In most companies, highly qualified (and highly paid!) finance professionals spend more than half their time combing through and compiling data from a variety of spreadsheets, notes and internal systems. A majority of that effort includes checking, cleansing, and reusing old data with very little time to correlate it against outside factors or information from external sources. In fact, recently one Head of FP&A told me about a challenge she still struggles with; having enough time to meet her operating departments’ demands for situational analysis, while also fostering useful discourse around the data.
Trying to plan or forecast in today’s dynamic business climate can quickly point out these limitations of traditional FP&A processes and systems. Overcoming this has become so important that we are now seeing a secular shift in the way finance looks at new technology. While historically the adoption curve for new technology in corporate finance is often the slowest, today’s climate is forcing the Office of the CFO to expand outside of its traditional accounting and back-office role and become more proactive and strategic. New technologies designed specifically for the sector are combining big data, predictive analytics, data visualization, mobility, and machine-learning to work iteratively with finance experts to reimagine consolidation, reporting, planning and forecasting – the foundational processes for understanding and driving business performance.
Senior Analyst Krishna Roy from 451 Research just last week dove into the topic. Her new research on machine-learning notes that while we’ve seen its adoption by CIOs in other technologies, for CFOs a number of factors had to occur first before machine-learning could start hitting prime time. Roy points out considerations like the ability to store and aggregate massive amounts of data and, “…the ready availability of economically priced processing power because machine-learning algorithms need a great deal of horsepower.”
For CFOs seeking true transformation of financial processes, this is arguably the most important point to understand. Within the CFO technology landscape of EPM, Roy is describing the difference between legacy companies who utilize the cloud as a hosting platform, and modern companies like Tidemark who believe the cloud is more. Today, organizations of all sizes can tap into the cloud’s explosive potential to package and make innovation available to everyone. For Tidemark, this means utilizing the cloud not just as a hosting platform to make our system available anywhere at anytime, rather we see the cloud as a computational platform to continuously innovate, build, and deliver new services to our customers. Roy, who had a chance to spend time in our platform the last couple of months, noted in her report that:
“Performance management in the cloud' pure play Tidemark Systems has also brought machine learning into the FP&A mix for predictive analytics use cases. Tidemark is using Apache Spark for processing and Spark's MLlib machine-learning library for predictive forecasting. The aim is to enable companies to understand customer churn, market share or some other forward-looking analysis related to performance management – without having to go to a statistician or analytics expert to get this type of analysis.”
Modern CFOs need modern technology to help solve today’s challenges. A true cloud inclusive of machine-learning enables the analysis of nearly unlimited numbers of attributes or sets of data, supporting financial leaders with the power to help their departments uncover revenue and operational insights, plan better and work smarter. If you’re interested in more in-depth analysis on machine learning’s impact on finance, take a look at our complimentary research, “Forecasting the Impossible and the Improbable.”
At Tidemark our vision is to re-imagine budgeting, planning and forecasting by unlocking the information stored throughout organizations so better decisions can be made with data that improve a company's performance. Since our inception, we’ve been fortunate to partner with many brands, leaders, CEOs, CFOs and CIOs on their journey to transform finance and operations for the digital era.
Today, we’re fortunate to gain a new ally in one of the top technology investment firms.
It’s an exciting time for Tidemark customers, partners and employees as we’re thrilled to announce a growth investment from Marlin Equity Partners! With over $3 billion of capital under management, the firm has resources and relationships across multiple industries and geographies. Marlin also has a very strong track record to significantly strengthen a company’s outlook while enhancing the value they deliver to their customers. We’re incredibly honored to partner with the global investment firm in our mission to advance and enrich FP&A!
As Tidemark continued to surpass important milestones over the past year -- like its first Fortune 50 customer, surging ARR growth and more than 30 new go-lives in the past six months -- it become clear that in order to maintain the accelerated rate of growth, the company would need to find a special type of partner. With a range of industry leading brands like ENGIE Group, the no. 1 independent power producer in the world, or Acxiom Data Corp., the top provider of consumer data, or the elite academic institution Stanford University, we sought an investment firm to help accelerate the maturity of our operations to deliver better services and support to our customers. Marlin’s global network and history of success with other first-to-market technologies stood out as the most complimentary and ideal partner.
