teams are the performance management captain of the corporate ship
empowered to provide the executive team, and business and support units
with real insight and understanding of past, present, and future
performance while guiding them on what the information means to each of
their constituents and how it can be interpreted for decision making.
That is their most strategic value to the business. However, because of
the explosion of information, speed of business, growing systems
through M&A and unique information capture needs of different areas
of the business not to mention growing business practice demands, such
as regulatory compliance to meet the regional, national, and global
reporting requirements, the corporation’s most important analytical
asset, finance departments, remains mired in just completing the basic
week-to-week tasks without providing this strategic guidance. As a
result, emerging trends, exploitable opportunities, efficiency gains,
addition-by-subtraction divestitures, and M&A opportunities go
undiscovered because the analytical part of finance is asleep at the
wheel. It has its proverbial head down doing the day-to-day grind of
low-value activities where this analytical blind spot can eventually
drive the company out of business. Let me illustrate.
the 1960′s, IBM was the 800-pound gorilla in the mainframe business
whose technology supremacy went unchallenged and superior performance
went virtually unabated into the 1970′s. They were the blue suits
bearing information-based mainframes to help companies use data to run
their large – sometimes multinational – businesses with greater know-how
about customers, products, operations, and financial performance far
more adeptly than any other technology could. Yes, they were considered
the masters of product innovation largely due to world-class business
practices and industry expertise. However, Big Blue got complacent and
far too comfortable in their long held pole position. Their inflated
confidence and market share eventually disintegrated as they missed the
advent of the new information-based technology, which, if they would
have had the right analytic capabilities in place, they would have seen
it coming; the emergence of the minicomputer. Minicomputers were
technologically simpler than mainframes but with stronger computing
power while requiring less resources to run them. To be fair, it wasn’t
just IBM that missed the advent of minicomputers. It was virtually
every mainframe company in existence at that time. This new technology
virtually wiped out the entire mainframe business such that no mainframe
business would be a major player in the minicomputer business at all.
What happened? What was missed? Who screwed up?
In my opinion, there were many failures that caused this emerging
technology to go unaddressed by IBM and others, but the chief culprit
who could and should have been prepared for it was finance. Yes, I
think it’s up to finance as the owners of business performance (past,
present, and future) to fundamentally understand the business climate –
internally and externally – to then advise their corporate constituents
on what the information they’ve analyzed means to them. For this to
happen finance needs to get a handle on its core responsibilities before
it can begin to really spot these performance-sapping icebergs that can
possibly turn into business shuttering threats.
Let’s get back to the technology story for a minute if that’s okay. Then, I’ll finish my point.
Where were we? IBM’s out because the mainframe business has gone
south – way south by way of the minicomputer. Exit IBM. Enter Digital
Equipment Corporation. DEC virtually created the minicomputer business
along with a few other aggressively managed companies like Data General,
Prime, Wang Computer, Hewlett-Packard, and Nixdorf. Did DEC and others
in the minicomputer business learn any lessons from IBM’s big miss on
the minicomputer market so as to not repeat the same mistake? Of course
not. The story of DEC’s demise rings almost too tellingly true to
IBM’s mainframe debacle of the 1970′s. In fact, the management gurus
and business journals missed it too. Digital Equipment Corporation was
considered by all who had some insight into the company’s operations as
being the ultimate technology company for decades to come. For certain
it was a featured company in the McKinsey Study that became the stellar
1980′s management book, In Search of Excellence. DEC seemed
destined for monster success. Still, despite all this fanfare, DEC
missed the next wave in computing technology, the desktop computer
Again, where was finance watching past performance by measuring and
monitoring it, to get analytical insight into what the future might look
like to then advise their constituents across the business on what all
of this means to each one of them? Answer: Heads down.
The desktop computing market was predictably seized not by DEC or one
of its minicomputer compadres but by Apple Computer, Tandy, Commodore,
and IBM’s PC-division. (Yes, IBM can’t be held down for long!)
What happened next? Like Rick Blaine says in the movie Casablanca,
“Play It Again, Sam.” Apple, Tandy, IBM and the rest of the desktop
computer gang focused on making the best desktop computers they could
but ended up missing the next new, new thing. Apple Computer and IBM
lagged 5 years behind bringing the latest-and-greatest technology rage
to the market: portable computers. That market was owned by Silicon
Graphics, Sun, and Apollo – all newcomers to this market.
each case, the leading companies mentioned were regarded as the gold
standard given their product excellence and operational execution only
to be quickly pushed aside by an out-of-nowhere, technologically
superior solution that reset the market’s expectations rendering the
prior leader’s solution frumpy and stale. Missing emerging trends in
the marketplace and not adapting to them quickly enough can ring a death
knell for most companies. Think Wang, Silicon Graphics, Apollo. For
others, this misstep can set them back 5 or even 10 years before they’re
back on their feet again.
