andré de waal arthur andersen - sascommunity · andré de waal arthur andersen ‘drowning in...

1

SEUGI 17© 1999 Arthur Andersen. All rights reserved.

André André de de WaalWaal Arthur AndersenArthur Andersen

Business ConsultingBusiness Consulting‘Drowning in information,thirsty for knowledge’

2

2


Purpose

3

3


Challenges (1)

TURNOVER

If we put it vertically,then it will look great

Strategy development:� Inward looking� Mainly financial &

hockey stick� Lacking actions, not

enough value based

Budgeting:� Too detailed� Manual & time

consuming

The first process is the business planning and strategy review process.

• In one of the businesses we found the business planning process beingsupported by strong communication. A consistent message over the years iscommunicated to the people by using pledges, posters, quality teams and staffmeetings. In this way, the total organization is aware of and supports the goalsof the business.

• The business planning process seems to be a yearly event which, in the opinionof many interviewees, is primarily performed for the BoM (strategic review). Itis not sufficiently linked to the operations in two ways: 1) the strategy is not(enough) updated through the year to take into account major changes in theenvironment (f.e. a merger of competitors) 2) often the execution of the strategy(‘are we reaching our strategic goals?’) is not measured enough with financial +non financial performance indicators. Another remark which was made often isthat the strategy is too focused on short-term and making budget then on longterm vision. Also, the long term targets in the strategy plan after are veryoptimistic after year 2: the so-called hockey stick effect.

• At some places in Philips there is some use of scenarios and contingencyplanning. Linking this with one of the outcomes of the N&W there is a clearneed for using theses techniques to increase the quality and depth of thebusiness planning process.

4

4


Performance Review:

� Forecasts too detailed,manual and not reliable

� Review meetings notbased on issues andexceptions

Compensation:

� Only based on short-term performance

Boss, boss ?

Challenges (2)

• In one of the businesses we found the carrousel process in which the major entities (BGsand regios) together plan for the future together for 2 days at a remote site. Lots ofinformation is exchanged and plans are discussed in detail. In this way it becomes possibleto reach mutual agreement in a relative short time.

•

• A remark often made is that Philips is too much inward looking. The company does nottake (enough) into account the outside world by structurally collecting information aboutcompetition, economy, trends etc. and linking this with the results of the company. In onebusiness we found that in the barrel specific (but very high level) mention is made ofmarketing information which can explain the results of the business.

•

• A lot of time and effort is spent on preparing the budgets and the forecasts. It is often beingdone bottom-up, involving lots of people, and in great detail. The question can be asked ifthis is worth the effort because many interviewees questioned the quality (and thereby therelevance) of the budgets and RoFos.

•

• In forecasting a lot of attention is given to the accuracy of the forecast, as somebody said‘We spend a lot of time on planing the unknown’. However, planning in so much detail 1year ahead makes accuracy rather academic. Is there a good trade-off?

• There is no specific information from the N&W about these processes.

5

5


I’m sure it is inhere somewhere ….

Performance Measurement:� Too financial� Time consuming data

collection� Reports not satisfactory� Quality of analysis

unsatisfactory� Impact of actions unclear� Insufficient IT support

for measurement +reporting

Challenges (3)

In one of the business management exception reports are used for the financials.With traffic lights a summary of key financial data per entity is given on one page.In this way, management can see in one glance which entity is in trouble.Supporting data for these entities can then be found in the underlying reports. Thisprinciple can and should be extended to the non financials as well.

In another business the barrel data is accompanied with a description of correctiveactions. In this way the BoM can directly see which actions management is takingto rectify certain issues.

Many people complain about the quality of analysis. Often, the narrative justrestates the figures, there is no real root cause analysis. There is also no impactanalysis of corrective actions proposed: so how do we know that the proposedactions are sufficient enough to solve the issues? Also, making analysis is still seenas a task of the controller, instead of a line manager’s task.

An issue here is the question: ‘does speed of reporting excludes good quality ofanalysis’? On the other hand: if the consolidation + reporting process has beenstructured in an efficient way management gets the time to do real analysis.

6

6


value

cost

dynamic

static

forward

historic

outward

inward

TRENDS, TOOL & TECHNIQUES:PROCESS

IT SUPPORT

Developments

Trends you can see in the area of performance management and the new role of control (business partner) can be summarized by the following 4changes:

cost - value

To become a business partner, the scorekeeper must change his focus from a cost-(cutting) approach to a value-added business view.

static - dynamic

As business changes drastically and time becomes more and more crucial, a static look on the business is no longer sufficient. Continuous focus onstrategic and operational performance and corrective actions to get back on track are crucial to stay up to speed with the competition

historic - forward

The changing business environment does not allow looking at the past only. Historic performance does not provide enough information to takeappropriate business decisions. Looking into the future, forecasting, simulation and modeling are some of the tools that enable us to learn more aboutthe future.

inward - outward

Today companies tend to look inward, to their own business. A more outward look to the business environment, market trends, competitive actions(intelligence) and integrating that knowledge into strategic planning and business operations is a key for success.

The trends applicable to the above topics relate to processes on the one hand and IT support on the other.

(In the examples to come we do not make a link with Philips, but talk about general trends seen and their potential benefits!!)

