Adaptive handling and flow of financials are an important ingredient to business agility. Essentially what we want to achieve is, to have the money in a company flow to where it creates most value. In the modern dynamic business environment this is an increasing challenge as we on one side see the need to be very adaptive throughout the year to cope with the changes in the business and on the other side people in enterprises as well as suppliers and partners would like to have sufficient financial stability to plan their work. On top of that come regulatory requirements. For ICAgile I led an international team of professionals in 2018 to create a learning curriculum outlining the most important things you need to know about finance in an agile enterprise. This curriculum is published under creative commons license. In this talk you will get an overview of finance agility based on the professional knowledge of this team. More details: https://confengine.com/agile-india-2019/proposal/8181/agile-finance-enabling-business-agility Conference link: https://2019.agileindia.org

1. Ericsson Internal | 2018-02-21
Agile finance
enabling business agility
Business Agility Day
Bangalore,
March 20th, 2019
Hendrik Esser
@HendrikEsser
Special Projects & Operations
Program Director
Supporting Agile Adoption

2. Ericsson Internal | 2018-02-21
When organizations adopt agile approaches enterprise-wide,
one of the most common challenges is changing the way
finance and accounting functions operate. In the traditional
world, financial planning most often occurs yearly, with budgets
allocated in advance and success measured in relation to
budgets.
In today’s complex business environment, this no longer works
and new approaches are needed. While continuing to
emphasize wise spending and compliance with regulations,
these new approaches also need to enable adaptation and
rapid response to the changing circumstances in the business
ecosystem.
Success today is about sustainable delivery of customer value,
while empowering the people who are closest to the work to
make good decisions. These decisions include responsible
stewardship of the organization’s funds. This means
approaching finance, accounting and procurement with an
agile mindset, radically changing the way budgeting and cost
allocation is undertaken, re-examining our accounting
principles and taking more collaborative and incremental
approaches to procurement.
This track provides learning outcomes that chart the path to
new ways of thinking and working in the finance, accounting
and procurement areas. These Learning Outcomes have been
built by pioneering practitioners from around the world,
drawing on their real experience helping organizations become
agile in finance.
AGILE FINANCE TRACK

3. Ericsson Internal | 2018-02-21
Finance with an agile mindset?
Budgeting and cost management
Accounting
Agile Procurement
How to change?
Summary
Q&A
Overview

4. Ericsson Internal | 2018-02-21
Financewithanagilemindset

5. Ericsson Internal | 2018-02-21
Whyagilefinance?
There is friction: Finance vs agile product creation
— Financial targets demand predictability.
— Tight budget follow-up
— Funding decisons taken seldom
— Budgeting is inflexible
— Regulatory requirements and financial
reporting vs agility
E.g. capitaization?
Volatile Uncertain
Complex Ambiguous
?

6. Ericsson Internal | 2018-02-21
Dealingwithcomplexity
Dave Snowden
HBR Article
Nov 2007
Very limited predictability
Cause-effect can only be understood in hindsight.
Anything you try will have side-effects, positive
and negative.
To deal with a complex system, you need to have
an experimental approach:
— Try to make sense of what you see.
— Try safe-to-fail experiments.
— Observe what emerges
— Iterate the above.

7. Ericsson Internal | 2018-02-21
Adaptingfinancetoagileorganizations
— What interactions are there?
— Are the tools helpful?
— Finance???
— How does finance focus on the customer?
— How can finance help product development
focus on the customer?
— How can finance get over stiff rhythms?
Individuals and interactions
over
processes and tools
Working software
over
comprehensive documentation
Customer collaboration
over
contract negotiation
Responding to change
over
following a plan

8. Ericsson Internal | 2018-02-21
Amoresuitableframework:
BeyondBudgeting
Thisframeworkisfullyalignedwiththeagilemanifesto.

9. Ericsson Internal | 2018-02-21

10. Ericsson Internal | 2018-02-21
Changesofroleandperception
Changes need to be accommodated fast → an iterative approach and feedback loops are needed.
→From seldom and big decisions to frequent small decisions.
→ From gatekeeping to being an enabler for decision making in a VUCA business environment.
→ From controlling towards management decision support
→ Financial trend monitoring
→ From yearly to continuously
→ creates an incentive to make them light-weight
(continuous integration of finance data into management decision and strategy evolution)
Guide decision-making in the moment
rather than enforcing adherence to previous decisions and plans
which likely no longer apply.