As a note, in the above example, I simply chose the technology sector
but we could have easily used the retail merchandising sector (Think
Sears vs. Nordstrom) or retail books (Think Barnes & Noble vs.
Amazon), or Automotive (Think GM vs. Toyota). Each situation is an
example of a failure to see the changing landscape which, I believe,
finance is mostly at fault for squandering these opportunities.
How come finance? I think finance failed their companies in each
instance because they weren’t effective enough in managing the
day-to-day, low value tasks which, if they had them under control, they
would have greater leverage to spend time on higher-value practices like
forecasting and business analytics to uncover data points that can help
the entire business spot emerging market forces before it’s too late to
respond. This responsibility to identify these threats and
opportunities lies squarely on finance. If not them, then who else? Be
careful because whomever you’ll name will probably expect finance to
provide them with the meaningful insight into performance results across
the business as well as external information, which, again, means it’s
incumbent on finance.
So, how does finance get to that point where it’s able to provide
this kind of insight with the resources it has because Lord knows it’s
not going to get additional headcount? Well, it all starts with finding
a way to better leverage the resources it has. This requires finance
teams to get the lower value tasks automated as much as they can so that
they can off-load these process management steps to take on added
capacity for these analytic practices.
What are the world class finance teams doing to be analytic leaders
in their industry? World class analytic finance teams have these
repeatable practices down to great consistency and repeatability from
Process: Financial close, financial consolidation, and financial reporting processes;
Process: Disclosure management-related efforts, including all external reporting, such as regulatory compliance reporting;
Solution: Identify these processes and automate the end-to-end needs through a disclosure management technology solution, such as IBM Cognos FSR;
Process: Financial, strategic, and operational
budgeting and forecasting, including Profitability modeling and
real-time analytical capabilities;
Solution: Leverage an enterprise-class budgeting,
forecasting and profitability modeling solution with real-time
calculation capabilities for high volume data sets, such as IBM Cognos TM1;
These practices are the foundational elements required for finance to
be the advisor in providing guidance to the business. Excel at the
practices mentioned above and you’re soon positioning your analytic
experts on your finance team to do the real analysis they’re supposed to
be doing. It’s incumbent upon the CFO’s finance department to provide
this guidance and leadership given finance’s role as the performance
managers for the company. It is therefore finance’s job to provide
insights into past, present, and future performance but also trends,
anomalies and market opportunities that become visible only after
thorough analysis of the information-based business results gleaned from
systems, i.e. ERP, CRM, SCM, etc. and processes, i.e. forecasting,
what-if scenario analytics, etc.
This finance role is looked to not only explain past business
performance and its financial effects but also advise and guide the
strategy in determining where to make investments with the resources at
hand. The CFO’s analytics team – finance – needs to spend its time not
on the everyday execution of basic, low value process steps, like
compiling, validating, and reconciling data for various internal and
external reporting needs but also analyzing past, present, and future to
present guidance on what’s happened, what’s happening now, and what
could happen. Only with an infrastructure in place to easily manage
these basic elements of the finance team’s mandate can the real
value-added analytic insights come to light. Otherwise, their companies
will continue to drive through its business climate with a perpetual
blind spot on what’s coming soon rendering them the next Tandy Computer,
Silicon Graphics, or Apollo.
It’s up to you finance to not let this happen.
Check out more blogs by Tim O'Bryan by clicking here!
entering the cockpit of a modern jet airplane and seeing only a single
instrument there. How would you feel about boarding the plane after the
following conversation with the pilot?
Q: I’m surprised to see you operating a plane with only a single instrument. What does it measure?
A: Airspeed. I’m really working on airspeed this flight.
Q: That’s good. Airspeed certainly seems important. But what about altitude. Wouldn’t an altimeter be helpful?
A: I worked on altitude for the last few flights and I’ve gotten pretty
good on it. Now I have to concentrate on proper air speed.
Q: But I notice you don’t even have a fuel gauge. Wouldn’t that be useful?
A: You’re right. Fuel is significant but I can’t concentrate on doing
too many things well at the same time. So on this flight I’m focusing on
air speed. Once I get to be excellent at air speed, as well as
altitude, I intend to concentrate on fuel consumption on the next set of
We suspect you wouldn’t board the plane after this discussion. Even
if the pilot did an exceptional job on air speed, you would be worried
about colliding with tall mountains or running low on fuel. Clearly,
such a conversation is a fantasy since no pilot would dream of guiding a
complex vehicle like a jet airplane through crowded airspace.
This is an often cited story by many business strategists and other
management prognosticators which I will attribute to Drs. David Norton
and Robert Kaplan, pioneers of the Balanced Scorecard. It’s intended to
reflect how critical the actual indicators are that we setup for not
only pilots but also the indicators by which you establish for your
entire workforce because these indicators will serve as the guiding
force behind their decision-making.
