During the first quarter of 2011 Market Dynamics, an independent market research firm, conducted a performance management study of 1,500 organizations in the U.S., Europe, Africa and the Middle East with annual sales of $100 million. The study, sponsored by Oracle Corp., found that a surprising 82 percent said they did not have complete visibility into the profitability of their organization. And 91 percent went further to say that this lack of knowledge had implications for their company, including:
• Misallocated resources
• Missed revenue opportunities
• Erroneous decisions
• Impaired financial performance.
Why does this happen? The study found that 59 percent use spreadsheets to monitor profitability. For profitability analysis this is particularly important when you consider the typical requirement will be to allocate cost and revenue across 6+ dimensions based on many different allocation methods. This is not something that can be done easily in spreadsheets—and it gets to be a nightmare once you change allocations, run different scenarios, and then change the basis of your planning and budgeting!
Another problem: Fully 54 percent of managers reported that they spend more time gathering information than analyzing it. When the study examined how much managers spend on spreadsheets, finance managers spent the longest at 45 percent but, surprisingly, chief executives came next at 40 percent. Organizations and managers are still drowning in spreadsheets!
Less than a third of organizations confirmed they had software for any one of the specific categories of planning defined as part of Enterprise Planning. The results include:
• Gaps in data
• Un-standardized data
• Late and/or inaccurate data.
In fact, 95 percent said they encounter problems with their planning process.
Given all of the above findings, when it came to asking about how long it takes to implement strategic change it is no wonder the average came out to 6.5 months. Fragmentation of management processes introduces time and errors that no organization can afford.
So what are leading organizations doing about this?
In our discussions with clients and authorities, we have found that the best firms are smart, agile and aligned:
Internal and external data abounds in every organization. The question is how to get the most out of it. Successful companies today are able to leverage existing data derived from both internal and external sources. With better insight, these companies can move faster than the competition and gain a competitive edge.
Being smart is only valuable if it leads to action. The organizations most likely to succeed are ones that can adapt to changing circumstances: Global competition and adjacent markets may bring new entrants, or new technology developments may enable new business models, and the company needs to change course.
In order to innovate and succeed, organizations throughout the value chain need to collaborate closely. Aligned companies evolve from a command-and-control approach to a collaborative model that incorporates contributions from all stakeholders and shares information through integrated systems and processes.
Download the complete report here:
Nigel Youell is a product marketing director with Oracle.