7

7


Mission&

Strategy

KeyPerfor-mance

Indicators

CriticalSuccessFactors

OperationalRevenues

OperationalCosts

Cost ofCapital

Riskfactor

Economicvalue

NOPAT

Risk adjustedCost ofCapital

Drivers that causefinancial results

KPI definitions

Value Based Management (1)

8

8


Improved Balanced Scorecard

Innovative perspectiveQuality brand portfolio

- Big brands �0 Brand reduction �

Quality investments+Big brand investment �

Financial perspectiveTop line growth

0 NSV growth �0 Sales volume growth �

Succesful new products+ New product sales �

Customer perspectiveTrade customer satisfaction+Customer satisfaction �- Days sales outstanding �

Trade spend0 Trade spend rate �

+

Internal perspectiveEffective processes

+Process goal achievement�“Quality” employees

+ Multiskilled employees Productivity

0 Qualified employees � 0 Qualified employees �

�

9

9


Budget contingency areas

③ D

ivision in

terven

e area

Jan Q1 Q2 Q3 Dec Q4

Target budget

Corporateinterveneline

Divisionintervene line

② Corporate intervene area

Budget level

① contingency

∑

Bonuslevel

extra ↑

no ↓

normalmin.

∑

10


Traffic Light Reporting

PD Lighting EPR Sales CM IFO NOC CAP EX Cash flowActual Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual Budget

Lamps 200 180 4,200 4,000 3,200 3,130 1,120 1,100 2,500 2,480 230 235 760 758

Luminaires 45 43 1,540 1,540 900 880 512 500 270 286 60 80 98 95

Automotive 57 51 450 448 410 400 60 58 430 300 35 60 115 103

ighting E & G 156 148 1,700 1,680 768 750 234 230 601 589 40 40 280 270

Batteries 10 10 280 220 95 94 30 60 100 90 2 2,1 23 23

thers Lighting 15 14 130 125 160 150 20 20 40 35 30 31 -12 -8

Total483 446 8,300 8,013 5,533 5,404 1,976 1,968 3,941 3,780 397 449 1264 1241

11


CriticalSuccessFactors

Keyperform.indicators

Budgetvalue

Actiondescription

Q2 Q2 Q3 Q4

Timetomarket

Fore-castedvalue

Q2

AverageLead time

1. Increase knowledgethrough recruiting

2. Build multi-discipli-nairy teams toincrease synergy

3. Invest in new CADsoftware

14 14 12

Projected result

period : Second Q ’98

date : 3-4-’98

15 12

Resp.Duedate

Analysis&Feedback

Lead time

increasesbecauseseveralexperiencedpeople willleave shortlyafter oneanother

1. Q2

2. Q3

3. Q4

1. X

2. Y

3. Z

Action Reporting

12

12


• Budget lines (target, PD intervene, Board intervene)• Contingency areas• Input for sensitivity

analysis (preventive actions)

STRATEGYFORECASTING/

REVIEWBUDGETING REPORTING

•Key financials•Leading non-financials•Input for targets year 1•Input for contingency (sensitivity analysis, scenario planning)

Linking the performance processes

13


IT support

SHALL I APPLY FOR APATENT?

14

14


• Real-time, day-to-day management information

• On-line business intelligence information about

customer + market developments

• Most performance indicators automatically

available (from ERP systems + EIS)

• Datamarts + datawarehouses

• Business Intelligence WEB applications

(inter/intranet)

ROLE IT IS ALL-IMPORTANT !

IT support developments

15

15


Information architecture based on ERP systems

��Data warehouse

Transaction systems(ERP)

DSS/OLAP

EISAnalysis /

ad hoc reports

��

��

Standard management

reportsOperational

reports

16


SALES FORCE

BILLING

ORDER ENTRY

TEMPERATURE

EXTRACT

CLEANSE

SUMMARISE

DATAWAREHOUSE

CONSUMER

DATAMART

INCOME

INTERNALINFO

EXTERNALINFO

operational systems

OLAP TOOLS

DATA MINING

QUERY &REPORTING

EIS

business intelligenceapplications

datawarehouse

METADATA

IT structure

17

17


Decision Room

[NEC foto]

A nice example of IT support is the decision room that NEC uses. The boardmeetings are conducted in this room. Every board member has a terminal onwhich external and internal information is displayed (using the Intranet!).During the discussion one person centrally looks for the supporting data.The DSS has been split in two: one for executive use giving primarilysummaries and one for more analytical use. This last one is also availableon the lap-tops of the executives.

18

18


WEB applicationsApplications:· WEB Publishing - Report distribution· Dynamic WEB Applications:

· Access up to date information· Create custom reports and graphs· Ease of information distribution and access· Empower the organisation and customers

Benefits:· Easy to use, common user interface· Platform independent, world-wide information access· Universally available, opens up data warehouse

19

19


Corporate

PD

Business

•Surf around to lowerlevel reporting onBusiness web pages

•Analysis capabilities(like drill down andslice & dice) dependon the functionality ofthe site that is visited

•Hyperlinks toexplanatory webpages (either internalor external)

external

‘Management by surfing around’

20


‘What is it?’ ‘Aperformanc

eindicator’

‘And what’sit used for ?’

‘Eh … Iwouldn’t

know

andré de waal arthur andersen - sascommunity · andré de waal arthur andersen ‘drowning in...

Documents