Why is this so important? Well, many reasons starting with the
business environment has substantially changed where no longer can a
company operate rudderless without a core set of metrics to steer each
of its employees individually and as a collective unit in the right
direction. That right direction is the enterprise strategy. The speed
at which these decisions are being made seem to have increased
exponentially in just in the past 5 years. The days of top-down,
command-and-control authority over decision-making are far from over in
deference to a more nimble, decentralized execution hierarchy intended
on keeping pace with the velocity of the related competition and
customer expectations. The need for getting relevant and actionable
information to the business users has never been more pronounced than
we’re seeing today. If you can’t react fast enough to the market
realities your customers will go elsewhere. We live in a world where
product or brand loyalties are becoming more and more a thing of the
past. It’s about execution. Good execution is about making smarter,
more informed decisions that support the organization’s goals.
These decisions being made are happening across all levels,
geographies, and functional areas of the business everyday. For this
post I want to zero in on the first question asked which falls under
measuring and monitoring the business. This question is, how are we
the executive suite is constantly measuring and monitoring overall
business performance to ensure the company is on track to meet its
strategic targets. In addition, the function leads in marketing, sales,
finance, HR, and development all the way down to the individual
contributor levels of the organization are measuring and monitoring the
performance of their area of the business too. But how does everyone
know they’re doing the right things at all times? What are their real
priorities helping the organization achieve its goals? Is it
guesswork? Is it trust-based that the entire workforce is going to
naturally make the right decisions supporting top-line goals? How can
we be so sure?
This fictional story referenced at the beginning of this post is
really about measuring and monitoring – not an aircraft – but your
business thru a tool called a scorecard.
There are personal, departmental, and enterprise scorecards. A
scorecard includes the key performance indicators, or KPIs, for which,
in the case of a personal scorecard, an employee is responsible which,
if these KPIs are correctly defined, would include measurements that,
when looked at in aggregate, support the enterprise’s top-line strategic
goals and objectives. Inevitably, there will be shared targets for some
of the KPIs in a personal scorecard either within a specific functional
area of the business (Think Marketing Director/Marketing Associate
having similar campaign targets) or as shared KPIs across functional
groups like marketing, sales, procurement, and development/manufacturing
for something like overall corporate sales targets. To illustrate what
I mean, if the organization has a revenue target of 15% annual growth
each of these functions might also have the 15% target in their KPIs.
Of course alone none of these groups is solely responsible for achieving
that total growth target but this enterprise target is still one of
their KPI’s. This shared goals can incent these groups to work more
closely together given that it’s mutually beneficial for these teams to
work together because they’re all needed to make this corporate goal.
Also, there are typically individual KPIs for their own controllable
element of that 15% growth figure that might apply. Sales will play a
role in this 15% growth target by needing to make actual sales to
existing and new customers accounts; Marketing is also integral because
they will have to generate enough pipeline to contribute to those sales
figures; Procurement will need to make sure the appropriate amount of
labor, materials and supplies are available to produce enough product;
and, Development/Manufacturing will need to have enough finished product
ready for shipping in time to meet these customer demands. Each of
these functions and the people working within these functions would also
have their own more specific KPIs that outline what their required
contribution is to achieve this top-line revenue growth goal that will
typically be measured within the respective functions too. Make sense?
actual KPIs – typically there’s about 6-10 for each individual – are
critical because they will define the actions taken by the individual
for which they’re responsible. The ultimate alignment via scorecards
composed of KPIs across these business groups, departments, divisions,
business units, etc. is the embodiment of what we call a company’s
strategy execution framework.
Harvard Business School having done a study on this framework found
that, “a 35% increase in Strategy Execution leads to 30% gain in
shareholder value”. That’s a pretty strong argument for at least taking
a harder look at it.
How do you deploy such a framework, you ask? Well, in theory it’s
very simple. You just translate the business strategy and its related
goals into a set of performance indicators that outline the targets for
which each department and employee within each department are
responsible and away you go, right? Yes, I know. It sounds easy in
theory. But, in practice it’s a little more work.
The key is working top-down with each business and support unit area
to translate their contribution towards meeting these higher level
targets so that these lower-level, cascaded measurements, or KPIs, will,
when rolled up in total, directly tie to the top-level enterprise’s
strategic goals. This ensures proper alignment of the organization
while providing an ongoing set of metrics by which the workforce can
Even more important in defining the right KPIs is the understanding
that whatever the indicators are, this will determine the individual’s
behavior so take care as you define these. Something else that makes
this framework so effective is that it makes it that much easier to
reset the workforce when those top-level strategies change. the
infrastructure is in place to restructure the scorecards. This allows
the company to adapt more quickly.
