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Tidemark announced the release of the Fall 2013 version of its eponymous cloud-based application that my colleague assessed earlier in 2013. This new release adds capabilities for labor planning and expense management as well profitability modeling and analysis. These two areas of planning and analysis are common to all businesses. The new release adds features that enhance the software’s ability to do sales forecasting, initiative planning and IT department planning. The company continues to refine its modeling capabilities to make it easier for people engaged in the planning process to translate their expectations and concerns into a quantified view of the future. For example, users now can build models using natural-language modeling. The objective is to eliminate the need for help from business analysts or experts trained in the use of a tool and immersed the details of the IT plumbing, such as the metadata used for specific general ledger accounts or operational data.
The Tidemark product fits into our business planning software category. It enables rapid creation and frequent updating of company plans by connecting the individual plans of business units in a unified view. It has workflows to manage periodic updates to an integrated plan and analytics to support the planning and review phases of the process. It offers engaging visualization and reporting functionality that enhances understanding and insight in developing plans as well as communicating results. It has built-in social collaboration capabilities in context because business planning requires collaboration.
Direct integration of individual business unit plans is a key capability of business planning software because it promotes coordination across a corporation. Companies in our research that plan using summarized business data much more often reported a lack of coordination than those that directly link their plan details: 27 percent of those that summarize data experience a lack of coordination in reacting to changing business conditions, compared to just 7 percent of those with direct links. As well, to facilitate planning among today’s dispersed organizations, Tidemark’s mobile capabilities support sharing plan creation and review on such devices.
One distinctive aspect of dedicated business planning is that it handles the operational and financial aspects of a plan in parallel. Traditionally, a budget-focused planning process conflates the two to produce a financial plan. Financial planning (budgeting) and operational planning have fundamentally different objectives, but they must be connected. Budgeting is about financial control; it’s about not failing. Planning aims at finding the best way to succeed. You can’t budget effectively without a plan, and you can’t plan effectively unless you consider fiscal constraints. But the two shouldn’t be homogenized, which is the way almost all companies do planning and budgeting today. Business planning software enables executives and managers to understand both the operational and the financial consequences of their actions, but it emphasizes the things that the various parts of the business focus on, such as units sold, sales calls made, the number and types of employees required or customers served.
The business planning category has emerged in response to the growing sophistication of users, especially as baby boomers are replaced by generations of workers who have more demanding expectations of how software should work. Complementing this trend are improved technologies, which already are having an impact on how companies do business planning and forecasting. The cumulative effect of a decade of advances have brought traditional processes to a turning point that will profoundly change how businesses look to the future and decide their courses of action. Tidemark was founded to produce technology to help organizations increase insight, accountability and agility by addressing the shortcomings of using budgeting as a management tool, especially when it is performed using desktop spreadsheets.
The user experience figures heavily in Tidemark’s design. It enable individuals to configure the applications to work the way they want them to in the context of the business, adapting processes, data collection and information presentations to meet the specific requirements of an organization. User interfaces follow this pattern. Collaboration, for example, is set up to understand which individuals the user will interact with in a particular context. As the user moves from task to task, that list will change. This capability is consistent with what I expect to become the norm in social collaboration in enterprise applications.
Tidemark’s competitive strategy is to push as much as possible of the planning process out to individual business users. The objective is to collect all relevant information in a context that helps a business unit plan and execute better while giving executives an integrated view of the individual plans. Devolving the modeling process and automating data movements and aggregations allows those in the financial planning and analysis (FP&A) function to devote more time and thought to the analytical aspects of their work, something I call “putting the A back in FP&A.” To do this, Tidemark aims to
facilitate the process of translating managers’ thoughts and expectations into models that enhance the value of the forward-looking information they can provide senior executives. This approach also promotes greater accountability because the outcome is the business unit’s plan, not allowing users to think of it as the finance department’s budget. Tidemark also places configuration and modeling into the hands of the users. Different parts of the business plan in different ways, and this differs between businesses. Moreover, as business and economic conditions change, the planning process must adapt in ways that suit the needs of those doing the planning.
Tidemark’s main competitor today is the status quo. Companies continue to use their budgeting process as a proxy for integrated business planning, which is only indirectly supported by individual business unit plans. This market is dominated by desktop spreadsheets and range of mostly legacy financial performance management (FPM) software, which includes dedicated planning applications from large vendors as well as smaller ones along with cloud-based vendors. Tidemark is changing the conversation from a finance-centric approach to one that support planning operations and finance in parallel – in short, business planning.
