Q&A with Adaytum CEO Guy Haddleton (Adaytum has since been acquired by Cognos)
CFO: What role do planning, budgeting, and forecasting have in lowering the cost of finance?
GH: Traditionally, the planning process has been based chiefly on budgeting. It's been painfully slow, and taken huge amounts of executive and finance staff time. We've found – and this has been corroborated through hard research by our colleagues at Accenture and the Cranfield University School of Management – that senior executives can spend 30 percent or more of their time on the budgeting process. And that process can stretch out from two to five months annually. If you add in the countless hours of financial staff and data processing time required, the costs are mammoth. For example, the typical billion-dollar company spends some 25,000 worker days annually on budgeting and planning. That's huge.
Furthermore, the traditional planning and budgeting process is driven from the top down. Managers concentrate on guarding their own turf and tell senior executives what they want to hear, rather than collaboratively looking for ways to add value. In such a climate, the cost of lost opportunities is massive.
The alternative to traditional budgeting is the paradigm that Adaytum has pioneered over the past 12 years. Planning, budgeting, and forecasting – along with modeling, analytics, and reporting – comprise a paradigm called enterprise performance planning or EPP – what others may call corporate performance management or enterprise performance management.
I hasten to add that EPP is not just another name for business intelligence. BI is retrospective, not forward-looking, and it doesn't include mechanisms for taking or communicating action, for closing the loop between business measures and business action.
But, whatever you call the paradigm, the fundamental notion is that planning must precede performance. Based on accepted industry best practices and leading-edge Adaytum technology, EPP is a streamlined, collaborative, continuous process that offers real-time insight into operating performance over and against strategic plans. And we're convinced that EPP deserves a place in the consciousness of every employee in every department in every division of every enterprise.
Enterprise performance planning offers substantial benefits in two areas. First is the streamlining of the planning process. We've had customers that – by reducing their planning cycles from months to weeks – have saved millions in workforce and data processing costs alone. Second is the opportunity afforded by real-time insight into company performance. In a time of constantly changing market conditions and consumer uncertainty, Adaytum enables companies to respond positively and creatively and to be survivors when the competition is falling by the wayside.
CFO: Can operating in this EPP paradigm affect shareholder value?
GH: Again, planning must precede performance. Companies have to determine what's achievable and then set realistic performance goals. Understanding what's achievable minimizes the risk of missing your targets, which further improves credibility with investors and analysts. Adaytum enterprise performance planning solutions enable companies to do just that.
And it goes without saying that a company with a clear view of external conditions and an understanding of its own internal efficacy will be able to perform when others can't. The company that applies Adaytum solutions to its enterprise planning process will have the kind of visibility that drives performance even when conditions are dicey. There won't be any unpleasant surprises. No out-of-the-blue announcements of less-than-expected earnings. The market recognizes that kind of company. And so do analysts and investors.
CFO: What value has Adaytum offered in achieving lower costs and improved access to information?
GH: As I mentioned, compressed cycle times and real-time insight into company performance have produced substantial ROI for Adaytum customers. We have a major retail client that saved millions in operating costs by applying an EPP approach to store managers' expense plans. A global pharmaceutical client gained substantial competitive advantage by reducing plan preparation time by 70 percent in its R&D organization, cutting plan iterations, and moving to a rolling forecast. A large telecommunications client implemented an Adaytum EPP solution and improved its working capital position by $1.5 billion in only 90 days.
The ultimate benefit in enterprise performance planning with Adaytum involves a fundamental cultural change in today's business. The focus must be on creating value all across the enterprise. Information will flow organically throughout the organization and decision-making will improve dramatically. And indeed this is exactly what is happening in the companies I mentioned, and in many others. By making the planning process more efficient and more effective, executives and line-of-business managers have more time to focus on performance. As one of our clients said recently, since implementing their Adaytum EPP solution, they've been able to stop arguing about the numbers and start talking about the best way to run the business. And that is the way it should be.
CFO: For those looking to leverage the experiences of a respected leader, what advice would you offer to those looking to change the organizational model of their finance function?
GH: First of all, it's vital that the planning process extend all across the enterprise – to the people on the front lines who really know what's going on. Second, we've become convinced that planning cycles and business cycles must be aligned, so that you can revise plans with the appropriate frequency. And you need a proven solution that can scale to thousands of users and pull in data instantly, so that no time is wasted with batch processing.
And it's critical to use the Web as a platform for enterprise communication, making it mercifully easy to contribute and access both financial and non-financial intelligence across the organization. The integration of data and forecasts from management, numerous line staff, and strategic business partners with data from in-place systems like G/L, CRM, or ERP will provide a view of current and future business performance in real time. When conditions change or when disconnects occur between strategic plans and current circumstances, management can respond rapidly and effectively.
CFO: Over the past few years, analysts and journalists have been calling Adaytum "the one to watch in this space." How do you account for your company's success?
GH: First and foremost, we deliver real value to our customers in these tough operating times. We've helped clients save tens of millions in operating costs, reduced planning cycles by weeks – even months – and enabled executives to stop wasting time bogged down in process and concentrate on running the business. We provide the CEO and CFO of Global 2000 companies visibility, accountability, predictability, and insight.
Secondly, we have real strength and depth in several areas: our product is the clear leader in its space, and behind that product we have best-practice implementations and first-class support. Our people are well-trained and of the highest caliber. We maintain strong strategic relationships with world-class partners like Accenture. The net result is an ability to deliver replicable high-value performance, quarter-in and quarter-out.
But the real key to our success is passion. Passion to be the absolute best we can be – to be the unimpeachable industry standard in both product and service – that's the glue that binds us all together.
