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In our benchmark research at least half of participants that use spreadsheets to support a business process routinely say that these tools make it difficult for them to do their job. Yet spreadsheets continue to dominate in a range of business functions and processes. For example, our recent next-generation business planning research finds that this is the most common software used for performing 11 of the most common types of planning. At the heart of the problem is a disconnect between what spreadsheets were originally designed to do and how they are actually used today in corporations. Desktop spreadsheets were intended to be a personal productivity tool used, for example, for prototyping models, creating ad hoc reports and performing one-off analyses using simple models and storing small amounts of data. They were not built for collaborative, repetitive enterprise-wide tasks, and this is the root cause of most of the issues that organizations encounter when they use them in such business processes. Software vendors and IT departments have been trying – mainly in vain – to get users to switch from spreadsheets to a variety of dedicated applications. They’ve failed to make much of a dent because, although these applications have substantial advantages over spreadsheets when used in repetitive collaborative enterprise tasks, these advantages are mainly realized after the model, process or report is put to use in the “production” phase (to borrow an IT term). To date most dedicated applications have been far more difficult than spreadsheets for the average business user to use in the design and test phases. To convince people to switch to their dedicated application, a vendor must offer an alternative that lets users model, create reports, collect data and create dedicated data stores as easily as they can do it in a desktop spreadsheet. Spreadsheets are seductive for most business users because, even with a minimum amount of training and experience, it’s possible to create a useful model, do analysis and create reports. Individuals can immediately translate what they know about their business or how to present their ideas into a form and format that makes sense to them. They can update and modify it whenever they wish, and the change will occur instantly. For these business users ease of use and control trump putting up with the issues that routinely occur when spreadsheets are used in collaborative enterprise processes. Moreover, it’s hard to persuade “spreadsheet jockeys” who have strong command of spreadsheet features and functions that they should start over and learn how to use a new application. Those who have spent their careers working with spreadsheets often find it difficult to work with formal applications because those applications work in ways that aren’t intuitive. Personally these diehards may resist because not having control over analyses and data would diminish their standing in the organization. Nevertheless, there are compelling reasons for vendors to keep trying to devise dedicated software that an average business user would find as easy and intuitive as a desktop spreadsheet in the design, test and update phases. Such an application would eliminate the single most important obstacle that keeps organizations from switching. The disadvantages of using spreadsheets are clear and measurable. One of the most significant is that spreadsheets can waste large amounts of time when used inappropriately. After more than a few people become involved and a file is used and reused, issues begin to mount such as errors in data or formulas, broken links and inconsistencies. Changes to even moderately complex models are time-consuming. Soon, much of the time spent with the file is devoted to finding the sources of errors and discrepancies and fixing the mistakes. Our research confirms this. When it comes to important spreadsheets that people use over and over again to collaborate with colleagues, on average people spend about 12 hours per month consolidating, modifying and correcting the spreadsheets. That’s about a day and a half per month – or five to 10 percent of their time – just maintaining these spreadsheets. Business applications vendors started to address business users’ reluctance to use their software more than a decade ago when they began to use Microsoft Excel as the user interface (UI). This provides a familiar environment for those who mainly need to enter data or want to do some “sandbox” modeling and analysis. Since the software behind the UI is a program that uses some sort of database, companies avoid the issues that almost arise when spreadsheets are used in enterprise applications. There also are products that address some of the inherent issues with such as the difficulty of consolidating data from multiple individual spreadsheets as well as keeping data consistent. Visualization software, a relatively new category, greatly simplifies the process of collecting data from one or more enterprise data sources and creating reports and dashboards. As the enterprise software applications business evolves to meet the needs of a new generation of users, as I mentioned recently, it’s imperative that vendors find a way to provide users with software that is a real alternative to desktop spreadsheets. By this I mean enterprise software that provides business users with the same ability to model, create reports and work with data the way they do in a desktop spreadsheet as well as update and modify these by themselves without any IT resources. At the same time, this software has to eliminate all of the problems that are inevitable when spreadsheets are used. Only at that point will a dedicated application become a real alternative to using a spreadsheet for a key business process. Regards, 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