Corporate finance has long been a black box. Analysis from financial and operational data is perhaps the key to unlocking better planning and performance across the entire business, yet historically it remains relegated to only a select few. Marlin has deep experience with innovation in the market, and together we look forward to continue our work to help FP&A teams become high performance finance teams and lead with transformation in their enterprise performance management (EPM) efforts.
Research and survey data can serve as useful benchmarks for assessing your performance. So when I wonder what other financial leaders are concerned about, I turn to a select set of reports to learn from. This week, I reviewed the latest Ernst & Young survey data and got this disheartening feeling when I saw that of 1,000 CFOs at companies with revenues of more than $500 million:
“Only 55 percent of CFOs express confidence in their ability to meet reporting requirements, compared to 84 percent a year”
19 percent is a pretty noticeable drop. With quarters ending and earning announcements well under way, it may be time to reconsider some of the traditional processes that have long been associated with these responsibilities.
In fact, it doesn’t have to be this way. With today’s arsenal of better technologies at their disposal, modern finance executives struggling to meet reporting requirements and expectations can move away from the old way of doing things, and attack the problem head on. Here are three steps they can take right away:
1. Streamline consolidation. If compliance regulations were a poker hand, many public companies would be holding half the deck. EY found that effectively half (48 percent) of businesses surveyed must comply with at minimum 10 reporting standards, from IFRS to local GAAP, often exceeding that number. As a result, these companies employ a constellation of reporting procedures, with nearly one in three (32 percent) using 16 or more reporting systems. Does battling complexity with more complexity equate to the best strategy?
A better approach is to streamline and simplify consolidation and reporting. But that’s hard to do with traditional approaches. Even companies that have invested heavily in consolidation efforts, including establishing a dedicated consolidation department, still find themselves gathering and sharing crucial data via manual, error-prone tools like email and spreadsheets. A new generation of cloud delivered consolidation and reporting solutions connect directly to financial, operational and transactional systems, and even social and mobile platforms. Unlike old legacy platforms, these new systems import and integrate data from cloud and on-premise management, ERP, CRM and sales systems. Users of all kinds then access a single platform that allows them to automatically see the impact of any adjustments made to key performance indicators (KPIs) such as operating profit, sales by product, sales by region and more.
2. Communicate more effectively with board members. Fewer than half (48 percent) of CFOs say their reporting has earned the confidence of the board – a sizable drop from a year ago, when 71 percent felt board members were confident in their reporting. This is understandable, since corporate boards are under increasing pressure to scrutinize the numbers companies report, with 84 percent of EY survey respondents saying audit committees and boards have intensified their focus on reporting in the past three years, with 34 percent noting that attention has increased “significantly.” As EY notes, the better relationship CFOs have with audit committees, the more confidence their reporting instills.
Building those relationships becomes much easier when board members can quickly investigate costs, revenue and net income in any business configuration and at any level of granularity. And it’s now possible for them to visualize key metrics, review highlights in an intuitive, infographic-style interface, and drill into financial, operational and transactional data to appreciate the impact of changes, trends and adjustments. The result is a vastly more collaborative process that delivers insights and results faster, and that allows board members to be confident in their numbers.
3. Be ready for changes in recurring revenue reporting. Any business with a subscription or “as a service” business model, which is becoming increasingly popular for many industries beyond software, will eventually find their already complicated reporting framework to become even more convoluted. That’s because these companies face fundamental changes in the way they recognize recurring revenue and associated expenses. The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have decided to align their respective accounting standards, with the new “harmonized” framework set to go into effect for annual reporting periods starting after Dec. 15, 2017.
The new framework represents a real sea shift for organizations that have added recurring revenue models to more traditional transaction-based models. To tackle that complexity, CFOs should consider platforms that integrate business planning, analytics and reporting into a single environment so all stakeholders can collaborate using one system. Currency conversions and other time-consuming tasks can all be automated, and decision-makers can easily keep track of subscription-based KPIs like annual contract value (ACV), annual recurring revenue (ARR) and total contract value (TCV).
CFOs wishing for more confidence in their reporting environment should take steps to simplify it. That may well be the answer they – and their boards – are looking for.
