Most organizations think about defining and improving the business case for expected ROI from EPM models only at the time of technology purchase - if these concepts are considered at all. But this is a mistake. Instead, the best practice is to measure the ROI of the system frequently in as many meaningful dimensions as can be evaluated. For example, solution and cycle performance times, analytic value, accessibility/reach are all crucial dimensions where metrics should be defined and consistently monitored for optimization opportunities. Doing so will help to bring about a significant shift in Performance Management capabilities.
The current trend is to start from scratch and re-implement performance management (EPM or xP&A) solutions to address challenges with the status quo solution effectiveness. Unfortunately, this extreme step is very costly and not likely to produce high-value results.
Some view the latest wave of cloud EPM solutions as more desirable than what they implemented in prior years. This perception is driven by cloud solutions having new features like AI/predictive analytics, browser-based reporting, etc. In contrast, legacy solutions focus on Excel-integrated user interfaces and lack what is loosely referred to as a “modern” user experience.
The fact is, all available performance management technology solutions are still oriented towards a mission of automating what once was and may still be excel based processes. These solutions have had the same target for the past 20 years. Swapping technology is relatively easy, but new technology without defining a replacement process hasn’t been proven as a significant source of ROI. Only when a cohesive and valuable replacement process is articulated with sufficient actionable detail to be viewed as “coming with” the technology. We aren’t there just yet!
So what does that mean for EPM users who feel they aren’t getting enough value and are considering switching products?
Today’s EPM solutions, as they have for the last 20 years, are sold on a “BYOP” basis (as in Bring Your Own Process). Whatever you were doing in Excel, you can do it better on this new platform! Despite technology’s steadily increasing capabilities, there has not been a significant process re-engineering for performance management since the advent of PC-based spreadsheets.
Do you want rolling forecasts? The efficiency and coordination of a “modern” EPM solution can help make such a process more achievable. Do you want to collapse cycle time by days/weeks? Does your strategy include detailed models to capture supporting assumptions that feed into financial statements? Would workflow align, validate, and control collecting inputs worldwide to improve the existing process governance? The truth is you could execute any of these minor improvements in Excel or most of the EPM solutions available today. Of course, each will have its nuanced differences in UX, cost, integration options, technology platform compatibility, and cost of ownership.
While organizations in the market changing their solutions will spend time comparing the nuanced feature lists across products, some won’t even notice the elephant in the room. All of these solutions leave the current process intact, and thus the scale of potential improvement value will be minimal.
What can a motivated client organization do about this?
First, we need to measure the status quo solution value in the dimensions I mentioned in the opening. What is our cycle time for a given process? Which automated EPM solutions manage analytic assumptions, metrics, and data elements, which are still handled by Excel or are off the grid entirely? Which users and decision-makers have their needs met ultimately by EPM, which are left to forage for needed analytic components in manual objects? Finally, when we talk about solution performance, what does that mean: time for a report refresh or process cycle completion?
Second, we need to understand best practices. ‘Best practices’ is a term that has been thrown around relatively cheaply, and readers are right to be suspicious here. However, the target to which you aspire to elevate your performance management capability matters greatly. A new process is possible with the latest technology, but few have articulated this new process, and none have established new process blueprints yet. For example, Gartner’s recently introduced term "Extended Planning and Analysis (xP&A)” comes closer to implying a blueprint for advanced performance management capabilities than before but still lacks a clear framework/checklist for a progressive process that will usher in the era of Excel process mindset obsolete.
We are on the precipice of the next generation of technology-enabled performance management solutions, and strategic thinking organizations must prepare for this new process enablement.
How significant is the potential disruption of this upcoming process shift?
First, the solutions currently available in the market will need to be replaced or augmented with much more valuable new technology and a replacement architecture. This architecture does not exist in an implementation-ready format yet. Technology solutions will require significant manual integrations, as in the early days of ERP. Second, the internal organizations supporting EPM in its present form will need to be completely reorganized. Instead of distributed analysts caring for specific workbooks, data silos, and even EPM solutions, we will see a trend towards centralizing a master enterprise model that avails users of much richer analytic value. Third, cycle times will move away from being measured in days/weeks/months and move towards real-time and continuous planning capabilities. Ultimately, the degree of manual data entry roles will decline, and computers will increasingly adjust performance targets autonomously.
Based on the above trends, one can conclude that the entire performance management paradigm needs to be re-imagined and a new process defined. If your organization is shopping for new technology, but you haven’t defined a new strategy to take advantage of this new technology, you may be overlooking much greater ROI!
Fortunately, the team at Column5 has given a great deal of thought to this challenge. We have been collaborating with the Darwin EPM team to develop that next generation of solutions. We actively assist important global organizations in articulating their next generation of EPM and xP&A performance management capabilities. We are developing solutions that support these advanced capabilities for unprecedented business value.
If you are dissatisfied with your current performance management process, solutions, or capabilities, let’s start planning the future of performance management at your organization today.