To be honest with you, I am still a bit puzzled. But it totally makes sense. Over the past 9 weeks, I ran into three different people that I had met through my work at IBM. They all had three things in common:
“Projects could be so much fun if it wasn’t for the users.” Well, I have often heard this from different project teams. And there is some truth to this: Too many projects fail to ‘wow’ an organization because the business is disappointed about the final results. Based on my personal experience, I believe that the traditional implementation approaches are partially responsible for that.
There is an interesting discussion going on right now. Actually, it’s been going on for a few years. There are some people that argue against planning: “Why plan today? The world is so volatile! Any plan is typically rendered useless within a few weeks or months.” And then there are others who argue that planning is more important today than it’s ever been: “Planning helps us prepare for the future. It helps us consider our options.” I personally support the later opinion. Planning is a critical process today.
Do you love to read? I do. Business books are high up on my personal favorite list. Luckily, the Kindle and the iPad make it so super easy these days to find and enjoy new books. While I was returning home from a recent trip to London, the person sitting next to me on the plane asked me about some book recommendations. Why not share some ideas here on the blog? The following seven books belong to my current list of favorite books. All of these books have one thing in common: I keep coming back to them. The insights are either so profound and interesting or the book is that fun to read.
Have fun with this. If you want more ideas, feel free to check out my Amazon.com reading list as well. Happy Reading!
P.S.: Many people ask me why I have a Kindle and an iPad. Here is why.
The other day I took some time to review a few chapters of John Medina’s excellent book ‘Brain Rules: 12 Principles for Surviving and Thriving at Work, Home, and School
THE POWER OF VISION
According to Medina, our brains devote over half of their resources to vision. The nerves between our eyes and our brains are much more powerful than those of our other senses. As a result, pictures allow us to absorb information much quicker and the information also tends to be stickier in our brains. Medina says:”Put simply, the more visual the input becomes, the more likely it is to be recognized – and recalled”.
THE PROBLEM WITH TEXT
Text on the other hand is very inefficient. It takes us longer to recognize information and we are likely to retain less of it. Medina states that each letter is technically a separate picture. When we see words we see tons of little images and our brains have a harder time to process the information. George Bernhard Shaw once said “Words are only postage stamps delivering the object for you to unwrap.”
THE LESSON FOR BUSINESS ANALYTICS
Most of this is common sense, but many of us still choose to ignore these facts. We create long reports with hundreds of columns and numbers. We spend hours analyzing these numbers. And we have a hard time recognizing the important patterns. If we want to follow Medina’s advice, we should visualize our data, instead. This not only speeds up our ability to recognize patterns and dependencies, but it should also help us with retaining the information. The old saying goes “A picture says more than a thousand words”, right?
AN EXPERIMENT
Dashboarding guru Stephen Few created a nice little experiment that shows how true and important this insight is. Take a look at the simple report below. It shows revenue numbers for two regions. Spend about 30 seconds to study the table. Then look away ask yourself what you saw.
Most people are only able to recall three to four different things from the table. The bigger picture usually remains hidden for a while. Now, take a look at the chart below. This is the same data. What do you see now?
Notice the difference? The chart is a lot easier to read and chances are that you are able to retain a lot more information.
THE SIMPLE LESSON
John Medina’s advice can be extremely valuable for all of us. We should strive to move away from pure number and text based reports. Instead we should visualize as much data as possible. But that requires us to spend some time to learn more about charting techniques. There are a lot of different options and not all of them are appropriate for any given set of data. You can find a bunch of valuable tips on this blog to get started. Also, utilize the appropriate Business Analytics platform. Cognos 10 offers over 160 differrent chart types, for example.
So, toss those tables and go visual. Inspect your current repository of reports and think about how you can improve in this area.
Listen to John Medina:
“Professionals everywhere need to know about the incredible inefficiency of text-based information and the incredible effect of images.”