Think about deploying such a framework for your organization. The
best incentive I can give you for taking on this effort is that going
through the KPI definition process for each set of scorecards it forces
discussions across functions, within departments and at the executive
level that will expose how achievable these targets really are with the
current resources in place today and who is ultimately responsible for
what. This is just about the most important exercise I think a company
can go through to make sure it’s not setting itself up for failure
because its strategy isn’t attainable given the resources currently in
place. Once this KPI definition process is complete and everyone knows
who’s doing what and where the synergies lye it’s all about execution.
This framework sets companies up to execute well because they’ve already
identified their needs and resources at their disposal and now it’s a
matter of delivering. It’s go time.
If done right this will be the outcome for your organization:
Workforce is engaged in this process arguing the questions about
what the targets are, how to achieve these targets, searching out
solutions, debating resource needs and actions, and reaching specific
and practical conclusions.
Ultimate enterprise-wide agreement is made on the KPIs where
everyone agrees on their commitments for getting things done and accepts
Given the share and collaborative ownership of some KPIs, processes
are more tightly linked to one another, not compartmentalized among
Through this exercise the strategy takes account of people and
operational realities. Through the debates and bartering between
managers, directors, executives within and across functional areas, an
enlightened awareness of what everyone is responsible for and whether or
not they have the resources to accomplish it is realized and addressed.
People are chosen and promoted in light of strategic and operational plans.
Operations are linked to strategic goals and human capacities.
Most important, the leader of the business and his or her leadership
team are deeply engaged in the People, Strategy and Operational
processes – not just the strategic planning or the HR or finance staffs.
Lastly, this serves to expose gaps in execution levels and important resource needs.
More coming on this subject. Stay tuned. In my next post I’ll tell
you some of the best practices in defining the right KPIs for personal
Email: firstname.lastname@example.org Blog @ http://ibm-business-analytics.com
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The global economic crisis, which began with the U.S. housing market’s nose-dive in late 2007, continues to burn brightly across nations far and wide. This financial meltdown has served as a jack-hammered catalyst for corporations today to re-evaluate their risk management practices – assuming, of course, they had one in the first place. Most didn’t. Apart from very large, globally diverse corporate behemoths, formal risk management practices didn’t really exist outside of the top-level business strategy sessions conducted between CEOs, CFOs, and other members of the executive team.
Until recently, boards of directors were simply there to listen and learn what the strategy and execution plan was. Not much more was asked. Part of the problem was that back in the day – let’s call it pre-crisis – having some celebrity status for board membership was de rigueur. That’s all gone, of course, in the name of being more legally accountable in their roles where board members are actually looking after the business in ways unlike before. (There’s a famous story about a Goldman Sach-delivered board presentation where Gerald Ford stopped the presenters and asked, “What’s the difference between revenue and equity?” …He was our U.S. president at one time. Ouch.) Yes, now boards are more actively involved in the business including taking an interest in not only the business strategy, but also what the risk assessments are for it and how they’re going to be mitigated, including the next-step plans to address them in the unlikely event they come to fruition. For all of these reasons, risk management practices arebecoming more pervasive and universally adopted by organizations, both large and small. These companies are expected to meet the demands of an uncertain and ever-changing marketplace not to mention evermore interested (read activist) shareholders, regulators, compliance hawks, and don’t forgot those employees. Yes, regulatory measures like Sarbanes-Oxley, Basel II, Dodd-Franke and other forthcoming reporting requirements have pushed companies to throw much greater rigor around how they’ve planned and executed their responses to risk events. Companies now are adopting risk management strategies to assess, manage, and mitigate strategic, operational, and functional risks in all shales and sizes. A formalized risk management framework is no longer optional or a nice-to-have.
Still, many companies are way behind the curve. According to risk management trade organization RIMS, only 17% of organizations have implemented company-wide risk management to look at risk categories like operational, legal, financial, compliance, IT, strategic, market, and health and safety risk in total – not in siloed isolation lacking an “enterprise view”. To a large degree, internal audit has been commonly given ownership of cross-organization collaboration.
If you’re in the camp that hasn’t implemented a risk management strategy or is only doing it in some, but not all, areas of the business, consider placing more (or some) focus around strategic risk management. Reason being is that according to the research firm, Corporate Executive Board, 70% of the risks that cause the most harm to corporations are strategic risks.
What is strategic risk, you ask? Well, it’s any risk whether it exists today or may crop up in the unforeseeable future that could force the company to change, modify, or overhaul its business strategy forcing it to change the way you do business. RIMS defines it as “a business discipline that drives deliberation and action regarding uncertainties and untapped opportunities that affect an organization’s strategy and strategy execution.” Still too ambiguous? Well, think of it as defining what risks could be applied to your company’s product lines, M&A actions, economic conditions, overall business model, or baseline assumptions that come into play when defining the business strategy. This is one reason bringing the risk team into the business strategy sessions is essential. The Risk Management team (or their leader) needs to have a seat at that table. More often than not the CFO, given his or her management of financial and operational risk, owns strategic risk. Gone are the days where the CFO is simply in charge of reporting prior year numbers – long gone. In this case, CFOs are the overseers of risk while delegating the task of ‘selling’ the concept to departments outside of finance.
