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Epm economy & you published

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Epm economy & you published

  1. 1. ENTERPRISE PERFORMANCE MANAGEMENT,ECONOMY AND YOUCould the timing for leveraging one of the worst crisis these companies saw. ABB1 when it lostEnterprise Management (EPM) systems be its investment grade rating and was in the middle of a majormore appropriate? With the slow-down liquidity crisis and Doux Group2 when their profits tumbled in the wake of bird-flu. These are Type A companies, they plan onin economy, we are all facing pressures succeeding and work and invest towards achieving success.on sales, margins, customer retentionand more. In addition, new laws on Following is the story of EdenOne, another Type A companycompliance, reporting and security are that made strategic technology investments at a sustained pace.being enforced across industries from Planning at strategic level, making investments, demonstratingFinancial Services to Banking to Health measurable results and gaining internal support is now in theirCare. So the top line is hurting while DNA. This investment has helped them inculate a cultural ofnew line-items are getting added to efficiency, effectiveness, speed, visibility and accountability. Letexpense side. us journey with the executives at EdenOne Corporation.The need of the hour is to bring efficiency in manufacturing, THE GOOD TIMESsupply chain and financial operations. Couple this witheffectiveness of your actions by focusing on what is core to STAGE I: FOUNDATION SYSTEMSyou and take corrective action where needed and you will bea winner. In these times, we need ability to adapt and adopt EdenOne was like any other traditional company that enjoyedto changing economic and competitive conditions and to the bounty of 1990s and focused on sales and top-line growth.communicate the strategy and the required actions down to Customers wanted more and more of EdenOne’s productsfront-line shop floor, sales and service organization. and paid premium prices. The CEO and CFO were involved in customer acquisition, new markets and finding low costThe question is how do we accomplish this and given the slow suppliers. The analyst meetings were always a pleasure, but thedown, is this a good time to make any investment in this area? only stigma EdenOne had, was that it was an ‘old-economy’ company. EdenOne had invested in an ERP system and was proud to have a new CRM system in place. The new CIO joinedThe business of business is growth EdenOne in early 1999 and got fat budgets for his e-Commerce initiatives. And shortly after that, the economy slowed down,Whether the economy slows down or competitive pressures dot-com bust happened and 9/11 took the remaining breathincrease, the best strategy for succeeding in business is to be away from the markets.on offense. Tony Dungy, Bill Belichick and Mike Shanahan suredo believe in the offense strategy, and their Super Bowl winrecords support that. As an organization, the offense strategy THE BAD TIMEShas to be applied, both to internal as well as external factors(think Porter model). STAGE II: FOCUS AND IMPROVEIn fact, every company is on offense with competition. You It was in these tough times that Cindy took over as the CFOstrive to offer better products and services, enhance value in of EdenOne. She was brought in to bring fiscal disciplinecustomer’s minds, and evolve tactics that steal market share at and tighten the projects that were committed to in the hay-the grass root level. But how offensive are you with your poor days. Neither the CEO nor Cindy subscribed to the conceptperforming products and your poor performing sales people? of cost cutting. Instead they wanted to ensure that EdenOneActually, do you even know how to measure profitability invested in areas that helped improve the operational efficiencyaccurately by business line, by product category, by geography and organizational effectiveness. They wanted to increase– and on a monthly basis? Similarly, are you on offense with investments in innovation and technology that related tocosts within your organization, not just direct travel costs or customers, products and process improvement.salaries, but resource drains such as in-efficient close process,manual budgeting and planning process that take valuable First and foremost, the thing she needed was visibility intoanalysis time away? company’s data. Having been a business analyst, she knew the value of having right data at the right time. She hated to waitSuccessful organizations are on offense irrespective of for days for IT to build a report and then having to wait for 20economic environment. Apple undertook development of minutes for report to run from the ERP system. Cindy was quiteiPod and iTunes right through the last recession and benefited technology savvy she knew there is a better way with analyticalwhen consumers started spending. Oracle Corporation made reporting. She had a conversation with Ivan the CIO aboutstrategic investments even when stock market was high, and her reporting challenges and they decided to work togetherhas, in turn made itself somewhat recession proof. Another on doing a package selection exercise and implementing thetrait of successful companies is continued investment in project in next quarter.technology and strategic assets. ABB and Doux Group are twocompanies that invested in EPM tools right in the middle of Cindy had correctly anticipated that the new system would help her get information on her business quickly and accurately.10
