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Tidemark Systems offers a suite of business planning applications that enable corporations to plan more effectively. The software facilitates rapid creation and frequent updating of integrated company plans by making it easy for individual business functions to create their own plans while allowing headquarters to connect them to create a unified view. I coined the term “integrated business planning” a decade ago to highlight the potential for technology to substantially improve the effectiveness of planning and budgeting in corporations, and it remains true that integrating business planning can produce superior results. Companies that maintain direct links between functional or departmental plans more often have a planning process that works well than others. Our next-generation business planning benchmark research shows that two-thirds (66%) of those that maintain such links have a planning process that works well or very well, compared to 40 percent that copy information from individual plans into an overall plan and just 25 percent in which plans have little or no connection.
Businesses commonly do a lot of planning within individual silos: There are sales plans, marketing plans, manufacturing plans, R&D plans and various others. However, in most companies the only unified plan is the corporate budget, which is a financial plan used mainly for allocating resources and controlling spending. Because they are focused almost exclusively on monetary consequences, budgets are not especially useful for planning the operations of a company, which requires attention to the things of a business (such as head count, numbers of purchased parts and tons of materials).
Tidemark has made significant progress with its software that I have previously assessed with how it unifies business planning and the company’s Fall 2015 release includes a new feature, Tidemark Complete, that enables companies to benchmark their performance against that of competitors. In almost all organizations, performance reviews compare results against the current plan or the previous quarter or year. While this is essential, it’s insufficient because business is not an “us-vs.-us” game; it’s an us-vs.-them competition. Even so, most companies don’t assess their results against the market because they find it too difficult and time-consuming to assemble the data. Tidemark Complete addresses this issue. The latest release also adds packaged configurations and metrics tailored for the insurance, hospitality and retail industries that enable such companies to accelerate their implementation of Tidemark. In the Spring 2015 release the company introduced packages for higher education and subscription commerce. The subscription commerce app is especially useful for companies with recurring revenue businesses for two reasons. One is that managing these types of businesses requires using metrics that are not directly available from the accounting process. These include the annual recurring revenue (ARR) and annual and total contract value (ACV and TCV). Typically, the finance staff assembles data from one or more sources in desktop spreadsheets to do the calculations, analyze the results and create reports. As well as time-consuming, this method is prone to errors and incompleteness in the data. The second reason is that revenue recognition in subscription businesses is often complex. For planning purposes, it’s useful to be able to automate the translation of booking events into reported revenue because it saves time and results in more accurate projections of future financial statements.
Ventana Research rated Tidemark a Hot Vendor in our 2015 Business Planning Value Index. Tidemark’s software offers all of the capabilities necessary to support state-of-the-art planning. That is, it offers engaging visualization and reporting functionality that enhances understanding and insight in developing plans as well as communicating results. It has workflows to manage plan creation and periodic updates that cut the time and effort required to supervise the process and thus shorten planning cycles. It offers integrated analytics to support the planning and review phases of the process as well as Storylines and Playbooks, methods that present an organization’s performance in narrative form with engaging data visualizations. An important reason why companies invest time in creating plans is to set objectives so they can periodically review their performance to those objectives. By organizing all business planning on a single platform, Tidemark allows each planning unit to review its results faster and headquarters to review the overall financial and operational performance sooner. Our research finds that companies that use a dedicated third-party planning application such as Tidemark are more able to uncover details during a review meeting because they can drill down to uncover underlying details while the meeting is under way. This enables managers and executives to get to information that can promote agility and provides an environment that encourages action in the whole organization.
Tidemark also offers built-in social collaboration capabilities in context. Collaboration is essential in the process of planning in corporations because it helps ensure that activities are coordinated. Companies have multiple objectives for their planning processes. Chief among these is accuracy. But since things don’t always go to plan, companies need agility in responding to changes in a timely and coordinated fashion, and collaboration facilitates this also. In a small business, planning can be informal because of the ease of communications between all members and the ease with which plans can be modified in response to changing conditions. In larger organizations the planning process becomes increasingly difficult because communications become compartmentalized locally and diffused across the enterprise. Facilitating collaboration across geographies or business silos addresses the communications issues. Tidemark’s collaboration capabilities address this issue more readily and completely than email or instant messaging. Setting and changing the company’s course require coordination to ensure that the actions of one part of the organization complement (or at least don’t impede) the actions of others. Better communication across the organization promotes coordination because it enables better understanding of the impact of policies and actions in one part of the company on the rest of it. Yet only 14 percent of companies are able to accurately measure that impact, and fewer than half (47%) have even a general idea. Integrated business planning coupled with a collaboration capabilities addresses that issue.
Using the most capable technology also helps. Using limited tools is a major barrier preventing companies from integrating their planning efforts; spreadsheets in particular are a major culprit. Our research reveals that across the spectrum of corporate planning activities, seven out of 10 organizations use spreadsheets to manage their planning processes. Tidemark’s common planning platform for individual departmental and functional plans, plus built-in analytics and reporting and its focus on ease of use, provides a compelling reason to switch from spreadsheets. Also, compared to using spreadsheets, Tidemark’s applications can make the planning process far more interactive by utilizing in-memory processing to speed calculations. When even complex planning models with large data sets can be run in seconds or less, senior executives and managers can quickly assess the impact of alternative courses of action in terms of their impacts on key operating metrics, not just revenue and income. Furthermore, having the means to engage in a structured conversation with direct reports can help executives implement strategy and manage their organization more effectively.
Integrated business planning applications are changing the conversation from a finance-centric approach to one that supports planning operations and finance in parallel. Companies that are dissatisfied with their current approach to business planning and are looking to improve important aspects of it including accuracy, insight, speed and alignment should consider dedicated business planning tools. When they do that, they should consider the kind of software that will enable them to support a better process. We recommend that they include Tidemark in their evaluation.
