Interview with Bill Hewitt

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cfo3_2_42_wp_qa_hewitt.pdf

Kalido

Bill Hewitt explains how companies can improve the bottomline with effective information management.

CFO: What’s driving the finance organization’s increased focus on information management?

Bill Hewitt: Users demand a “single source of truth,” but they can’t get accurate, consistent information in time to affect major business decisions. With most information in silos, managers and executives can’t view information in a holistic business context. While we see this across the organization, the key drivers are often financial: How can we improve margins? Where can we cut costs?

Unfortunately we haven’t delivered business information the same way we deliver transaction systems: accurately, consistently and accessibly. For every commercial BI installation, there are 50 managers who use spreadsheets and their own version of “the truth.” Regardless, none of these tools – from the most sophisticated finance application down to the workbook on someone’s PC – can be more accurate than the data that feeds it. If you’re formulating your strategy and planning based on “recent” reports that are, in turn, based on six- to 12-month-old data, you may be missing critical opportunities or making strategic decisions on the basis of stale information.

In the face of regulatory pressures, microscopic scrutiny, constant competition, market consolidation and the drive toward greater operational efficiencies, it’s unacceptable to have lag times of months, weeks or even days. That’s why finance departments are looking for systems that can keep pace with change – the No. 1 requirement for staying competitive.

CFO: What do you think of all the hype around real-time reporting and what it means to the finance organization?

BH: We need “right time,” not “real time.” Real-time reporting sounds good in theory, but corporations still have significant difficulties viewing data in the context of their ever-changing business, a problem compounded by efforts at “real time.” As a result, many public companies have shied away from real-time reporting. They’re focusing on accuracy and consistency, rather than speed. More CFOs are being asked to answer “why,” not just “what,” as in, “Why did my gross margin decline?”

Multibusiness, multicountry financial reporting is complex and time-consuming. Most multinationals struggle to identify something as simple as their most profitable customer or product because they define products and customers differently across their different systems. For real-time reporting to work, companies must develop approaches and deploy technologies that make better sense of information and can deliver it to the executives in charge more quickly.

CFO: Why is it so difficult to get the information finance executives are seeking?

BH: One of the biggest reasons is the explosion of data and where and how it’s kept. With regulatory changes and high-profile cases, organizations are taking the “better safe than sorry” route and saving everything.

As a finance executive, however, you’re facing a serious issue: How do you mine valuable insights out of this mountain of data, much of it meaningless to your needs? Plus, much of the data comes from different places, in different formats, with differing degrees of granularity. To be responsive to your business owners, you need to know not only where it is, but how to bring it all together into a holistic view on a regular basis.

Let’s say your reports told you that net margin was down, despite having increased overall revenue and meeting all other financial goals. You want to understand the causes so you can fix them. But neither the reports nor the information feeding them can tell you what actions can improve those margins. That’s exactly what happened to one of our customers.

A merger or an acquisition has a simi-lar effect. The second the deal goes through, you’re operating with out-of- date information. Without a way to understand where the data’s coming from and how information from different areas relate to each other, you’re left with a hodgepodge of aggregations, assumptions and inaccuracies. And that’s what you’re using to determine where to cut costs, where to invest and how to improve the bottom line.

CFO: So what did that customer suffering from declining profit margin do?

BH: They created a cross-functional team to implement a margin analysis project. Business and IT worked closely to develop the requirements and a business-model-driven view through a series of collaborative prototyping workshops. In many companies, once the initial requirements are set, business just sits back and waits for the results. In this case, business managers stayed connected throughout the whole process, even collaborating to refine those requirements.

The end product delivered valuable, relevant information to the business that they could act on immediately. Turns out that their two fastest-growing product lines were actually their most unprofitable. By shutting them down, they saved tens of millions in just months. In fact, they can now drive sales compensation based on margin instead of revenue. They wouldn’t have been able to do that without a highly adaptive system.

CFO: What kind of information management strategy would you suggest? How can companies improve the situation?

BH: Lots of things can help, but the situation is different for every company. Often IT reports to finance because finance is the single biggest stakeholder in the information management process. By bringing IT under finance, you’re organizationally forcing a connection between the business managers that need the information and the IT team managing the systems that turn data into information.

You also need to make the business more accountable for managing its data and information. Some of our customers have created an information management competency center with a mix of IT and business managers to serve as a central point for all information management needs. This could include data governance programs to enforce corporate information consistency and reconcile data that falls outside those parameters. These central information offices can be supplemented with regional ones so that needs are met at both the local and the global levels.

Information management is about more than technology – it’s also a business process. For too long, organizations have relied on siloed data sources to deliver business information. The truth is that business and IT need to collaborate in the face of continually changing business requirements. By having them work together on an information management strategy, companies can dramatically reduce the time, cost and risk typically associated with the delivery of timely business information.

CFO: It seems that we’ve been talking about IT and business working together for eons. What can companies do to make it actually work?

BH: We talk about “bridging the gap,” but usually it’s done out of necessity rather than strategically. Everyone needs to understand not only how to work together, but also their individual roles and how they can help each other. They need to find a way to communicate in the same language. Today while one group might be talking about product cost breakdowns or ledger hierarchies, the other is talking about source systems and data marts.

Business managers get frustrated because they can’t get the information they need. IT managers are frustrated because they think they’ve delivered what’s been asked of them. By bringing them onto the same team and making them equally responsible for a project’s success, companies can foster greater communication and understanding. With the right tools and working conditions, the groups will be able to articulate better what they mean, what they need and what they’re going to get. The result is that organizations can finally use information to drive results rather than lagging behind them.