impact profitable revenue or future market share. Connected Planning can impact this area in many ways, for example:
Understanding customer and product profitability allows companies to focus on marketing and selling the products that give the best return.
Quickly modeling NewCo scenarios in a pending acquisition and basing those models on historical data and actual constraints (by product, by geography, by customer segment, etc.) can give a more accurate picture of available synergies to set the expectations of the street.
Cash Cycle
Accelerating your cash cycle gives you more confidence in working capital, better opportunities for investments, and improves overall efficiency. Connected Planning efforts can include:
Gathering and sharing information on Days Sales Outstanding (DSO), Days Payable Outstanding (DPO), and Days in Inventory (DII)—delivered to the right people in the organization (and tied to employee rewards)—can have a positive impact on cash cycle.
Cash-Flow forecasting and Working Capital analysis can help improve the cost of capital and debt ratios and can reduce risk.
Asset Utilization
Ensuring that assets such as plants, production lines, or equipment are being employed in profitable activities is the way of an efficient organization. A couple of ways that Connected Planning can impact your return on assets include:
Modeling capacity to ensure you have the right equipment availability, manpower, and output or yield
Scheduled versus unscheduled repair analysis to show how effective your preventative maintenance programs are
Customer Satisfaction
Making sure customers are attracted to your company and products and then retained for maximum lifetime value is one of the goals of most organizations. Connected Planning can help ensure that this happens by:
Showing if there's a correlation between customer satisfaction levels and customer support staffing
Analyzing customer satisfaction scores by product and product lifecycle over time, showing root causes for declines in product satisfaction
Tracking a plan to improve Net Promoter Score by department
Employee Engagement
With more awareness and accountability, employees at all levels of the organization can make decisions to improve both the top and bottom lines.
Connected Planning helps show how what you're working on is related to overall targets. For example, an accounts receivable (A/R) clerk can see how the velocity of receivables under his or her control can impact DSO, working capital, and free cash flow.
It encourages more sharing and collaboration of plans, analyses, and results, and reduces the need to re-create the wheel every time.
Organic Growth and Outperformance Management
The real goal of Connected Planning is to have a material impact on business performance, to standardize on one management operating system across an organization—for better performance visibility, execution, accountability, and organizational flexibility. What if you had a stretch goal of using Connected Planning not just for performance management, but for OUT-performance management?
How would we use Connected Planning to outperform your competitors on both revenue growth and profitability over the long term?
There are many ways to do this:
Organic growth is key—an intelligent investment in organic growth may provide more value than growth through acquisition. Connected Planning supports organic growth in many ways:Profitability planning with customer and market segmentation: spending more effort marketing and selling the most profitable product/service offerings to the right people at the right time at the right price (price modeling and analytics is a key component of this).Model, plan for, measure, and manage cross-selling and up-selling efforts. Use analytics to understand which cross-selling and up-selling initiatives work and how they can be replicated. Tie this into the pricing models as well.Look to adjacencies, for example, bundles with partner products/services (e.g., Nike + Apple Watch). These can capture new markets and pull along sales of your products. Including external parties (suppliers, partners, resellers) in your rolling revenue forecasting process gives you more visibility into opportunities.Market expansion: Connected Planning includes multidimensional modeling of different scenarios that can be risk-weighted, so, for example, if you want to expand to an emerging market, you can factor in risk from currency fluctuations, government regulations, and other assumptions. Once you have debated and selected the right model, you can use that as the basis for a capital expenditure plan, revenue and expense budget, and workforce plan.
Other areas for Connected Planning to contribute to out-performance include supporting and interconnecting knowledge-intensive intangibles (intellectual property [IP], patents, copyrights, strong brands) to financial and operational key performance indicators (KPIs)—thus linking innovation to the entire business.
If you want a quick way to start using Connected Planning to impact the top and bottom lines, simply add a new category to your revenue forecast: from “worst-case,” “probable,” and “commit” to a “stretch” (upside) number, and start managing to that.
Planning, as it is currently practiced, is still largely a collection of silos. It's time to bring it all together, to interconnect the processes, to build on a common-rules and metadata platform and to turn planning into a sophisticated management operating system.
My hope is that you embrace the Management Operating System and use Connected Planning to drive value for your people, your customers and vendors, your markets, and all of your stakeholders.
My hidden agenda is to help move the Connected Planning market category forward through more sophisticated adoption and by showing more correlation to improving performance. At a minimum, that would include:
Making it a closed-loop process, not fragmented silos and initiatives
Encompassing all areas of the business including Sales and Marketing, Operations, and Development, not exclusive to Finance
Including cognitive and predictive analytics, not just Financial Planning and Reporting
Using it as a platform for continuous improvement, better transparency, collaboration, and what author Daniel Pink says truly motivates us: Autonomy, Mastery, and Purpose1
Note
1 1. Daniel H. Pink, Drive: The Surprising Truth About What Motivates Us (Riverhead Press, 2009).
ACKNOWLEDGMENTS