Do you know your AQ? AQ stands for Analytical Quotient. It is a new measure that provides you with insights about your organization’s ability to leverage business analytics. Most importantly, AQ helps you determine how to best go about improving your capabilities. I would highly recommend taking the self-assessment test on the IBM Website. It takes just a few minutes and provides you with very interesting feedback and ideas.
FOUR STAGES & THE NOVICE
IBM found that organizations typically go through four stages with their business analytics programs: Novice, Builder, Leader & Master. Companies that belong to the Novice category are still stuck in a spreadsheet world. And that can be a big problem. Spreadsheets are a great productivity tool, but they are not the right tool for managing your business. That raises the question: what exactly is the problem with being at the Novice stage? Let’s take a look at the Finance department as an example.
WHAT IS THE PROBLEM WITH SPREADSHEETS?
A few years ago, my team started conducting some surveys amongst finance professionals. For this purpose we teamed up with David Axson (co-founder of the Hackett Group, book author). We specifically went after professionals that were not using Performance Management software, yet (i.e. organizations that belong to the Novice category). One of the key things we were interested in was the type of work finance professionals do in these organizations. It quickly appeared that there were five major categories of work. The results from our survey looked like this:
The majority of the time is spent on manual tasks such as collecting data (loading data from systems into spreadsheets, copying & pasting, manually entering budgeting numbers, etc..), maintaining spreadsheets (developing worksheets, fixing formulas, aggregating spreadsheet data, Visual Basic programming etc.) and then also developing reports & presentations (creating spreadsheet reports, graphs, Powerpoints etc.). Only about 20% of the overall time is spent on the high-value tasks such as performing in-depth analysis, running what-if scenarios, personal development etc.. A shocking but not a surprising picture. When we present the results to finance professionals we get a lot of head-nods. But I often sense a certain level of resignation as well (“Oh yeah….I know….that’s just the way it is.”).
A COMPLETELY DIFFERENT PICTURE
Statistics are always a bit dry. So we took the data and applied the percentage distribution to a work week. The picture now looks quite interesting. What do you think?
How does this feel? Same numbers. Just a different perspective. Two key questions come to mind: Can we live with that situation? Would we want to live with this situation? I doubt it. I have been there and didn’t necessarily like this. Sure, it’s nice to play around with spreadsheets knowing that you are indispensable. But is that what we want to get out of our professional lives? Is that why we went to business school? Is that why we spent so many hours studying for the CPA, CMA, CFA exams? This what being at the Novice stage can feel like.
MOVING TO THE NEXT LEVEL
Technology helps shift this picture around tremendously. Business analytics can help you make a lot more time for the important things. What do you think about these insights? Are you familiar with this situation? I would love to hear your thoughts and about your own experiences.
Back in April, I posted an interview with a master forecaster: Franz the Frog. Interestingly enough, this post is one of the most popular entries on this blog. But all jokes and irony aside: Weather forecasters are indeed world champions in forecasting and there are some lessons that we as finance professionals can learn from them. Let’s take a look:
LESSONS FROM MASTER FORECASTERS
1. Forecasts should be objective: Have you ever seen a subjective weather forecast? Well, it may feel like that sometimes. But weather forecasters do not publish what they think the public or the managers of the TV stations or newspapers want to hear. That would be dangerous. No, they strictly publish what their algorithms and forecasting processes show them. We can therefore rely on them (except for the obvious and inherent forecast errors that can occur).
2. Forecast discussions should look forward not backward: Huh? Well, weather forecasts focus on the future. Have you ever seen a weather person spend 75% of his time explaining past variances, apologizing and arguing about assumptions? No. Weather forecasts are strictly forward looking. The focus is on what lies ahead and not on what happened in the past.
3. Forecasts should be flexible: How often do we we get an updated weather forecast? Once per quarter? Once per month? No, the weather is too volatile for that. The forecast would be outdated within a few hours. People might be unprepared for a snowstorm, for example. Instead, weather forcasters continuously update their models when new information arrives. That way we can all rely on the most current and accurate forecast. We don’t have to worry too much about being caught in dangerous weather.