In the offices of CFOs, particularly at large publicly listed companies, confidence appears to be waning. In fact, numerous surveys indicate that in 2016 optimism is low. The problem? Many finance chiefs have lost trust in their ability to accurately track, report, and improve performance across the enterprise.
One big challenge CFOs are dealing with is complexity. With the growing volume and velocity of data, myriad reporting mandates, and outdated and archaic planning processes, there’s a burgeoning fear that finance is getting further and further behind in its efforts to partner and support their organization’s lines of businesses, key departments and CEO.
I’ve long believed that what can make or break a company is their approach to collaboration and how they plan their business. For too long, we’ve seen companies structure their organizations into a number of small teams that operate in silos. Separate goals, processes, communication and data. The byproduct of age-old corporate structure (and subsequently reporting), these top-down hierarchies typically have each team (with minimal to zero communication) feed their own data and plans into some type of system-of-record, with the pertinent data usually only accessible to the “Office of the Few.”
Respected author Geoffrey Moore, known for his groundbreaking work in Crossing the Chasm, coined the term “system of engagement.” A concept designed to eliminate silos within organizations (as I described above), systems of engagement were originally focused on CIOs and IT leaders. Yet as digitalization modernized, and all departments (from marketing, to sales, to HR, to finance) became impacted, forward looking CEOs saw the potential and entrusted their right hand women and men to utilize the progressive framework as a foundation for transformation.
This brings us back to the office of finance. A respected study by Accenture notes that more than 80 percent of CEOs at large organizations select their CFOs as the architects of transformation. Their ability to measure, analyze, and forecast growth have put them at the forefront of strategy (the same study reports that now an astounding 3 out of every 4 CFO has seen their role in supporting strategic decision making increase in the past two years). Yet in order for finance to drive transformation, they too need change. When reviewing the recent data on CFO optimism, it’s clear to me that the lack of confidence in improving performance across their enterprises is tied to their outdated, legacy planning systems. These systems-of-record prohibit the type of real-time information sharing, department-to-department collaboration and ease-of-use that non-finance users need in order to engage with complex financial and performance data.
Similar to the idea popularized by Zuora’s founder and CEO, Tien Tzuo, around new tools for new relationships, I believe new responsibilities require new processes. High performance finance teams understand that you can’t improve performance enterprise-wide without changing existing processes. New systems-of-engagement put an emphasis on making it easier for not only the core users, but for the non-technical user as well. In finance, this means the planning system must support not only the financial planning and analysis (FP&A) team, but also the lines of businesses users. Yet a financial planning system that encapsulates a system-of-engagement framework should include more than collaboration features like instant messaging and annotations. Modern systems need to not only make communication easier and more routine, but they must also help illustrate performance data in a user-friendly way.
Having attended the MIT Sloan CFO Forum at the end of 2015 to watch my CFO speak on a panel, we heard a recurring theme around the need for storytelling and performance narratives. “Stories, not just graphics and visualizations, help explain trends and patterns to the masses,” is what one CFO said. Getting the masses to engage is how you help move a siloed company towards greater companywide collaboration. Her words resonated with us because this type of collaboration is what we call ‘planning at the edges.’ Modern systems-of-engagement, unlike their predecessors, make it possible for the CFO and someone in the field to have access to the same numbers and performance data. This allows both the CFO and those in separate departments to track not only their own team’s goals, but because they are using the same integrated system they can also track against the company’s overall goals. No longer is critical data discretely kept to a select few, rather that information is freed throughout the organization so employees at all levels, regardless of location, can leverage it to improve what they do.
Shared data can result is greater alignment and better communication, which -- as we all know -- improves decision-making. When those outside of finance can think like the CFO, and vice versa, organizational transformation is underway.
Oracle recently commissioned a survey of CFOs to determine which key performance indicators (KPIs) matter most in a world where intangibles like customer satisfaction increasingly drive brand value. The survey forms the basis of a white paper titled, “The Digital Finance Imperative: Measure and Manage What Matters Most.” What’s surprising is how many of the survey results – and the resulting prescriptions offered by the paper – actually end up exposing some inherent weaknesses in Oracle’s own Hyperion Planning platform and Essbase analytics.