It was reporting in a 2011 Accenture survey that 39% of the organizations surveyed said that risk managers have a seat at the company objectives-setting table; In 2009, it was only 27%. It’s getting there but needs to be at 100%. Rome wasn’t created in a day but headway is being made.
In summary, if you’re new in adopting a formal risk management strategy, given that 70% of the risks that cause the most harm to corporations are strategic risks, take a look at starting with strategic risk management. Then, attempt to apply financial metrics to these risk events and how they align with your business plan. You want to be asking questions that look at your strategic assumptions, specifically what if they’re wrong. An example is, what if you’re expected EPS growth is X% over the next 5 years…Ask yourself, what’s stopping the company from getting there? Also, try setting up a risk committee to review the risk events in question and explore the outcomes and the company’s response(s) to these events. Don’t take this on yourself. Tackle strategic risk first.
What if you knew tomorrow’s winning lottery ticket number? Imagine the possibilities. Quit your job? Travel the world? Buy that convertible Bentley you’ve always wanted? Addition to the house? Pay off those nagging debts? Think about the impact of knowing what a stock price will be next week, or knowing when your car is going to break down, or exactly when your roof is about to start leaking? Better, what about if you had early insight into your future health condition? Now, wait a minute! Something seems different here. With regard to the winning lottery ticket number that seems a lot more unpredictable than say, picking a stock or determining when your car is going to break down not to mention forecasting potential health concerns. It certainly is different.I’m sure you can guess the difference between predicting the winning lottery ticket number and the other examples. I’ll state it anyway. It’s because in these other examples we can draw from historical data, analytical research, individual’s input based on their experience, and a vast array of data to more accurately determine what is likely to happen. Once you know this information you can begin to do some planning for these possibilities or scenarios. Seems pretty logical, right? We know how much information is being captured today by companies about their customers, employees’s insights, internal operations and external market conditions that there’s obviously not a problem with lack of data to do this predictive analysis. Yet, in a lot of companies today this practice does not happen with regularity. Companies aren’t using their most valuable resources available for forecasting – their people and their data – to develop this in-house capability.
Look, I don’t need to tell you the advantages of knowing what’s likely to happen and how an organization can exploit this knowledge. If you’re an investment bank in 2006 and have a large amount of CDO’s and mortgage-backed securities on your books it might have been helpful to hear from these traders and other knowledgeable people in your operations that these speculative instruments were bound to go belly up. In hindsight the information was all there but there wasn’t a culture in place to gather this feedback. Prescience. Only helpful to the enterprise if there’s a platform in place to capture these insights and communicate them up the corporate tree so all are aware. Without this kind of enterprise forecasting platform the enterprise won’t die…not overnight that is. But, in the long run, it might suffer from multiple missed opportunities which could lead to a slow death by a 1,000 cuts.
The more unbiased participation you can glean from the relevant stakeholders and knowledge experts the more likely you’re going to be able to predict what will likely happen. The key is reaching out into your workforce across functional areas, remote operations, corporate support units, to gather feedback as far out into the future as they can most accurately predict with some likelihood which can then be leveraged by business unit managers, executives and other stakeholders to make decisions NOW based on this feedback. If you know something’s likely to happen in the future, say a hurricane, are you going to remain in your home if your home is in the hurricane’s direct path? No, of course not. You’re going to do everything you can to save all of your earthly possessions – maybe even your home, if possible – and get out of there. You’re acting now. Not waiting for the day of the hurricane to do something about it. This is the basis for business forecasting.
Only in obtaining honest, unbiased feedback from your workforce will you be able to trust this information to take action on it. If it’s not unbiased – meaning the figures that are produced from this effort were top-down dictated (think sales manager telling their sales rep what their next quarter’s sales figures MUST be vs. what this sales rep believes the figures WILL MOST LIKELY be – it ends up with little use for decision making. It becomes a performance contract.
This is not your mother’s forecast. You should not be repeating the same process you’ve gone through in your annual budget cycle. This forecast process has a different intention (insights for decision making) than the budget (annual objectives typically tied to performance contracts) and therefore needs to be designed and administered differently than the budget. With a forecast, benefactors of this process include more than just the executive management team but also the actual contributors to the forecast and their managers. This is because there’s now a formal means of submitting honest and real feedback about what’s really coming. Managers can then take that information and have a real discussion about the difference between what the direct report said was likely to happen and what the targets are. That gap between the two is where the real golden nugget of value exists in delivering a forecast. This changes the conversation from “this is your target, now go get it done” to something like “your targeted number which we captured in the annual budget is different than your newly forecasted number for the same thing…let’s discuss this difference and see how/if we can make up the shortfall”.
