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Analytics Finance

Spreadsheets Confidential – The Connected Business – Part 2

The other day I wrote about the special section of the Financial Times called ‘The connected business’. One of the key take aways from this section was the fact that way too many finance departments are putting their faith into 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. One of the key things we were interested in was the type of work finance professionals do. It quickly crystalized that there were five major categories of work. The results looked like this:

Cognos Finance Survey 2008

The majority of the time is apparently spent on manual tasks such as collecting data (loading data from systems into spreadsheets, copying & pasting, manually entering budgeting numbers, etc..), maintaining spreadsheets (development, 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 apparently 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.”).

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?

Cognos Finance Survey 2008 - part 2

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?

Technology helps shift this picture around tremendously. We can literally reverse this. I will write about that in the next few weeks. For now, I will leave you with this picture. Take a look at your own work environment. How do you get things done? How do your clients operate? Is there room for improvement? Would love to hear your thoughts and about your own experiences.

Categories
Analytics Finance Various

The connected business?

The Financial Times from December 8th 2010 included an interesting special report called “The Connected Business”. A bunch of great articles about technology in the office of the CFO. One thing that caught my attention was the fact that the entire section highlighted the problems caused by the use of spreadsheets.

For people who work in the field of Business Analytics it has long been clear that while spreadsheets are useful, they are not the right tool to manage your company. People like us sometimes take that knowledge for granted. Here are some interesting pieces I picked up in the section.

Nigel Rayner from Gartner is quoted as saying: “But when I talk to them [CFOs] about management reporting, understanding the drivers of profitability, forecasting or planning, all they know are spreadsheets because they have always done it that way. They are not aware of how the technology market has developed.” Andrew Meade from Accenture confirms this notion in another article: “Most companies bemoan the fact that they have a spreadsheet jungle.”

Mr Giles Thomas from Revolver system highlights some of the inherent risks: “Businesses that start using spreadsheets for a specific purpose can get grabbed and they never escape. When you have a spreadsheet with thousands of rows in it, things can get quite nasty.” He highlights this problem with the case of an unnamed investment company: “For several months, they had been running the business on numbers that were meaningless. When people copy and paste, they often forget to incorporate the changes they have made.” The FT then highlights some of the other associated risks like proliferation, tracking, version control etc..

One article raises the question of whether the massive use of spreadsheets is likely to change in the near future. But the somber conclusion is: “He (Mr. John Van Decker – Gartner) and other business analysts do not see this situation changing quickly, because they say most business and finance education does not address these issues“. Mr Rayner adds “It is a cultural issue, because finance folks tend to be very conservative. They are comfortable with what they know, which is spreadsheets, and having an army of spreadsheet jokeys.”

The point about education is an excellent one. I used to be an active  member of the Institute of Management accountants (IMA). The organization itself is great and I highly recommend their professional degree CMA (Certified Management Accountant). But they consistently frustrate me with their singular focus on spreadsheets. Hundreds of articles in their publications teach people how to leverage spreadsheets. They offer courses for managing a complex budgeting process with spreadsheets. Time to wake up, from my perspective.

The conclusion? Well, the section does offer some nice examples of how technology helps and I will continue to write more blog posts in the near future about that. But the key finding for me here is the astonishing fact that there is a serious opportunity for all of us. As a CFO I have the ability to gain a serious competitive advantage (or: to avoid disaster) and as a Business Analytics professional I can make a serious contribution to the success of many businesses. Let’s use this opportunity.

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Categories
Analytics Events Various

Behind the scenes – Middle East Cognos 10 launch

Snow. Massive amounts of snow. And it’s really cold. Hmm…Do I really want to leave here? Greetings from Dubai airport. My colleague and I are stuck here right now. Most flights to Europe are delayed due to winter weather. Oh well….the joys of traveling. But this trip was really worth it. We just finished a three-country tour through the Middle East for the Cognos 10 launch. Three days, three cities. Three amazing launch events in Dubai, Qatar and Kuwait. Some of the customers I talked to were wondering what it was like to execute such an event series. Well, here is a little peak behind the scenes.

The amount of work that goes into these large customer events is crazy. Our great marketing teams spend a lot of time arranging locations, speakers, food, drinks and inviting customers etc.. Luckily, I hardly ever get involved in these activities. But let me say that much: I admire my colleagues for consistently doing an amazing job. It really makes a difference. I get to focus on the content and the presentation delivery.