4. Forecasts should speak a clear language: Weather forecasts are being presented in a simple and concise manner: “Heavy winter storms expected with up to 20cm of fresh snow.” This type of presentation allows us to quickly make decisions (stay at home). The message is not hidden in hundreds of lines of technical details.
5. Detail is adjusted based on the predictive ability: What is easier to forecast – the weather tomorrow or the weather in two weeks? Stupid question: the weather tomorrow. Weather forecasts acknowledge that they cannot predict weather much further out than a few days. And they adjust the level of detail based on that insight. Today’s forecast shows detail by the hour. The forecast for next week is just a general trend (‘rising temperatures expected’). This approach obviously reduces the effort involved in creating the forecast. Most importantly, this approach avoids the trap of setting wrong expectations (“I thought it would be sunny in three weeks from now!”) More detail does not mean higher accuracy.
6. Forecasts are compiled with the help of modern technology:
What type of instruments and tools do weather forecasters leverage? Weather frogs, old fashioned thermometers, wet fingers, flight patterns of birds? No, they rely on modern technology. They continuously push the envelope and upgrade their equipment. This tremendously speeds up their work while also reducing mistakes and increasing the accuracy. They actively look for new ways to improve their processes and techniques.
YOUR FORECASTS?
Think about your forecasts. How do they stack up when compared to these six characteristics? Are there areas where your forecasts can improve? If you are interested, join of of our Rolling Forecast workshops to learn more.
“Make sure the teams get to know each other! It’s a lot easier to collaborate once you have had a drink together.” That was the ubiquitous advice from my former boss. We were discussing some communication problems related to a large international project. Some team members on a global project were running into some issues. Most people had never met each other. Communication suffered and it was starting to show in the results. Not a big surprise: Effective communication is vital for success and it is therefore always listed as a critical success factor. Interacting and working with people we do not know is especially difficult.
WHO ARE YOU?
Many projects bring people from different places or organizations together. And it is a challenge for project managers and sponsors to build teams around people that have just met. To start this process many people either resort to elaborate introduction rounds or sometimes even games. (I remember once putting my right hand on the shoulder of a colleague while looking him in his eyes for three straight minutes….it was an interesting experience and that’s about it) But a lot of these efforts fall short in expectations: we do not get to know the other person and we are utterly bored.
A SIMPLY SIMPLE BUT AWESOME IDEA
The other day, I attended one of those infamous project kick offs at the global headquarters of a successful German company. We were about 15 people from different parts of the world. To be honest, I was dreading the common introduction round (“Hello my name is Tom and I work out of the ABC office.”). But to my surprise, the project manager dimmed the lights and launched a series of short videos. Believe it or not, each and every one of the attendees had recorded a simple video about themselves, their offices and their colleagues. Within a few minutes we were taken on an interesting and fun journey through their Hong Kong, Sydney, Munich and Beijing offices. We got to learn about their teams, we saw their offices, we learned a few things about their lives. Most importantly, all of the videos revealed something about the personalities behind the people. And it worked: the atmosphere in the room was great and energized. And the videos stuck: Just this morning, I found myself thinking about some of them. I will never forget these great people and it almost feels like I have known them for a while.
TAKE OUT YOUR CAMERA
How do you like that idea? I will definitely try this next time I kick-off a project with different new faces. Remember: It doesn’t have to be fancy. Any camera or smartphone will do to record something decent. Show your new team mates your offices, tell them about your self. All this requires very little effort. Keep it short and sweet. Have fun with it! Get to know your team from a new and fresh angle. It’s these fun moments that can really help build teams. So, take out your camera now!
Things come and go. One day we love a certain hobby, a few years later we are utterly bored with it. The same thing is true for management practices. What is hot today seems out of fashion tomorrow. A few days ago, I had an interesting discussion with a group of senior finance professionals. One of them argued (I won’t name the organization) that working capital management was dead – once again. Just like in the late 90s and early 2000s. And then I came across an interesting article in CFO World that seems to confirm this idea. What an interesting thought! Is working capital management really dead? Or more importantly should it be dead?