Robert Kugel – SVP Research
Business planning includes all of the forward-looking activities in which companies routinely engage. Companies do a great deal of planning. They plan sales and determine what and how they will produce products or deliver services. They plan the head count they’ll need and how to organize distribution and their supply chain. They also produce a budget, which is a financial plan. The purpose of planning is to be successful. Planning is defined as the process of creating a detailed formulation of a program of action to achieve some overall objective. But it’s more than that. The process of planning involves discussions about objectives and the resources and tactics that people need to achieve them. When it’s done right, planning is the best way to get everyone onto the same page to ensure that the company is well organized in executing strategy. Setting and to a greater degree changing the company’s course require coordination. Being well coordinated in this case means being able to understanding the impact of the policies and actions in your part of the company on the rest of the company.
Our recently completed research on next-generation business planning benchmarked 11 of the most common types of business planning (for example, demand, head count, strategic and supply chain). The research finds that planning activities typically are created in a stand-alone fashion by the departments primarily responsible for them and receive little or no direct input from other parts of the organization. The main exception is the budget, which is the only integrated business plan; most companies connect individual plans with the budget in some way. The research finds a correlation between how a company connects individual plans with the budget and how well the planning process works. Two-thirds of companies that have direct links from individual plans to their budget said their planning processes work well or very well, compared to two in five that copy detailed information from individual plans into the budget and just one-fourth that have little or no connection between individual plans and the budget.
Information technology has the potential to make business planning more useful, enabling it to improve a company’s performance and increase its competitiveness. Most companies can fundamentally change how they plan for the better, thanks to increasingly capable and easier-to-use information technology. Technology makes it possible for companies to take an integrated approach to business planning. In such an approach individual parts of the company continue to plan as they are used to doing, but they are also able to see what other parts of the company are planning, and they can determine what impact their plans will have on the rest of the organization. Questions they can answer include, does the marketing budget align with the individual sales plans? Will there be a sufficient number of people to make the plan work? Are there more people than necessary, too few of some or too many of others? It’s not that companies are completely incapable of doing this today – they just take too long to do it and don’t get enough of a return on the time they invest. They aren’t able to achieve the kind of accuracy they need. They aren’t able to adapt as business conditions change. Today, in a period of relative stability, it’s easy to forget that during the last downturn, most companies spent months producing plans that were obsolete right from the start.
Most companies can use business planning to improve their performance and competitiveness. To do so, it must achieve four main characteristics. First, business planning must focus on performance. In other words, it must establish a baseline against which results can be measured. Performance must be measured against both business and financial objectives – not just against budget. Second, it must help executives and managers quickly and intelligently assess all relevant contingencies and trade-offs to support their decisions. Third, it must enable each individual business planning group to work in one central system; this simplifies the integration of their plans into a single view of the company and makes it easy for planners in one part of the business to see what others are projecting. Fourth, it must be efficient in its use of people’s time. Let’s face it – success in business comes from doing, not just planning. Having a time-efficient planning process makes it possible to improve a company’s agility in responding to change, especially for larger organizations.
Contrast this with how companies plan today. As we said, the purpose of planning is to figure out how to succeed in achieving business objectives. Typically, today the only company-wide business plan is the budget. It should be an open-ended exercise that explores different paths to success. However, the budget’s main purpose is to prevent a company from failing. It’s about setting limits and ensuring those limits are enforced. Budgets are essential for financial management, for corporate governance and for control. But they much less useful for determining how to achieve objectives through a coordinated set of actions. Most budgeting and operational planning efforts are only loosely connected. In contrast next-generation business planning closely is designed to integrate unit-level operational plans with financial planning. At the corporate level, it shifts the emphasis from financial budgeting to planning and to performance reviews that integrate both operational and financial measures. It uses available information technology to help companies plan faster with less effort while achieving greater accuracy and agility. By using capable software and accurate, timely data, current systems can simultaneously support better business planning and traditional budgeting.
Today’s dedicated planning software is an important element to more effective business planning. Our research demonstrates the connection between how well a company manages its planning processes and the accuracy of the resulting plans: 80 percent of those that manage their processes well or very well have plans that are accurate or very accurate. Only one-fourth (24%) of those that manage their processes just adequately said they get these kinds of results, and almost none (8%) of those that manage their processes poorly said their plans are accurate. Used properly, today’s applications support better management of the process. They provide a single environment in which individual functions or business units can create and revise plans to meet their requirements while making the plans available to the senior leadership team and the rest of the organization. Because they are working from a common database, it’s relatively easy to combine the most up-to-date data from individual contributors or to aggregate planning data from multiple sources.
What’s more, collaboration is essential to effective planning. Perspectives from people in different roles or departments can help produce more complete plans and identify risks and opportunities. Here again many organizations fall short: Only half collaborate effectively or very effectively. And this, too, impacts the process: 85 percent of organizations that collaborate effectively or very effectively said they manage the planning process well or very well. Along similar lines, nearly half (47%) of participants reported that they have only a general idea of the impact of their department’s plan on the rest of the company. Most dedicated applications have built-in capabilities. Vendors increasingly are improving the ability of individuals to collaborate in context as a way to differentiate their offerings.
The findings of this benchmark research lead us to conclude that all but a few companies would benefit significantly from investing in improving the various aspects of planning, particularly technology. Applications dedicated to planning and next-generation tools such as analytics, collaboration and mobility can contribute to the development of fast, forward-looking plans that help in the spectrum of planning processes and benefit the entire organization.
SVP & Research Director