  2. 2. So one quarter, when the reports showed a spike in Gross planned. Though she was getting field information, but wasMargin to 34.52 percent instead of about 32 percent, Cindy she managing to plans? EdenOne just did not have the culturewanted to get insight into the reasons. With the on-line analytic of Planning and there was a reason for that. Nobody liked tocapabilities of the Business Intelligence (BI) Application, undertake the long and cumbersome, un-secure and non-Cindy took about five clicks to drill down from P&L to Sales to collaborative planning exercise using Excel spreadsheets. WhileCustomer level data by Geography and learned that the margin the business complexity grew, the need of a strong budgetingwent up because the company completed a large shipment to and planning system became more pronounced. Consequently,a profitable customer in Ohio. On digging deeper, in two clicks the relevance of Excel-based Planning and Budgeting systemshe saw that order pipeline and shipments will be down to only went down!normal levels in the next three months! Cindy remembered what her mentor CFO used to tell her, “ItsDelighted with the speed of information availability, she spent all about Planning. Plan the Plan and monitor the Plan and30 seconds reminiscing her early career years, when it would revise the Plan – and do it often.” Cindy knew that the currenthave taken her hours and days to explain the spike! She made process could probably help them survive, but definitely notquick mental calculation of time saved by the six business help them grow and compete! As she pondered more, sheanalyst in Finance department and multiplied that by three realized what she really wanted was a system that was drivertimes for time saved by Sales, Supply Chain, HR and Production based, fully integrated from Revenue to Expense to SalaryPlanning analysts. Cindy was proud of her decision to invest Planning and inculcated a culture of planning. She also wantedin the BI project that had increased the velocity and quality of the system to be fully compliant and secure.insight from “What” to “Why”. In her weekly breakfast meeting with Ervin, the CEO, she talkedFrom analyzing the past to predicting future about how Sam was predicting savings of $0.8M in 2006 and exalted the benefits of technology. She also talked aboutOver the years, while everyone got used to and settled down how broken the Planning Process was and how she wanted towith the BI solutions, Cindy was itching for more. She pondered inculcate a culture of planning in the company. Ervin supportedif she should actually be able to predict the margins? She and her idea and encouraged her to look for ways to increasethe CEO knew that the street was getting more demanding accountability and visibility into both, people and processes.with accuracy of forward-looking results and she needed more He reminded her of the Noah Principle, “There are no rewardsinsight into her business, in a proactive and actionable manner. for predicting rain. You only get rewarded for building the ark.”She started running these thoughts again with Ivan, the CIO The first action that Cindy took after the meeting was to fixof the company. In their conversations, Ivan mentioned about a lunch appointment with Ivan, Sam, Heather the VP ofa demo he had seen on Siebel Analytics (now OBIEE) in a Human Resources and Frank, the Financial Controller forconference on pre-built analytics. He told Cindy that those pre- March 19, 2006.built analytics could help her predict results rather accurately.Cindy was excited about the prospect of being prepared to Piecemeal to strategic approachexplain the variances in advance! She could see her and theCEO’s confidence going through the roof before every analyst Ivan, Sam, Frank, Heather and Cindy brainstormed over ancall. Ivan and Cindy undertook the project to implement extended lunch session on taking a holistic view of whatPredictive Analytics in sales organization and later that year Ivan termed as “EPM Roadmap”. The virtues of Enterpriseextended that tool to Supply Chain organization. Performance Management, or EPM, Ivan explained, were many and far reaching. It encompassed not just PlanningSam, the VP of Supply