Working capital management is all about increasing the liquidity of an organization. We try to carefully balance our current assets with our current liabilities. To optimize net working capital, companies implement a plethora of different activities such as: lowering inventory, standardizing payment terms, improving demand forecasts, active monitoring of customers that are slow to pay, rationalizing product mixes etc.. Hmm….doesn’t sound all too complicated, right?
Many companies who do these things well are rewarded handsomely. One of my customers for example put a strong focus on slow-paying customers (AR > 60 days) and was able to free up over 200M USD in cash flow. Overall, I think it is fair to say that the activities that help us optimize our net working capital should belong to the category of sound and useful management practices. The CFO Magazine from September 2008 stated: “One securities analyst has called working capital his ‘microscope’ into the competence of the management team“. I fully agree with that idea.
Why would working capital management be dead now? Sure, a lot of the associated practices are not necessarily sexy and it can definitely be overdone (many companies got extremely harsh with their suppliers and customers during the downturn). But why would we stop doing the good things? Why would we want to have excess inventory? Why would we be lax about managing our accounts receivables? Why would we want to create lousy demand forecasts? Should we start smoking only because the government of a country that we are visiting has decided to loosen the local non-smoking regulations?
Many countries are experiencing a solid recovery these days and it is a lot easier to obtain fresh credit and to manage cash flow. But I would strongly argue for not abandoning working capital management practices. The recovery is still fragile and there is always a good likelihood of some economies taking a turn for the worse. But apart from that, we should all strive to make our businesses more competitive. Doing that requires patience and effort. Working capital management can be extremely effective but to get the full bang for the buck, we should not treat it as a temporary initiative but rather as a standard process. It takes a while to get really good at certain practices. Business Analytics can play a big part in this. But more about that in another post.
Lego is amazing. Lego is a smart toy. It teaches us and our kids many things. Lego can especially teach us a fundamental insight that is true for many areas of our lives: We love doing those things that we are good at. And this is true for Business Analytics, too.
START SMALL
Last year my twin boys wanted to build a fairly large space ship. They were really excited but that excitement ended up in a major disappointment: the project was too difficult for them. They lacked some critical skills. They made a bunch of mistakes and they soon lost patience due to a lack of visible progress. My wife and I tried coaching them. But we finally decided to shift their focus on a few smaller projects that they could finish in less than 10-15 minutes. They loved these projects. And they quickly learned new skills and they completed their objects faster and faster. As a result, the complexity of their projects rapidly increased and they got more and more creative. Today, they are able to build fairly large and complex sets and they need very little help from us. Most importantly, they love Legos as it gives them confidence and they are seeing personal success. When they tried conquering complexity too early, they easily got frustrated and Legos ended up not being their favorite toy for a while.
BIG BANG
Over the past few years, you and I have seen many companies fail with their software implementations. There was this infamous word Big Bang and it usually stood for failure. Companies decided to execute long and massive projects. The associated teams ran into plenty of dead-ends, they made mistakes, they had to compromise and they got really frustrated. Consulting cost often exploded. Business users were getting impatient and project teams decided to counter-act that with change management efforts. As a result, many companies literally hate the tools that they spent years implementing. Such a shame.
START SMALL AND GROW BIG
When we get started with business analytics we should not attempt to do these large projects. It is just like with Legos: we have to develop new skills and we have to find out what works and what doesn’t. We also have to build the excitement. Small projects allow us to learn and to quickly collect success. The more we learn, the more confident we get. While we might need some consulting help in the beginning we can soon rely on our own skills. That significantly increases the motivation of all stakeholders. You will soon find that people are asking for projects instead of you promoting them. And before you know it you can apply the knowledge and skills to the bigger and more complex projects. And those projects will be successful. Isn’t that a better approach?
My advice to you: Think Lego. Start small and grow big.