11. Ericsson Internal | 2018-02-21
Budgetingandcostmanagement

12. Ericsson Internal | 2018-02-21
Thepurposeofbudgeting
— The place of most value in a VUCA world?
→ need for fast adaptation in routing the
money
→ from yearly to continuously
— Distribution of financial resources needs to
have in the same pace as agile product
creation.
Direct financial resources
to the place that provides
the most value for the company .
Creating customer delight in a profitable way.

13. Ericsson Internal | 2018-02-21
Separatethethreecorepurposesof
budgeting
Three conflicting purposes → split / handle them separately
1. Target setting (what we want to happen)
— Should be inspiring and motivating
— Relative wherever possible
— Holistic performance evaluation (outcome > output)
2. Forecasting (what we think will happen)
— Unbiased – expected outcome
— Limited detail (too much detail will give the illusion of control)
3. Resource allocation (what it takes to make it happen)
— Event driven, not calendar driven
Continuous
monitoring and
adaptation
where / when
needed

14. Ericsson Internal | 2018-02-21
Budgeting–mindsetshift
Budget
OK
Not
OK
OK?
OK?
OK?
OK?
OK?
Is this really
necessary?
Do I have a
budget for this?
What is good enough?
How much value is this
creating?
Is this within my execution
framework?
From one big upfont
budget
to
Cost conscious from
the first penny:
incremental funding
Source: BBRT / Bjare Bogsnes

15. Ericsson Internal | 2018-02-21
Accounting

16. Ericsson Internal | 2018-02-21
Regulatoryrequirements
Examples:
— Produce an annual budget
— Capitalization rules for intangible assets (e.g.
software)
— Revenue recognition for work performed under
contract.
Insight:
Not all financial
procedures and
regulations need to
change in an agile
organization.
There are synergies
between agile
approaches and the
objectives of
compliance
organizations.
Internal accounting
control can be
enhanced by the
regular inspect/adapt
cycle associated with
agile processes.

17. Ericsson Internal | 2018-02-21
AgileProcurement
Overcomingtraditionalprocurementchallenges
Agilecontracts

18. Ericsson Internal | 2018-02-21
Agilecontracts
— Although agile contracts are more collaborative in nature, critical legal
questions must still be included.
Discussing them helps gauge compatibility in the earliest stages.
— Co-create a joint agreement based on shared vision and equal partnership.
— Consider aspects like IP rights, warranty, risk sharing, etc.
Towards
partnership

19. Ericsson Internal | 2018-02-21
source: Mirko Kleinert, www.lean-agile-procurement.com

20. Ericsson Internal | 2018-02-21
source: Mirko Kleinert, www.lean-agile-procurement.com

21. Ericsson Internal | 2018-02-21
4criticalingredientsthatmakeLAPwork
1. Remove or minimize the handovers (also in the procurement process)
2. Include the people who will do the work from the very start
3. Foster collaboration with all your techniques and approaches
4. Bring all into one room for a Sprint-like start of the project

22. Ericsson Internal | 2018-02-21
Howtochange?

23. Ericsson Internal | 2018-02-21
Gettingfinancialpeopleonboard
Not we vs them!
→ Let’s solve our problems together.
Involve financial people in your agile transformation from the start.
Make it also their journey!
It starts with a conversation:
Define the common problems and the common goals.
Agile transformation
in finance

24. Ericsson Internal | 2018-02-21
Summary

25. Ericsson Internal | 2018-02-21
Summary
Agile finance is not rocket science.
The agile manifesto isn’t helpful enough to guide finance
→ Beyond budgeting is a more suitable framework
The role of finance moves from a gatekeeper to an enabler.
Separate the three purposes of budgeting and manage them separately and
continuously.
(Target setting, Forecasting, Budget allocation)
Regulatory requirements can be fulfilled also with agile approaches.
Use the agile procurement canvas for fast creation of agile contracts.

26. Ericsson Internal | 2018-02-21
A
Q