Companies that are dissatisfied with their current approach to business planning and are looking to improve what our research finds in a third to almost half of organizations as important like accuracy, insight, speed and alignment of their business planning should consider business planning. When they do, 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 is a new software category. These applications enable senior executives to integrate all the plans of business units into a single, integrated view, which helps them have more accurate plans, do more insightful what-if planning, achieve greater agility in reacting to changing business and economic conditions, and execute plans in a more coordinated fashion than was possible. Business planning software is intended for CEOs and COOs, who are not well served by current capabilities. Business planning software enables executives and managers to understand both the operational and the financial consequences of their actions, but it emphasizes the things that the various parts of the business focus on: units sold, sales calls made, the number and types of employees required, customers serviced and so on. Lines of business already do this but in a fragmented fashion using desktop spreadsheets circulated within silos via email. Business planning software provides a platform to support modeling in individual business units, individual planning processes and visualization of the impacts of changes in what-if scenarios. It offers a central data repository for all plans; our benchmark research shows the advantage of this approach: Companies that directly link individual business unit data to an integrated plan get more accurate results. To be specific, 22 percent of those with such links have very accurate budgets compared to just a handful with less direct links and none that employ summarized data.
Business planning software is structured to enable rapid creation of an integrated company plan, workflows to manage the periodic updates to an integrated plan, analytics to support planning, and review and reporting functionality to support collaboration on plans and to communicate results. Because business planning requires collaboration, applications must have built-in social collaboration capabilities in context. Integrating individual business unit plans also promotes better coordination across a corporation. Companies in our research that plan using summarized business data much more often reported a lack of coordination than those that directly link their plan details: 27 percent of those that summarize data experience a lack of coordination in reacting to changing business conditions, compared to just 7 percent of those with direct links. To facilitate planning among today’s dispersed organizations, mobile capabilities supporting plan creation and review are essential.
Planning is not the same as budgeting, as I’ve noted. It has different objectives. Planning is the process of determining what it will take to achieve business goals. Budgeting is about maintaining control of finances so a company doesn’t fail. Planning must be open-ended. Planners must think multiple steps ahead to consider a range of possible outcomes and how to respond to them. Budgeting, in contrast, is a process of narrowing down. It is about getting to a fixed agreement on what financial resources will be available and how they will be allocated. Business plans must constantly change to adapt to conditions and look forward at least five or six quarters. Budgets change only infrequently and almost always are confined to a single fiscal year. Budgeting mainly serves the needs of the CFO and the finance organization. Business planning serves the needs of the CEO, COO and senior operating executives as well as the CFO. Thus budgeting and planning are fundamentally different, but they must be connected. You can’t budget effectively without a plan, and you can’t plan effectively unless you consider fiscal constraints. At the same time, the two shouldn’t be homogenized, which is the way almost all companies do planning and budgeting today.
To this point technology has mainly constrained the planning and budgeting processes. The process of collecting information to create a budget, performing calculations and basic analyses and creating reports was highly labor-intensive in the days of paper spreadsheets and adding machines, so simplification was required. Electronic spreadsheets enabled companies to do more detailed budgets, but only up to a point. Both approaches required the actual business plans (such as “Here’s what we plan to sell at the following prices” or “Here are the people we need to staff this department by function”) to be subsumed into the budget. This homogenized approach, which I call “budgetingandplanning,” prevents the kind of practical business planning that is useful to senior executives. It erects a barrier to adapting quickly to changing conditions. On the other hand, business planning software enables decision-makers to measure the impacts of the trade-offs they’re considering and rapidly calculate the impact of different courses of action from both operational and financial perspectives in the context of their key performance metrics.
To be productive, planning must be a structured dialogue, structured in the sense that it involves hard numbers. Measurement is necessary to set objectives and assess performance. A back-and-forth discussion helps planners agree upon objectives with which to measure success. If getting to the hard numbers at each stage of the discussion takes too long, the conversation becomes stilted and may have to be cut short because of deadlines to make decisions. If running a set of corporate-wide what-if scenarios takes hours or days, there will be no time for dialogue. In that case business planning defaults to individual silos, and the budget becomes the single integrated corporate plan. Even if response times can be cut to five to 10 minutes, that’s still too slow. The conversation must be unbroken.
Today’s business planning software can run even complex scenarios in seconds or less, enabling companies to change the way they plan and review. Using in-memory processing it can deliver answers fast enough to support a structured dialogue. Big data analytics can be used to quickly deliver insights and guidance to inform planning and review conversations. At long last business planning technology is able to facilitate a business-focused approach to planning. By providing better insight and visibility into potential outcomes, executives and managers can make more informed choices about their courses of action. The software is available to enable a more effective business process, but the question is how quickly senior executives will take advantage of it.
Robert Kugel – SVP Research