For this particular event series, we had to leave Munich on Saturday evening to get to Dubai in time. The first event started on Monday. Getting up in a new time-zone always hurts on the first day. And so day after day we rush out to the event location early in the morning to setup the room, prepare the laptop, make sure that all the demos are working, check the microphones, upload additional presentations from other speakers etc.. I am always amazed at how much can go wrong with these type of events: The demo that worked in the morning suddenly stops working. The laptop shuts down without notice. The beamer does not receive a signal. Murphy’s Law?

The event in Dubai was a success but I am tired after delivering three presentations. Right after lunch, our team of close to ten people rushed to break down all the banners, pack up brochures, badges, lists etc.. Then off to the airport with a ton of extra luggage in hand. A few hours later, we sit down in Qatar for a quick debrief and discussion of the next event. There is always some tweaking that needs or should happen. Every country is different. Cultures are different. Audiences are different. There is no one-size fits all. Each and every presentation needs to be customized.

The next morning looks similar. Setup at the hotel around 8am, preparations and then another round of three presentations with a few breaks between. Before heading off to the airport with all our extra luggage, a journalist from the Qatar Tribune comes over for a quick interview about the launch. We finally arrive at our hotel in Kuwait around 9pm. Quick shower than out for a quick team dinner at a local place. Back at the hotel I can’t remember my room number and head back down to the reception. Long day.

The 7am wake up call feels like a scene from the movie Groundhog Day. Shower, pack, quick breakfast, taxi to event location, setup the laptop, discussions with the local team and a quick cup of java. As much as most of this is really busy routine work, I always get excited when the event finally starts. Presenting our products and talking to customers is a privilege and it is a lot of fun. Luckily, the Kuwait event was very special again. The audiences in all three countries were great. Unfortunately, I had to leave for Dubai right after the final presentation. On the way to the airport, my colleague noticed that the cab driver was falling asleep. So we engaged him in a discussion even though he did not speak a word of English. The surprises never end. Check-in at the Air Kuwait counter and then a quick snooze on the plane.

Waiting for the flight

8pm…I am checking into my hotel room in Dubai. 8:01pm….I am checking out my mind but I am very grateful for four special days with amazing colleagues & customers. But everything seems like a blur now. Too many impressions to process at this point. But it feels good.

Some final statistics:
Days: 4.5
Total travel time: 32h
Presentations: 8
Tired: Yes!

Categories
Analytics Various

Collaboration and BI?

One of the first things we learn from our parents and teachers is that we are stronger when we act as a team. 1+1=3 or something like. And it is true! I have had some of my best learning experiences in a team environment. Every once in a while, we forget just how powerful teamwork and collaboration can be. We get stuck trying to solve a problem by ourselves and we loose a lot of time. Okay. Everybody knows that.

But what about Business Intelligence and Business Analytics? Are we really collaborating with that team idea in mind? Even more important: even if we wanted to collaborate, would we be able to do so in an effective and efficient manner?

What does collaboration for BI and PM look like. Think about the following common situation. It is early Monday morning and you conduct some analysis in your BI portal. You quickly realize that there is a big problem. And you have no idea what to do about it. The first question that comes to mind is whether anybody else has come across this issue. But what do you do? It’s early in the morning. Nobody is in the office.

Social media are changing the way we communicate with each other. Email did that for us 15-20 years ago. Today we are at the start of a new revolution again. Twitter, Facebook, Flickr etc allow us to collaborate in an unprecedented way. We can leverage the wisdom of large crowds of people. People we don’t even know. The other day, I had a problem with my camera. I sent out a tweet with a question about it. 20 minutes later I had the problem solved with the help of other photographers out there on this planet. And this new way of collaborating is now entering the corporate world.

Back to our little Monday morning problem. We still have no idea what to do. Imagine we could quickly identify whether another colleague had reviewed this dashboard and come across this problem? What if you could see what steps they have taken to identify a solution? Wouldn’t it be nice to search for similar problems and find out how colleagues fixed this in the past? How about we could help other team members by contributing to their questions?