When you dive into the survey data, there are some interesting results. For instance, back in the industrial era of 1975, 83 percent of the market value of S&P 500 businesses was determined by tallying up tangible physical and financial assets, with intangible assets (such as human capital, brand reputation and intellectual property) accounting for just 17 percent of value. Fast-forward to today, and the tables have turned completely upside down: 84 percent of S&P 500 market value now is driven by intangibles.
This puts pressure on finance organizations to wrangle data about those intangible assets and integrate that information into business processes that help every part of the organization. That requires new KPIs able to measure the things that matter most. It also requires new software capable of tracking and managing those KPIs derived from across the organization; something Oracle users know all too well isn’t actually possible in Hyperion.
We explore those shortcomings in detail in a complimentary new white paper from Tidemark: “Sifting Through the Hype(rion): Why Enterprises are Abandoning Hyperion Planning and Essbase.” Download the complimentary research paper to get all the facts, but for now, let’s touch on three areas where we readers can better understand what is hype or reality.
1. Analyzing external data. A key finding from Oracle’s survey reveals that businesses need to find new ways to measure the intangibles that drive business value today. The top value driver, by a long shot, is customer satisfaction (76 percent of respondents recognize its importance). Yet measuring factors like customer satisfaction requires businesses to analyze not only the structured data generated by their internal enterprise platforms, but also “complex, often unstructured digital data such as social media streams.” That can be a problem for Essbase, which extracts data from the source in a process known as ETL (extract, transform, load). Note where “transform” appears in this sequence. Because data is transformed before it’s loaded into the analytics system, it can be inherently dated – which is not desirable when tracking and analyzing a real-time KPI like customer satisfaction. In contrast, Tidemark uses an ELT approach, which brings data closer to the user by extracting it from multiple sources, loading it into the Tidemark computational grid in the cloud, and then transforming it on the fly, and only when business users are asking questions (at runtime) and performing modeling and analytics processes. So when it’s time to ask questions about customer satisfaction, users want fresh insights based on the latest data. Former Oracle customers tell us Tidemark delivers in this area where Hyperion and Essbase did not.
2. Exploring new paths to insight. It’s a given that the point of establishing and tracking new KPIs – as Oracle’s paper endorses – is to achieve data-driven insights that help grow profit, sharpen efficiencies and improve competitiveness. But with the multidimensional database (or cube) architecture that underpins Hyperion Planning and Essbase, users are subject to strict limitations that are imposed by cubes and that -- as a result -- actually hobble an organization’s ability to explore new paths to insight. The inherent rigidity of cubes means business users generally can’t explore new avenues, compare data side by side on the fly, or ask questions they haven’t previously considered – unless these tasks have been enabled ahead of time by IT. (And even for IT, the process isn’t straightforward.) Compare this to Tidemark, whose grid-based applications feature varying dimensionality that allows for far greater flexibility. For instance, when you add a new dimension, instead of reconfiguring the cube and reloading the remapping data, you simply configure new relationships among objects in the application. Those new paths to insight are just a few clicks a way – with no help from IT needed.
3. Modernizing finance. Much is made in Oracle’s paper about the need for finance to modernize, and a key part of this is taking a partnership role with LOBs and other functions, which includes engaging business managers in “collaborative conversations.” While I agree wholeheartedly with this concept – in fact, making finance a participation sport is a core design principle of Tidemark – our experience with former Hyperion and Essbase users suggests that, for Oracle at least, this notion remains much more of a future goal than a current reality. One user calls Hyperion “ridiculously outdated and clunky to use.” Others note the unintuitive Hyperion interface, which requires users to access the application through a series of folders. And they complain that Essbase’s Excel spreadsheet front end is fine for highly trained analysts but isn’t well suited to the stakeholders at the edge of the business who executives hope will participate in modern finance processes. Upon seeing the Tidemark user experience for the first time, however, Hyperion and Essbase users remark on Tidemark’s natural, consumer-grade interface. That’s intentional: Tidemark apps are built to deliver a self-service experience; they’re designed around recognized business processes and workflows, not folders. This makes Tidemark far easier to understand for the average user.
