Business Intelligence, CPM and the Middle-Market

I want to take a moment to thank CFO Magazine for inviting me to be a part of the social media coverage for their 2011 Corporate Performance Management Conference in Dallas. It was, indeed, my pleasure and my privilege to be a part of this foray of theirs into social media connections with their audience, and I trust that they will continue to expand the application of social media in connection with their helpful events.

So, what did I learn while at this conference?

I learned much.

• I learned that there is a broad and increasing array of tools available for businesses to leverage as they begin or expand the business intelligence and corporate performance management efforts in their organizations.
  
• I learned that there is considerable confusion in the CPM (corporate performance management) marketplace over the application of various terms including “budgets” versus “forecasts”; the differences, similarities or where the line falls between “business intelligence” and “corporate performance management”; or even whether simply having a “budgeting” or “forecasting” system in place means that you are practicing “CPM”.
  
• I learned that many, many organizations in the small-to-mid-sized enterprise marketplace are increasingly sensible to the need for improved visibility and insights regarding their own businesses, the industries in which they participate, and the broader economics that affect them, their customers and their suppliers. Managers and executives are, therefore, turning to “business intelligence” to aid them in finding the answers they think they need.
  
• I learned that despite the tremendous interest in the middle-market for adventuring into business intelligence and CPM, most middle-market participants are still on the sidelines, mostly because they just don’t know where to start. At the same time, they are not yet convinced of an immediate ROI if they jump-in feet first.
  
• I learned that many organizations feel that they can do BI and CPM with Microsoft® Excel™ and/or Access™ and save “a ton of money” while still reaping the ROI rewards.
  
• I learned that most participants in major “forecast” and “budget” initiatives know that their processes are being undermined by “sandbagging” and “gaming,” but feel (more or less) helpless to stop these practices.
  
• I learned that when mandates are handed down from on-high (say, a parent company or corporate HQ for a division) saying, “We need you to do X next year,” that even the financial executives in the subsidiary company or division will “game the system” to satisfy the mandate—whether or not the “gaming” reflects reality.
  
• I learned that the vast majority of middle-market financial managers are still entrapped in cost-world thinking. Such executives and managers are far less likely to engage BI and CPM to discover ways to increase Throughput, and are far more likely to spend their time, energy and money in pursuit of the diminishing returns of cost-cutting.

Apart from the conference, my experience in working with an array of middle-market firms tells me that a great many executives and financial managers fall into one of two very large camps:

1. Those who feel they have no need for business intelligence or a comprehensive program of corporate performance management because they already know and understand all they need to know about their firm, how it operates, the industry(ies) in which they participate and the affects of the economy at large on their business.
   
2. Those who have set up some spreadsheets to analyze certain factors of their business and who, perhaps, actually create an annual budget. Many of these, therefore, feel like they are already doing “business intelligence” and “analytics” and “CPM.” Such folks generally have a sense that there is no significant ROI for them in doing more.

Given all of these different factors, I think it is good—an imperative, in fact—that organizations like CFO Magazine are sponsoring events and stimulating more conversation on these topics—especially in the middle market where most of the confusion appears to reside.

Let me hear your thoughts.

Implementing CPM in small business on a limited budget

Eric Lundberg’s presentation at CFO Magazine’s 2011 Corporate Performance Management Conference today was refreshing. Lundberg brought things back down from the stratosphere for the large number of small-to-mid-sized business finance people in attendance.

My sense is that many of the presentations thus far have set forward concepts of such a broad scope and relative complexity that they are far, far beyond the pale of immediate consideration by many of the firms represented at the conference. Many of the attendees with whom I have spoken are mere “beginners” in corporate performance management (CPM).

Now, do not get me wrong: I have done no scientific—or even non-scientific—polling on this subject. I say what I say based solely on conversations I have had with a relatively small handful of conference attendees.

Nevertheless, I believe that many of the folks in attendance came here really trying to find out answers to pretty basic questions about CPM. And, given the fact that Julia Homer presented—that 63 percent of CFOs surveyed are more pessimistic about the coming year than they were about last year—I would further surmise that most of them are looking for ways to implement some kind of business analytics and CPM with the smallest possible drain on their corporate cash-flow.

That is precisely why I found Eric Lundberg’s presentation so very refreshing. Lundberg introduced his remarks by saying that he wanted to present “practical applications of tools” that he and his team put in place at ALM. He went on to tell the crowd that, as CFO in a firm held by private equity, he is not in a position to "go out and spend $100,000" or more on sophisticated analytics tools. Therefore, he and his team have implemented substantial business analytics built mostly around “home-grown” applications—not the kind purchased from analytics application vendors.

Lundberg went on to describe—in considerable detail—a number of the analytics in use at ALM. Using these effective but relatively low-cost tools, Lundberg and his team have gained considerable insight into what makes—and keeps—their company profitable. They have already implemented rolling forecasts and have the facility to re-forecast every month. They also do a complete bottom-up forecast fresh every quarter.

I really believe that Lundberg’s presentation put a light at the end of the tunnel for many CFOs struggling with the question: “How can we begin gaining the advantages of business intelligence and analytics without ‘big bucks’ to invest in making it a reality?”

This is real innovation, and it is clear that the analytics Lundberg and his team have put in place at ALM are already making the firm more successful, even in the midst of the present economic doldrums. Sixty-three percent of CFOs today may be more pessimistic about the coming year than the year just past, but Lundberg has leveraged limited resources in a way that will make his firm far more likely to survive and even thrive.

Congratulations, Eric Lundberg! And thanks for giving more small businesses hope for embracing new management metrics and analytics despite severely constricted funds.