The time is right. We should be able to collaborate in our corporate world just like we collaborate in our private lifes. Cognos 10 allows us to just that. We can comment on dashboards, reports, cells, graphs. We can share activities, we can assign tasks. We can discuss, review and share. Just like we do on Facebook and Twitter. Within our own company. I have had to opportunity to test this functionality and I love it! But most importantly, the many customers I have shown this to love it just as much. When I return from travels through Europe and the Middle East I will share some additional thoughts and reactions about this. What do YOU think about this?

Categories
Events

Postcard from Moscow

Greetings from Moscow! We just finished an incredible IBM Cognos Performance event. Over 450 customers spent the day to discuss the latest news in Business Analytics. It was a busy day for me up on stage: keynote presentation, two technical sessions and a press conference.
The Cognos fans in Moscow

Before I start repacking my bags for the next trip on Sunday, I wanted to share one interesting fact with you. The biggest discussion topic on Moscow was Collaboration. Facebook and Twitter have changed the way we communicate. Email did that about 20 years ago. People are now demanding the ability to collaborate and communicate in business just like we do in our personal lives. More about that in a few weeks. Off to Tel Aviv, Vienna and Madrid this week. Hope to see you there!

Categories
Visualization

The power of Data visualization

We all know that visual information display is more effective. But yet, we still create, run & analyze hundreds of thousands of flat reports. A survey from 2007 (CFO Executive Board) found that the average management report is 30-40 pages long and that it contains 12000 to 15000 data points. But only 5% of those are deemed to be important. The most obvious question that comes to mind is: How much time is wasted to go through this amount of data and turn this into real insights? Would it help to start using more powerful visuals to display the hidden meaning behind all those data?

Watch this inspiring and entertaining speech by author, journalist & visualization pioneer David McCandless. I will blog about some of his ideas and how they relate to business at a later point.

 

Categories
Analytics

The Speed of the Dragon

The other day I met a good friend of mine. We hadn’t seen each other in a few weeks. But it felt a lot longer than that. A ton of stuff had happened. A sign of the times? The speed of business and our personal life seems to increase steadily. The economy already feels like a freight train racing through the night. But I believe that we are about to ditch that train and replace it with a high-speed bullet train.

ENTER THE DRAGON

At the end of August, I had the opportunity to run a bunch of performance management workshops for finance professionals in China. I do have to admit that I was blown away by what I saw and experienced. Hustling & buzzing cities, shiny buildings, fancy airports, giant construction sites and many ambitious people. Many, many ambitious people. People that are starving for success.

Early morning traffic & smog in Beijing

THE SPEED OF CHINA

Time seems to run faster in China. Construction sites are open 24*7. Co-workers from that region told me stories about areas of large cities changing within just a few weeks or months. Changes that would take years in the US or Europe. And that was evident everywhere we looked. Our hotel had just opened a few weeks before.

THE STRADDLING BUS

But there was one story that really told the story of Dragon Speed. Right about when I left for this 14 day trip, some newspapers reported that Chinese engineers had developed a futuristic concept for a straddling bus. This bus literally straddles the road. Passengers sit in a cabin high up over the street allowing cars to travel underneath it. Well, that was a concept. We didn’t think much of it at first. But I almost could not believe my eyes when I read the paper in the Air China lounge on the way back to Europe: The city of Beijing had reviewed and approved the concept. And not only that: they were expecting to have a working prototype with the next 6-9 months. Wow.

THE ECONOMIST

In 2007, the Economist had predicted that China would overtake Japan as the 2nd largest economy in the world within the next ten years. It only took three years. What’s next?

Western governments & businesses will hardly be able to ignore this trend. We will all have to pick up speed and it will affect businesses across the globe. It will be ever more important to make sound decisions quickly. Performance Management plays a crucial role in this.

Categories
Analytics

Unleash my talent?

Greetings from the IBM Cognos Business Analytics Forum. IBM just released the latest version of Cognos: Cognos 10. The general theme around this new product is: Intelligence Unleashed.

The theme is quite powerful and it made me think about how most of us conduct our work. I have met many clients that are still struggling to gain control over all their spreadsheets. They struggle to reconcile data between different systems. As a result, many professionals spend way more time on mundane and non-value added tasks than on inspirational and high-value tasks. As a matter of fact, a survey that we conducted a few years ago revealed that finance professionals spend over 70% of their time on administrative things. Many people that I talk to feel that they are not using their talents appropriately. A customer recently joked: “The CPA credentials that I have worked really hard for stand for Copy & Paste”. That’s a tribute to the enormous amount of manual labor conducted by her and her team.

