Questions Examples of Business Insight Current View <ul><li>Balance sheet, profit and loss, and cash flow statements </li></ul><ul><li>Revenue and cost variance analysis </li></ul><ul><li>Customer, product and market profitability </li></ul><ul><li>Spend optimization </li></ul><ul><li>Working capital analysis </li></ul><ul><li>Market, customer and channel pricing </li></ul><ul><li>Sales and supply chain effectiveness </li></ul><ul><li>Cash forecasting </li></ul><ul><li>Scenario-based planning and forecasting </li></ul><ul><li>Strategic investment decision support </li></ul><ul><li>Volatility and risk-based predictive and behavioral modeling </li></ul>
    14. 14. Business Insight Challenges
    15. 15. Anticipate External Forces % Better 70% ANZ Global % Better 34%
    16. 16. Timely Metrics Impact on Analytics Satisfaction High Automation % More 26% Financial Metrics % More 93% Operational Metrics % Better 31% % Better 116% ANZ
    17. 17. Non-Financial Data Standards % More 169% High Adoption of Non-Financial Data Standards ANZ Global % More 49%
    18. 18. Theme #3 <ul><li>Delivering efficiency through standards matters more than ever </li></ul><ul><li>Providing business insight drives performance improvement beyond Finance </li></ul><ul><li>The greatest rewards come from doing both well </li></ul>“ Our job is to focus the enterprise on making timely, risk-based decisions by providing access to the right business-relevant information and insight-driven analytics.” Mark Buthman CFO, Kimberly Clark Corporation “ What makes companies stand out from one another is the ability to use analytics across the end-to-end business model. Greater transparency from one end of the business to the other is key.” Dennis Hickey VP - Corporate Controller, Colgate Palmolive
    19. 19. Efficiency and effectiveness
    20. 20. Paths to Higher Value Finance Efficiency Business Insight Low High Low High Value Integrators can maintain their advantage through a program of continuous improvement to sustain capabilities and value Constrained Advisors have good business insight, constrained by structural complexity, therefore address process and data standards to improve efficiency, accuracy and speed High efficiency enabled by process and Finance data standards suggests Disciplined Operators focus on maturing business insight and partnering capabilities Scorekeepers can attempt a direct path to become Value Integrators. This will involve establishing Finance efficiency while simultaneously building business insight capabilities. Alternatively, a staged approach can also be done

    ×