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AUTUMN 14
Hyperion & EPM
OracleScene
D I G I T A L
Reinventing Enterprise
Performance Management
to Support Sustainable,
Innovation-Based Growth
For 2014, The Hackett Group’s Key Issues research finds that companies are focusing on
innovation as a core strategy to deliver growth. Financial planning and analysis organisations
are profoundly impacted by this strategic orientation as well as the main business drivers
behind it (global competition, volatility and the “information revolution”).
Gilles Bonelli, The Hackett Group
To rise to the challenge of supporting innovation-based growth,
FP&A organisations must pursue a broad transformation
agenda covering:
• Integration of EPM processes and development of
business partnerships
• Improvement of core processes to recalibrate FPA’s
value proposition
• Development of business intelligence information
delivery capabilities
While owned by FPA, this agenda is aimed at elevating the
company’s broader EPM capability level, and thus extends
beyond the functional boundaries of FPA.
Strategic Priority in 2014:
Sustainable, Innovation-Based Growth
The Hackett Group’s EPM Key Issues research is based on a study
conducted in late 2013. Study participants included executives
from over 150 large companies globally. The study covered their
business strategies, revenue and budget expectations, as well as
key initiatives for 2014.
The study found that the business environment continues to
be characterised by high levels of volatility and risk. Volatility of
demand has been a recurring theme since the global financial
crisis and remains the number-one driver of business strategy.
However, other types of risk and instability are becoming more
prominent. These are related to competition, regulation and
talent. Furthermore, the lingering risks of the crisis are still
being factored into business strategies by 62% of companies
participating in The Hackett Group’s 2014 Key Issues Study; so
is supply volatility (for example commodity prices), included by
70% of companies.
Despite persistent uncertainty about business conditions,
most companies have reverted to a focus on creating value
for shareholders through revenue growth and margin
improvement. Over half of study participants cite revenue
growth as their top financial objective; 25% indicate margin
improvement is their main goal. Just 4% of companies are
actually targeting the acceleration of their historical revenue
growth rate. This very low percentage indicates a great amount
of lingering caution in business.
This conservative outlook is reflected in the business strategies
that will be deployed to realise financial objectives in 2014.
Sustainable, innovation-based strategies are top-ranked, but
only for the purpose of maintaining historical growth rates.
Traditionally, innovation was usually associated with a growth-
acceleration strategy. Today, it is a prerequisite to simply
maintaining growth rates, staying competitive and ultimately
remaining commercially viable.
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For many, this will require changes touching all aspects of
operations. The most important among these are adopting
technology, unlocking the value of information, and realigning
talent. Companies also continue to look for growth in other
countries, as reflected in the high priority given to expanding
the customer base. Globalising the business brings its own
challenges. Not surprisingly, then, finding or developing the
right talent remains a fundamental issue.
EPM BI: Critical to Achieve Sustainable, Innovation-
based Growth
EPM and BI are critically important organisational competencies
to develop and execute an innovation-based growth agenda.
While both competencies extend beyond the boundaries of
the FPA organisation, in our research we focused just on the
implications for FPA organisations of the need to support the
enterprise’s innovation- based growth agenda. For many, this
will demand the reinvention of their own service offering and
decision support capability.
The majority of companies are pursuing changes in cost
structure, led by reduction in SGA cost. As a result, few
organisations will find additional budget for net-new
investment in FPA, so any reinvention will need to be self-
funded. Staffing levels across the finance function are expected
to decrease in 2014, while operating budgets will increase
slightly (Fig. 1). FPA budgets and staffing levels will closely
track these projections. Yet FPA organisations are expected to
meet higher demand levels. Our model assumes that demand
is proportional to the revenue base supported by the FPA
organisation (which is projected to grow at 6-7%). This increase
in demand, plus the anticipated budget cutback of close to 1%,
translates into a need for productivity gains in the range of 7-8%.
