Robert Kugel's Analyst Perspectives

Ventana Research does benchmark research that assesses the maturity of organizations across four dimensions: people, process, information and technology. We examine business issues along those dimensions because we recognize the interconnected relationships among them. Especially in larger companies, data issues such as accuracy and accessibility are often a root cause of poor performance of a core function. It may be a factor in such areas as poor customer service, sales execution or operations planning, to name just three.  Addressing only the people-related issues of some challenge a company faces (such as communications, training or management style) may produce positive results in the short run, but these gains are likely to fall short of their potential or prove to be transitory unless companies tackle related process, technology and information problems at the same time. Our comprehensive approach is the foundation for our research, and what makes our benchmark research different and relevant to executives and managers.

The findings of our recent benchmark research covering business planning trends shows that businesses engage in a wide variety of planning activities (such as budgeting, sales forecasting and capital allocations), and a majority do a poor job with these. Companies have failed to improve most aspects of planning over the past five years. The right software is an integral component to more effective planning. The research once again demonstrates the relationship between a company’s holistic maturity across the four dimensions in managing a core process.

For example, companies rate accuracy as the most important reason for improving budgeting and planning. More than one-fifth (22%) of the most mature, innovative organizations describe their budgets as very accurate, while none of the least mature, tactical companies do; conversely, 15 percent of tactical companies say their budgets are inaccurate but none of the innovative ones do. Planning accuracy is in part the cumulative result of fully understanding the factors driving past mistakes and correcting for them. More than half (59%) of innovative companies say they can drill down to understand the underlying causes behind some disparity in their results during a review meeting; only 10 percent of the tactical ones are able to do so. Most often, the inability to immediately quantify drivers of outcomes is the result of not having the right software and data. It’s also often the case that not being able to explore actual underlying factors causes organizations to tolerate gut-feel or politically driven hypotheses about the causes of disparity. I find it’s difficult to rally a company to improve if there is little or no sense that something is missing.

Another important reason for planning is to ensure that the actions of an entire organization are well-coordinated. This grows increasingly important with the size and complexity of a company. Being able to understand the impact of one part of an organization’s plans on another is important. For instance, the manufacturing, fulfillment, supply chain and logistics organizations must understand the upcoming focus of marketing and advertising efforts on demand for specific products or product families to be able to make their plans. Innovative companies have an edge here as three-fourths (76%) of these participants can accurately measure the impact of their plans on the rest of the company, compared to just 8 percent of tactical ones.

In order to get better results from planning, organizations must address the root causes of their problems in a holistic way. Transforming planning and budgeting into more useful business tools doesn’t have to be difficult. I outlined a measured approach in an earlier blog post. Better technology, and a better process that incorporates the capabilities better technology and data can provide, are essential, and these are neither too difficult nor too expensive to prevent organizations from using new methods. I think the hardest element to address is the people dimension, but organizations must resolve to make the fundamental changes necessary to improve and achieve better performance.

Regards,

Robert Kugel – SVP Research