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Beyond Budgeting: Driver-Based Forecasting and Performance Management

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Foresite’s Brian Hawkes explains the practical application of driver-based rolling forecasts and performance analytics for realising sales targets and avoiding forecasting becoming an unachieved prediction or statement of aspiration. He explains how up to 95% of commercial activities are inadequately analysed in business reporting and reveals how getting the right information from the right place can be a rich source of analytics for business drivers, limiters and inputs; their impact on sales trajectory and the remedial capability to close forecast gaps. Whilst this information is critical for supporting performance management and financial control, it often does not warrant the complex BI or prescriptive SFA systems that have been the traditional solutions for so long and can distract management from the real issues in their business. Lean and agile systems are robust, easily understood and essential to establishing business forecasts and insights that are both provable and evidence-based.

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Beyond Budgeting: Driver-Based Forecasting and Performance Management

  1. 1. Dynamic Growth Management & Driver-based Forecasting 1 November 2011
  2. 2. The Driver-based Philosophy <ul><li>Rolling forecasts - evidence-based and provable </li></ul><ul><li>One Real-time group forecasting database </li></ul><ul><li>Management collaboration towards one common strategy What do we want to achieve? </li></ul><ul><li>Manage Future Growth – control future outcomes </li></ul><ul><li>Plot Sales Trajectory </li></ul><ul><li>Measure Drivers/Limiters </li></ul><ul><li>Dynamic Performance Management </li></ul><ul><li>Track Competition and Competitiveness </li></ul>
  3. 3. Rolling Forecast Dynamics £53,249 $86,578 € 72,894 $98,617 Timeline Today ► FØ F/cast
  4. 4. Sales Value Chain SALES VALUE CHAIN OPERATIONAL MANAGEMENT SALE SALES PIPELINE 5% 30% 55% 75% 95% ULTIMATE CONVERSION RATE ATTRITION
  5. 5. Forecasting Sales Trajectory <ul><li>Zero Subjectivity </li></ul><ul><li>100% Dependable Prospects </li></ul><ul><li>Matched to Risk Appetite </li></ul><ul><li>Accurately Sensitised </li></ul>X > Filter Sales Tail by Conv. Rate Sensitise by Actual Conv. Rate
  6. 6. Meeting Forecasts DRIVERS LIMITERS TARGET 100% 150% 50%
  7. 7. Drivers / Limiters <ul><li>Service Levels </li></ul><ul><li>Lifecycle/Obsolescence </li></ul><ul><li>Competitor Activity </li></ul><ul><li>Replenishment Capability </li></ul><ul><li>Causal Analysis </li></ul><ul><li>Impact & Trends </li></ul><ul><li>Process Performance </li></ul><ul><li>Delinquency </li></ul><ul><li>Value of Sales Inputs </li></ul><ul><li>Competitive Advantage </li></ul><ul><li>Causal Analysis </li></ul><ul><li>Impact & Trends </li></ul><ul><li>New Business Activity </li></ul><ul><li>Scenario Data </li></ul><ul><li>Source Analytics </li></ul>
  8. 8. Process Performance Landmark Process Lead Attrition SUCCESS SALES LEADS <ul><li>Competitor Analysis </li></ul><ul><li>Causal Analysis </li></ul><ul><li>Success rates </li></ul><ul><li>Customer Service level </li></ul><ul><li>Activity/Throughput </li></ul><ul><li>Process Duration </li></ul>WIN FA IL EXCEPTIONAL SALES [e.g. Promotions, Intra-Group] <ul><li>Ultimate Conversion rates </li></ul><ul><li>Impact & Trends </li></ul>
  9. 9. G-Index <ul><li>Actual sales </li></ul><ul><li>Actual wins </li></ul><ul><li>Actual churn </li></ul><ul><li>Actual conversion time </li></ul><ul><li>Actual sales pipeline </li></ul><ul><li>Actual conversion rate </li></ul><ul><li>Actual spot FX rate </li></ul><ul><li>Actual impact previous sales </li></ul><ul><li>Actual impact previous churn </li></ul><ul><li>Actual conversion performance </li></ul><ul><li>Future pipeline potential </li></ul>12 months Today 12 months next 12 months forecast previous 12 months actual
  10. 10. Lean Enterprise Cornerstones <ul><li>Platform </li></ul><ul><li>Cloud or Intranet </li></ul><ul><li>Vendor-side Investment </li></ul><ul><li>Vendor-side Infrastructure </li></ul><ul><li>Advanced Security </li></ul><ul><li>Methodology </li></ul><ul><li>Non-prescriptive </li></ul><ul><li>Skinny ‘Input’ vs. ‘FAT’ output </li></ul><ul><li>Localisation </li></ul><ul><li>Internationalisation </li></ul><ul><li>Design </li></ul><ul><li>Way-you-Work Values </li></ul><ul><li>Advanced web optimisation </li></ul><ul><li>User Collaboration </li></ul><ul><li>Intuitive </li></ul><ul><li>Function </li></ul><ul><li>Interface to personal systems </li></ul><ul><li>Data Portal to personal files </li></ul><ul><li>Data Exchange to core apps </li></ul><ul><li>Document sharing </li></ul><ul><li>BUSINESS FIT </li></ul><ul><li>FUNCTIONAL FIT </li></ul><ul><li>HIGH ROI </li></ul><ul><li>LOW RISK </li></ul><ul><li>LOW MAINTENANCE </li></ul><ul><li>HIGH ADOPTION </li></ul>
  11. 11. Taking the ‘if’ out of ‘What if?’

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