Think of the Titanic and the benefits of an early detection system. Would it have been helpful to identify that fatal iceberg well in advance of its arrival??? Duh. It was later learned that the captain of the Titanic saw the hulking iceberg well before the actual impact but, because of the sheer size of the Titanic and how much open sea was needed for it to veer off course, it was too late to veer away. This is just like your business. If the Titanic knows that it can only change course with at least 500 yards of open sea in front of it then the captain should at least be forecasting and re-forecasting in increments of 500 yards because that’s the space it needs to react. Otherwise, we know what can happen. Your business forecasting time horizon and the frequency which you update the forecast, or re-forecast, should be planned similarly.
Other related resources:
Execution: The Discipline of Getting Things Done by Larry Bossidy & Ram Charan
Implementing Beyond Budgeting by Bjarte Bogsnes
Switch: How to Change Things When Change Is Hard by Chip & Dan Heath
Lastly, don’t let the perfect be the enemy of the good. There’s no simple way to go about doing this right. Every company is different with its own politics and culture. The key is to get started with some small wins and build from there. I’d suggest you start in an area of the business that could benefit from a forecast more than others. What department needs the most help? Partner with IT and/or Finance depending on where you sit in the organization and make it happen. Get a quick win and expand. Baby steps.
Remember the Tom Cruise and Colin Farrell movie, The Minority Report??? For those who don’t recall this movie it’s a science fiction thriller based in the year 2054 where Tom Cruise plays Captain John Anderton, the chief of the Washington, D.C. PreCrime police force. The movie’s other star, Colin Farrell, plays the Justice Department’s auditor in charge of evaluating the PreCrime unit’s strategy and tactics before the program goes nationwide. The PreCrime unit has been very successful having prevented any crime from being committed for over 6 years since its implementation apprehending criminals before they’ve committed their future crime based on what they call foreknowledge. In other words, this department has predictive insights into these future crimes allowing all in the community to sleep safe and sound knowing they’re being protected from the bad guys. (Look, I know there are multiple holes in this story (Think of the legality of a pre-crime arrest) but, it’s a movie, so you gotta seriously suspend your disbelief like in most movies.) Yes, I’m sure you’re thinking this is an extreme and unrealistic example of how predictive analytics can revolutionize the way things are done. Or, maybe this movie’s storyline isn’t that unrealistic???
Enter the Santa Cruz, California Police Department. Just like most police departments (and businesses for that matter) the Santa Cruz police department spends a majority of their time allocating their existing resources most effectively to produce the best bottom line results. These bottom lime results being fighting or preventing crime while protecting the safety of its community. Apart from identifying who the specific individuals are that will be committing these future crimes like was the case in the PreCrime unit in the movie, The Minority Report, the Santa Cruz Police Department is able to identify specific times and actual locations where crimes are most likely to be committed using their own set of predictive analytic capabilities. This allows them to proactively be there and wait for these crimes to unfold and swoop in before anyone or anything is put in harm’s way. They call it predictive policing which utilizes ‘Predictive Analytics’ to make better decisions about the future. Predictive analytics encompasses a variety of techniques from statistics, data mining and game theory that analyze current and historical facts to make predictions about future events – to identify patterns or likelihoods of afuture outcome – in this case, crime. Erica Goode of the New York Times says that, “Santa Cruz’s method (of predictive policing) is more sophisticated than most. Based on models for predicting aftershocks from earthquakes, it generates projections about which areas and windows of time are at highest risk for future crimes by analyzing and detecting patterns in years of past crime data. The projections are recalibrated daily, as new crimes occur and updated data is fed into the program.” Amazing.
Predictive policing is working so well that it’s being employed by other police departments around the nation. Besides it being an effective way to fight and prevent crime it’s a cost-effective and efficient way to leverage resources, especially in light of shrinking police departments trimmed by the global slowdown. Erica Goode goes on to say in her excellent article that, “efforts to systematically anticipate when and where crimes will occur are being tried out in several cities. The Chicago Police Department, for example, created a predictive analytics unit last year.”
Besides wanting to share this incredibly interesting story with you showing how far we’ve come as a society in leveraging data to make better decisions, I also wanted to use it as a way to illustrate how using predictive analytics to manage your organization’s resources (read make better decisions) based on knowing what the future will most likely look like applies to business and government just as well as in policing. Think about it. Why shouldn’t corporations employ a similar approach in how they run their businesses? And, Police departments aren’t stopping there. They’re now thinking about “Crime Forecasting” to understand future events to ensure they’re prepared for what this future will most likely require of them. The question is, where is your business on this predictive analytic path? Better, where is your competition?