An Agenda for Reinvention of FPA
The need for transformational change in FPA to support the
evolving requirements of the business is nothing new. Ever since
the financial crisis, companies have generally been operating
in a structurally higher-risk (and thus less predictable) business
environment. Meanwhile, the transition from the industrial-
age economy to the information-age economy is accelerating,
creating its own set of challenges for EPM. These trends all
have major implications for financial planning, forecasting,
performance reporting and analysis processes.
With innovation now prominent on the enterprise agenda, FPA
has gained yet another reason to rethink its value proposition.
An innovation-based enterprise agenda requires rigorous
decision-support based on operational and financial modeling.
FIGURE 1: ANTICIPATED CHANGES IN FINANCE BUDGET AND STAFFING 2013-2014
FIGURE 2: EPM PRIORITIES IN 2014
The FPA function plays an important role in providing this
support throughout the entire innovation life cycle. Innovation-
related business decisions are fraught with far more uncertainty
than traditional capital investments and resource allocation.
Hence, FPA needs to innovate itself in order to support
innovation in the core business.
Our research shows that to improve the organisational EPM
competency level, FPA needs a broad transformation agenda,
which can be clustered into the following three themes (Fig. 2):
1. Integrate EPM processes and develop business partnerships:
Financial planning and analysis is at the core of the enterprise
EPM capability, which extends beyond finance. The maturity
of EPM as a decision-making competency is a function of
integration between planning domains (strategic, operational
and financial) and the maturity of partnerships between
FPA and the business.
2. Improve core processes to recalibrate FPA’s value
proposition: FPA is the custodian and owner of the
organisation’s core financial management control cycle:
financial planning and budgeting, forecasting and
performance reporting, supported by analytics. Continuous
improvement in this cycle is needed to improve service levels
and drive out cost. Efficiency gains are also necessary to
free up resources to move up the value chain with a flat or
declining cost base. Further, providing better value to the
enterprise will rely on FPA groups’ability to better integrate
and garner business operational knowledge to take their
insights to the next level.
3. Develop BI information delivery capability: As the preeminent
value-added information provider to the organisation, FPA
is at the center of the BI revolution. Often a driver and major
contributor to kick-starting initiatives in these areas, FPA
is well positioned to help bring a focus on what matters in
analytics, as well as bridge the gap between financial analytics
and those in other business domains (e.g., sales, marketing,
operations). Transforming and innovating the way information
is delivered will become a critical capability for FPA.

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AUTUMN 14
Hyperion EPM: Gilles Bonelli
OracleScene
D I G I T A L
In the remainder of this report, we explore each theme and its
associated initiatives in more detail.
Integrate EPM Processes Develop Business
Partnerships
While financial planning and budgeting, owned by FPA, have
traditionally been at the heart of the organisation’s performance
management cycle, EPM is inherently an enterprise-wide
capability and includes the strategic, operational and financial
planning domains. In part, integration of these domains revolves
around formal process and data integration and alignment
of planning calendars. Various EPM performance studies
conducted by The Hackett Group since 2011 have all found
a strong correlation between EPM performance and process
and data integration, consistently showing far higher planning
integration at top-performing organisations.
However, without effective collaboration among stakeholders,
successful integration of operational, finance and strategic
planning will be elusive. Many organisations focus either on the
(structured) process and information aspects of integration, or
the (unstructured) partnership aspects. The most successful
organisations focus on both and maturity evolves in parallel; as
FPA business partners benefit from better information access,
analytical capability and more mature processes, they can add
more value to the partnership.
Improve Core Processes to Recalibrate FPA’s Value
Proposition
Many FPA organisations are redesigning parts of their core
financial management control cycle (financial planning and
budgeting, forecasting and performance reporting), motivated
in part by widespread frustration over the ineffectiveness
and inefficiency of the traditional annual financial budgeting
process. While some organisations aspire to eliminate the
financial budgeting process altogether, very few have actually
achieved this. Most are trying to ease the pain of annual
budgeting simply through process improvement, technology
enablement and complexity reduction.