Isn’t it time to take things seriously? Is this the way we want to work? Shouldn’t we start spending a lot more time on the exciting and analytical tasks? Technology like Cognos 10 allows us to automate processes and to seriously increase our analytical capabilities. Just imagine if we could spend time on all the cool and exciting things that we learned about in business school. The tools are there to help. Let’s start unleashing our very own talent!

Categories
Analytics

Spreadsheets, spreadsheets everywhere

Everybody loves spreadsheets. But pretty much everybody acknowledges that spreadsheets are not the right tool for managing critical aspects of a business.

Earlier this week I had the pleasure of hosting a seminar with the ‘father of data warehousing’ Bill Inmon. He presented his ideas about the architecture of the next generation data warehouse. To our surprise, Bill spent a good amount of time discussing the dangers of spreadsheets. That’s surprising as hardly anybody suspected this topic to appear in that type of presentation. But Bill felt that it was relevant to highlight the dangers. That’s yet another sign that the proliferation of spreadsheets is indeed a huge problem.

At the DW 2.0 workshop

Bill told the story of the CFO of a large oil company. This CFO is apparently very frustrated about the use of Excel within his organisation. He sarcastically states that ‘spreadsheets are the best decision-making tools’: If you want to make a certain decision, you can use a spreadsheet to create and provide the supporting information for that decision. Spreadsheets are ideal to not only manipulate data but to also make serious mistakes with the data acquisition and preparation. And of course, somebody else will be able to produce yet another spreadsheet that provides information that speaks against this decision. Big discussions and data comparison exercises are the result. Trust in data goes down the drain.

True: Spreadsheets are risky. It starts with the data load (where did the data come from, how was it acquired, when was it loaded). And then there is the omnipresent danger of breaking links and formulas. To add insult to injury, spreadsheets are also fragmented – not part of a common data repository.

In summary, spreadsheets are so flexible and fragmented that we can use them to influence our information to a degree that is dangerous. Controlling data integrity is virtually impossible. Bill Inmon clearly stressed the dangers associated with liberal spreadsheet usage. And we should listen to those warnings. The answer: a solid data warehouse along with the proper reporting tools?

Categories
Finance Plan & Forecast

Poor forecast accuracy

Over the last few weeks three separate clients have expressed their frustration with inaccurate forecasts delivered by certain members of the salesforce. Nothing new here. It happens all the time. However, what struck me about these three independent cases was the nature of the issues: The salesforce consistently forecast higher than actuals. This is not typical. Most sales people try to forecast lower to build up some buffer in case of bad news.

BOOKING INVENTORY

What happened here? Very simple: sales tried to utilize the forecast to ‘reserve” inventory of their extremely well-selling products. Their rational was that a higher sales forecast would inevitably lead to a higher availability of finished products ready for sale. In the past several sales people had encountered product shortages which affected their compensation negatively.

The sales forecast as an inventory 'reservation' mechanism

THE THREAT

This kind of poor forecast accuracy could lead to a precarious situation. In case of an unexpected economic downturn, the company could end up sitting on a ton of finished goods inventory. And not only that: average inventory could trend upward reducing liquidity as a result. As we all know, inventory is central to effective working capital management.

THE REMEDY

The controllers of these companies were very frustrated with the situation. Despite senior management discussing the resulting issues with the sales force, accuracy barely improved. But one controller had developed an interesting idea that he is about to implement: start compensating the sales teams based on Working Capital measures.

WORKING CAPITAL & FORECAST ACCURACY

The basic idea of this evolves around punishing sales for consistently producing these unacceptable variances. And the implementation of this does not necessarily have to be that hard. We can measure forecast accuracy. A series of negative variances (Actuals < Forecast) leads to a reduction in the sales bonus. The critical thing here will be to avoid punishing people for random variances. I could see using a rolling average to only punish consistent ‘offenders’.

This is an interesting idea. The actual compensation impact would obviously have to be worked out carefully. But the basic idea is quite interesting!