When I think about the capabilities of our IBM Cognos FSR solution it
reminds me a lot of Aesop’s fable about the Ant and the Grasshopper.
It’s about preparing today for more challenging times. If you don’t know
this fable I’ve included it below as it’s so short it’s not worth
paraphrasing. The story goes like this:
I think about the capabilities of our IBM Cognos FSR solution it
reminds me a lot of Aesop’s fable about the Ant and the Grasshopper.
It’s about preparing today for more challenging times. If you don’t know
this fable I’ve included it below as it’s so short it’s not worth
paraphrasing. The story goes like this:
One summer’s day, a merry Grasshopper was dancing, singing and
playing his violin with all his heart. He saw an Ant passing by, bearing
along with great toil a wheatear to store for the winter.
“Come and sing with me instead of working so hard”, said the Grasshopper “Let’s have fun together.”
“I must store food for the winter”, said the Ant, “and I advise you to
do the same.”“Don’t worry about winter, it’s still very far away”, said
Grasshopper, laughing at him. But the Ant wouldn’t listen and continued
When the winter came, the starving Grasshopper went to the Ant’s house and humbly begged for something to eat. If you had listened to my advice in the summer you would not now be in
need,” said the Ant. “I’m afraid you will have to go supperless to bed,”
and he closed the door.
Get your house in order so that when the onslaught of work comes you
can focus on the right things. IBM Cognos FSR is one of those solutions
that helps with that “preparation” and the FSR solution can grow with
those changing regulatory, compliance, and performance reporting
requirements. I spoke with our Product
Marketing Director, Dan O’Brien, about IBM Cognos FSR and how he
explains the capabilities to our customer base. He said the hardest part
is explaining how transformational this software is for finance
departments. It’s almost like “selling cars to people still
using a horse-and-carriage. This solution is so far advanced that a lot
of customers find it hard to believe that it can really work that
seamlessly.” No buggy whips required. I’ve seen the technology in action
and its pretty incredible.
Look, we all know that today’s hyper kinetic, ingloriously
competitive business climate is calling for organizations to react and
respond more ably than ever before while at the same time these
organizations are being asked to comply with increased regulatory,
compliance, and external reporting requirements showing no signs of
Analytically-driven organizations are not wasting time while these
ever-changing, always demanding disclosure management-related processes
spiral out of control. At risk is more time robbed by these lower value
activities from the real analytical and predictive research finance
needs to be doing that’s the most value added. Also, we know the
outcome of reporting late or reporting the wrong numbers. Why not take a
look at IBM Cognos FSR???
Top performing companies have found a way to manage these additional
regulatory and external reporting requirements through the use of IBM
Cognos FSR. This solution has raised the bar in not only managing the
disclosure process, including XBRL capabilities, but this solution also
has assisted organizations with their performance reporting needs too.
This solution can automate and manage the complex tasks of collecting,
editing and reporting various performance and financial data for
finance, treasury, reconciliations, portfolio and asset management,
audit, and risk management, etc.
Reporting now requires structured and unstructured information which
is highly susceptible to errors, especially when handled manually to
edit, review, and publish that data into narrative management reports.
So get out ahead of these manual intensive, error-prone processes and
leveraging an integrated solution that can automate and effectively
manage these tasks because the pace of change for what’s being expect of
the office of finance and it isn’t slowing.
I encourage you to take a look at IBM Cognos FSR and see what it can
do for your organization because there’s only more changes coming. Be
prepared for it with IBM Cognos FSR.
“The art of war teaches us to rely not on the likelihood of the
enemy’s not coming, but on our own readiness to receive him; not on the
chance of his not attacking, but rather on the fact that we have made
our position unassailable.” – Sun Tzu
For more information on IBM Cognos FSR, click here.
Hope you enjoyed.
Tim O'Bryan/IBM Business Analytics Software IBM More of my blogs @ http://ibm-business-analytics.com
1. Before saving the websheet, make sure Excel calculation mode is set to ‘Manual’.
2. Delete all Rows and Columns beyond the last used cell before saving. Excel does not do a good job in cleaning up and there is no point having web render more than it needs to. Use Excel’s Go To Last Cell feature to find the last used cell. If the Last Cell includes empty rows and columns, delete the unused ones.
3. Use the subsets in the view when creating the Activeform, especially on the rows. This will eliminate the need for Active Form to insert a hidden sheet with the element names.
4. Delete any Named references with #Ref in them, do an Excel find to see if there are any #Ref in cell formula, check for external links and change/delete
5. Keep SUBNM formula to a minimum
6. Dynamic subsets puts a lock on the cubes which the dimension is part of. Use MDX instead.
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You'll see some of these recent acquisitions next month if you're heading down to Information On Demand next month. It boasts the biggest EXPO in the IBM Software galaxy and ample opportunities to meet product and solution experts, so not only will you discover the value that these acquisitions can bring to your organizations, you'll see how that value is augmented and extended within a broader IBM software solution. On a Smarter Planet, the smartest companies will win. So whether you're in retail, banking, education or simply want to learn more about analytics I'd urge you to do two things: read the report and register now.