These three examples alone suggest that the vision laid out in Oracle’s new white paper is just that: a hyped vision of the future. And while it’s reasonable to believe Oracle will ultimately get there, a growing number of businesses aren’t waiting around for that “someday” to arrive. Can your business afford to wait while the competition moves forward?
To find out why more enterprises are abandoning Hyperion and Essbase, download our complimentary new white paper.
Retailers expect overall year-to-year sales to increase only 3.4 percent in 2016. That’s less bullish than last year’s expectations of 3.9 percent and below the industry’s historical 4 percent growth outlook. Against this backdrop, BDO recently surveyed 100 retail CFOs to learn what worries them most.
According to BDO’s study, 29 percent of CFOs surveyed said they mostly worry about competition and consolidation in their space – that’s natural, as the two often go hand-in-hand. And they realize if brisk consumer spending alone can’t drive sales growth, it will be up to them to plan better, forecast more accurately, and outmaneuver competitors fighting for the same shopping dollar.
For many retailers, this requires shopping for a new mindset and strategy. Brands long accustomed to differentiating themselves with a superior shopping experience and unique product assortment are looking to further set themselves apart by doing a better job analyzing customer spending, understanding where profit may be hiding, and quickly making adjustments to promotions and supply at the store level.
Retailers will do this through insights gleaned from new layers of performance analysis (e.g. revenue, profitability) that haven’t been possible until now. Imagine the actionable intelligence that would result from analyzing performance at the SKU level across the entire span of operations on a daily basis. For the first time, drivers for each SKU would be revealed. SKU-level correlations would emerge. Weather impacts, weekly seasonality, and time of day factors could become clearly understood. Link up competitive data, and the impact of competitor promotions and pricing would be apparent.
From a performance management perspective, financial and operational forecasting takes on a whole new life via the revelation of these newfound drivers and correlations. New cohorts of stores and departments within stores across the operating map can be created based on actual performance traits in addition to (and perhaps in lieu of) traditional operating or demographic traits. Procurement and stock management can become more effective when influenced by product-level intelligence and forecasting. Through deployment of mobile applications, store and department managers can understand and effect local performance in real time.
While the competitive playing field is in near-constant turmoil and the economic outlook for 2016 is uncertain, it’s still possible to drive better performance through modern performance management. Take advantage of the transformative opportunity presented by the evolution of performance management to understand and manage your business in a new and better way.
Only four out of 10 C-level executives are “very confident” that the data their organizations use is data whose quality they can count on, according to a study from 451 Research. That doesn’t say much for the majority of businesses, particularly when 94 percent of senior leaders worry that poor data quality leads to limited information and, “…lost revenue or bad strategic decision-making."
As CIO magazine’s Clint Boulton observes, problems with data quality often result from a disconnect between those who gather, clean and report the data, such as the CIO, and the line of business (LOB) managers throughout the organization who are actually accountable for it. When these two groups don’t collaborate on important data such as performance metrics, important checks and insights are overlooked. And that leads to business decisions based on bad business data.
It doesn’t have to be that way. Laredo Petroleum, which operates more than 1,000 wells in the Permian Basin of Texas, has created a planning and forecasting environment led by its CIO that gives every stakeholder an opportunity to make decisions based on the same set of data. Traditionally, Laredo Petroleum supervisors and foremen had to wait up to two weeks to learn how much revenue a particular rig was producing or whether it made financial sense to continue or stop drilling on a site. With oil prices near record lows, the ability to answer these questions is more crucial than ever. Fortunately, managers and field personnel alike now can access their planning environment from virtually any device to get answers to those questions immediately, enabling them to save expenses by taking the right actions sooner.
When CIOs and others who “own” performance data can work with those managers whose functions have to rely on it, great things happen. And before long, those C-level executives can cross data quality from their list of worries.
It's earnings seasons and corporate finance pros everywhere are gearing up for the quarterly Super Bowl, i.e. the earnings call.
See the 5 changes in finance Christian Gheorghe, CEO and founder of Tidemark, will be looking for in 2016.
When asked about Netflix, a popular catch phrase we continue to use is ‘killing it.’ That phrase may be more relevant today when thinking about the global entertainment company. When a business combines third party data insights with operational and financial data in the same environment, decision-makers can access not only outside sentiment but also correlate that to company information that helps them budget and operationalize a plan.