Chain was very excited about his ability and Budgeting solution or Profitability Management solutionto do Spend Analysis and Supplier Performance. He was never that Frank wanted or the Scorecarding solution that Heatherbefore able to prioritize his suppliers or reward or punish his had wanted to implement, but it would almost alter the waysuppliers based on their performance! He started predicting EdenOne ran, managed and measured itself.the Procurement Cycle Times for each supplier based ontheir geography and scalability and negotiated $0.5 million in At the end of the lunch, the group decided to let Frank runsavings in 2004 alone. the EPM effort, and Ivan volunteered to invite vendors for first round of conversations. Cindy was to report into Ervin and theTHE CIRCLE OF ECONOMY: GOOD TIMES ARE BACK AGAIN board and request for budget approvals. Walking out, Cindy quipped that ‘she was becoming an IT junkie and had neverPHASE III: SUPPORT THE GROWTH imagined she would be so closely involved in IT solutions’. Ivan concurred and said that he was becoming more of a businessNeeded: Culture of Planning executive than IT and demanded a higher level of coordination with business.3As Cindy got accustomed to deeper insight into her businessand was able to predict sales, costs and quarterly financials, Following is the High-Level EPM Roadmap that EdenOne cameshe had started to long for more. She realized that what she up with:was getting from her BI Application was still reactive, it was not 11
  3. 3. EPM ROADMAP FOR EDENONE Expected Business Benefits from EPM Solution ImplementationEnter, Ervin the CEO She was still very glad that it had been good six months that EdenOne had an EPM effort underway and had a viableEdenOne had seen healthy growth in domestic and exports road-map in place. The EPM effort was also maturing withmarkets in last few years. This gave renewed confidence to Ervin strengthening relationships with Hyperion, the product vendor,and to the board that the company was ready for aggressive and their consulting partner, a boutique firm focused on BI andgrowth. Towards end of 2006, Ervin had started serious EPM solutions. She was also glad that they were on scheduleconversations with the Board and Senior Management about with the expected go-live of Hyperion Planning and Budgetingspecific overseas acquisition targets to support growth, hedge solution in December 2006, so that they could roll the systemfrom domestic recession cycles and to invest extra cash. Cindy out with Outlook process in January 2007. She also knew thathad recently become part of those conversations and supported their EPM strategy would be the center-piece in executing thethe strategic direction of the company. She also knew that growth strategy.as EdenOne bought other companies around the globe, shewould need a robust consolidation solution as well. The following week she reported Ervin’s plans to the EPM Steering Committee. The committee members agreed that12
  4. 4. they needed to act fast – actually, very fast. The committee DÉJÀ VU – ECONOMY SLOWS DOWN AGAINdiscussed opportunities that this new direction presented and ifthey could implement solutions that could help Ervin and other STAGE IV: SPEED UP YOUR INVESTMENTSexecutives manage the growth more effectively. ImplementingHyperion’s Performance Scorecard solution was the number While EdenOne’s executives were basking under the warmth ofone on everyone’s agenda as the next step. They also discussed their global growth, the local economy started to show signs ofimplementing Hyperion Financial Management for multi-entity, slow down towards the end of 2007. By January 2008, the signsmulti-currency consolidation. of economic slowdown became more pronounced. Although the results of 2007 were still strong, a section of Board started2007 – A year full of action questioning if a ‘Growth Oriented CEO’ was the best choice to navigate EdenOne through the recession.EdenOne did not lose much time and as they entered 2007,they announced an acquisition in Europe and a factory in China. Ervin was keenly aware of cutting costs and requested a twoThey entered into a partnership with a local company in India day off-site meeting with his Executive team to review 2008to tap the local markets. All the senior executives saw new budgets and expenditure in light of economic slow-down.challenges and opportunities, Frank and Cindy were traveling Along with their departmental presentations, Cindy and Ivanto India, while Sam was spending time in China. Ivan was in sponsored a special session on EPM Roadmap. In the off-siteEurope working on merger-integration. Technology was the in February 2008, the EPM Steering Committee made a strongthread that kept the company humming while executives were business case for EPM projects and suggested continuedtraveling, the BI dashboards highlighted the exceptions to investment in Hyperion