The financial forecasting process is often hampered by the same
complexity and excess detail that burden budgeting. Hackett
research shows that effective forecasting is driver-based, and
that failure to reduce complexity is the main reason many rolling
forecast implementations do not achieve their objectives. Our
2014 Key Issues Study strongly confirms finance organisations’
emphasis on improving core FPA processes. Improving
the efficiency of annual budgeting is the highest-ranked
performance improvement initiative among finance functions,
with 18% of companies considering this their top priority;
another 55% have a major initiative planned for 2014.
The third core FPA process, business performance reporting,
is often resource-intensive, inefficient and ineffective. As
with budgeting and forecasting, complexity is performance
reporting’s worst enemy. World-class organisations cover
most of their reporting needs through standard reporting, use
well-defined, standard reporting packs, and have a rigorous
governance process to prevent unnecessary complexity
from creeping in. They also use self-service reporting portals
and scorecards far more extensively than the peer group to
improve reporting efficiency and timeliness. (The need to
improve business performance reporting is aligned both with
the “improve core FPA processes”and “develop information
delivery”themes discussed in the next section.)
Improving core FPA processes is a prerequisite for moving up
the value curve in decision-support services. In the absence of
additional funding to develop new capabilities, the reinvention
of FPA needs to be self-financed. Only efficiency improvements
beyond the rate needed to meet additional growth-driven
demand can free up the necessary resources.
Develop BI Information Delivery Capability
After decades of investment in transactional backbone systems,
and the digitisation of content (documents, multimedia)
on a massive scale, companies are accumulating data at an
unprecedented pace. Add in universal connectivity, access
to virtually unlimited amounts of information through the
Internet, an explosion of information access devices and
technologies, and it is clear that a “perfect information storm”
is brewing. For years, Hackett studies have found that BI and
analytics rank among the top three most important technology
investments, and are often the number-one priority. This year’s
Key Issues Study findings were no different (Fig. 3).
FPA’s primary role is to improve business decision making by
providing value-added information (including analytics) services
to the business. The vast majority of business decisions have
a financial dimension, which is the primary area of focus and
expertise of FPA organisations. This puts FPA at the center
of the BI analytics revolution. First, FPA is the custodian (and
in many cases, the owner) of purely financial information and
analytics. Second, it plays an important role in developing the
financial dimension of analytical models in other areas of the
business. Third, it is responsible for ensuring consistent financial
planning assumptions of financial and operational analytical
models and tools used throughout the organisation. And finally,
it is responsible for governance of much of the financial master
data, KPIs, data definitions and metadata underlying all of these
models and tools.
Given financial planners’and analysts’central role in BI/
analytics, it should come as no surprise that in many
organisations these staff are aligned with BI/analytics Centers of
Excellence. They may be the de facto functional owners of BI and
analytics data models and toolsets, and help elevate the general
BI/analytics competence level throughout the organisation.
FIGURE 3: BI, ANALYTICS AND DATA MANAGEMENT INVESTMENT PRIORITY

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Strategic Implications
The demand emanating from changes in the external business
environment, business strategies focusing on innovation,
and the information revolution puts tremendous pressure on
FPA organisations for reinvention. Those that remain stuck
in a pattern of facilitating the annual financial budgeting
cycle, periodic forecast and financial variance reporting will
rapidly become viewed as adding no value, and thus strictly an
overhead cost.
To avoid this fate, FPA organisations must pursue a very
broad transformation agenda, simultaneously making core
FPA processes more efficient, developing new BI and analytics
capabilities, integrating financial planning processes with
the operational and strategic planning domains, and building
partnerships with the business.
The FPA transformation roadmap must be the outcome of a
deliberate design process, based on current-state performance
and capability in assessment and gap analysis.
Fortunately, Hackett research indicates most FPA
organisations recognise the challenge and are answering the
call, as reflected in their aggressive transformation agendas for
2014 and beyond.
ABOUT
THE
AUTHORS
Gilles Bonelli
Practice Leader, The Hackett Group
Gilles Bonelli is Practice Leader, Enterprise Performance Management Business
Intelligence Executive Advisory Program, Europe, for The Hackett Group.
Article written in conjunction with Erik Dorr Sherri Liao