Financial Management go-live in Q2 ofexisting processes, results and KPIs. This helped the traveling 2008 and Hyperion Business Modeling, Hyperion Profitabilityexecutives to focus and manage by exceptions in the two hour Management and Hyperion Strategic Finance as the next setworking overlap that they got with their teams in the US. of products to be implemented, not necessarily in that order. While the Executive committee was unanimous in slashing costsJust as the executives were crisscrossing the globe, the at many places, they were equally unanimous in investing inPerformance Scorecard effort was being rolled out in the US. R&D and innovation and maintaining the push for EPM projects.The scorecards were a close reflection of the global expansion Ervin actually argued to expedite EPM adoption with rolling outstrategy and operational efficiency measures. The Logic Models Scorecard globally and opined that EdenOne still had plentybroke down the strategy into measurable and accountable cash remaining for more buy-outs in late 2008 or early 2009actions across four perspectives of Learning & Growth, Internal when many a good assets will be available for much lowerProcesses, Customer and Financials. Implementing Hyperion cost. To optimize the M&A evaluation criterion, Ervin requestedPerformance Scorecard was a significant leap ahead, as it took prioritizing the implementation of Hyperion Strategic FinanceEdenOne way beyond traditional KPI focused Dashboards (HSF) by summer 2008.and helped it manage and measure the company’s strategyimplementation in a truly proactive manner. It also allowed With the help of Scorecard solution, they evaluated whichunprecedented collaboration between supply chain, plants/ initiatives were aligned with the EdenOne’s revised corporateoperations, sales and finance. The exceptions were captured objectives for 2008 and 2009. They identified cost cuttingdynamically, corrective actions were implemented and both measures of about 2.7 percent of sales – something that wastracked and documented. They could trend the improvement going to directly impact the bottom-line.in a particular measure and know if their tactical initiatives wereresulting in tangible and measurable improvements or not. The Board MeetingThe benefits of the EPM effort within the company were lauded Ervin reported to the board that he and the executives hadby one and all and Ervin always found a way to mention the identified expenses that totaled to about 2.7 percent of salesHyperion Planning or Hyperion Performance Scorecard in the and that it was giving more aggressive push to EPM adoption.Analyst calls. This, he said, reflected to the stakeholders that The board wanted more aggressive cuts in expenditure andEdenOne was on the cutting edge when it came to managing wanted to slow down EPM efforts and cut consulting costs.the business tight and the executives knew that there was no Charlie the critic led a more vocal beating of Ervin.revenue loss or expense leakage and EdenOne was on top ofcompliance issues. Ervin was better prepared and his next slide showed the gains made from EPM efforts:The rising stock price was a positive reflection of enhancedconfidence the market had in Ervin and EdenOne. 13
  5. 5. EPM PROJECT: EXECUTIVE BRIEFING* Estimated Savings Per YearThe next slide in Ervin’s presentation contained the tag-line: About Syntelli Solutions Inc.EPM Savings Scorecard: Syntelli Solutions is a dynamic, fast growing consulting Savings in Tangible terms = $7.0 million company focused on BI and EPM Solutions. Our expertise Savings in Intangible terms = 3 FTEs is in helping our clients define and execute their BI and EPM vision by partnering and collaborating. We deliver Having confidence and visibility into EdenOne’s the best solution at the best available price-points. For business = Priceless your BI and EPM design, install and implementation and training needs please visit us at www.syntelli.com or call 877.SYNTELLI (796.8355).CONCLUSIONThe board was totally impressed by the two closing slides onEPM. Ervin got unanimous support and Charlie the critic turnedappreciative and was the first to support extension of Ervin’s termby another five years. EPM project got full funding and supporteven when the economy was slowing down. This reflected thatBoard and Executives considered it as a strategic investmentrather than an expenditure. Ervin and the Executive Committeewere proud that their Board had ensured that EdenOne remaineda winning Type A company and their push for EPM.1 ABB implemented Hyperion Strategic Finance. Read about their success story at www.oracle.com.2 Doux Group implemented Hyperion Financial Management and Associated Reporting Suite to get visibility into profitability and other operational, as well as financial, KPIs.3 Read more about EPM Roadmap at www.syntelli.com/RAE.14

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