THINKing about Leadership, for a Smarter Planet
IBM Chairman and CEO Sam Palmisano opened this week's IBM THINK Forum in New York by calling for a new type of leadership. Palmisano noted that although competition drives progress and innovation, it's not sufficient in an interconnected world. In this new model, Palmisano said, "the wild west of competition needs to be complemented and tempered by far more collaboration across old boundaries: across academic disciplines, industries, nations; even amongst our most fierce competitors. Palmisano also commented on the lessons IBM has learned over its first century, lessons that will enable it to survive into the next:
The Forum drew many influential - not to mention thoughtful - attendees including Sir Howard Stringer, Chairman, Chief Executive Officer and President of Sony Corporation, New York City Mayor Michael Bloomberg and His Excellency Felipe Calderón Hinojosa, President of Mexico. Rob Enderle of Forbes wrote about the conference here, and you can see more videos here.
In addition to the Forum, IBM has also installed the THINK Exhibit, a visual exploration of making the world work better, in Lincoln Center in New York. The exhibit takes visitors on a journey through a series of experiences, including:
The Data Wall: Striking patterns undulating on a 123-foot digital wall, visualizing live data streaming from the city’s nearby systems, like traffic details, untapped solar energy, water leakage through the city’s main aqueduct, air quality and credit card transactions.
Immersive Film: An immersive film displayed across 40 seven-foot, vertical media panels that tells stories of progress, including space exploration, personalized medicine and biotechnology.
Interactive Experiences: After the film, the 40 media panels switch to interactive touch screens, becoming a forest of discovery. Visitors can explore the various ways science and technology have improved the world, and the
tools and methods used to drive progress, showcasing inspiring examples of systemic progress around the world.
The Icons of Progress: IBM’s top 100 milestones, including the PC, the first computerized airline reservation system and the Apollo Missions. Through graphics and stories, the icons tell the story of big risks, lessons learned and discoveries that have transformed the way we work and live.
The Exhibit is open to the public from September 23 to October 23, and smaller scale exhibits are installed at 14 IBM locations around the world, including IOD.
With six weeks to go before the end of the year my thoughts have of late been going in two directions, usually at once. If I'm not looking back on the year that was (an extraordinary year for IBM, given its 100th birthday as a company) I'm looking at the year that will be, given our persistently uncertain economy and the blinding pace of change.
We'll be recapping the major themes of the year over the next few weeks, but in the meantime I'd like to highlight some recent research from IBM that should help you chart your course as you look ahead to next year as well.
Mind the gap. (The analytics gap)
The first is Analytics: The widening divide. This is the second study from MIT Sloan Management Review and the IBM Institute for Business Value to explore how organizations are using business analytics to outperform and drive better outcomes. The 2010 survey identified three types of analytical sophistication: Aspirational, Experienced and Transformed. This new survey reveals what these organizations were able to achieve competitively through their use of analytics. IOD attendees saw a sneak peek of the results (Read my earlier post here).
The study's main finding was the growing gap in the ability of organizations to gain competitive advantage through analytics. Almost 60 percent of organizations are now
achieving competitive advantage with analytics. Transformed organizations that apply analytics for a
competitive advantage are 3.4 times more likely to substantially
outperform their industry peers. Companies that wait to advance their
analytics capabilities do so at their own risk.
Next is the 2011 IBM Tech Trends Survey, which came out earlier this week. This extensive survey asked more than 4,000 IT professionals from across our developerWorks community about the future of analytics, cloud, mobile computing and social business and returned some fascinating results.
For cloud adopters, "developing new applications" is
expected to be the top activity in the next 24 months, surpassing
today's top cloud focus areas of virtualization and storage.
51 percent of respondents stated that adopting cloud technology is part of their mobile strategy
India may be all about social business technology (57% adopting), but other countries including Russia (19%) are more hesitant.
Respondents cited Java (77%) Linux (56%) and Linux (50%) as the skills most valued by employers, with PHP, (35%), SOA (33%) and C# (33%) finishing off the list.
The third report is the 2011 IBM Midmarket CMO Study, which points out the big-time concerns of small- and mid-sized businesses. For example:
Building and sustaining brand loyalty is the top concern for midmarket CMOs, yet 72 percent of them are not sure how to effectively build this loyalty.
70 percent of these CMOs are concerned about data explosion, as they are tasked with making sense of highly complex information generated constantly from a variety of sources such as consumer blogs,
Tweets, mobile texts, and videos.
Only 40 percent of midmarket CMOs are taking the time to understand and evaluate the impact of consumer generated reviews, blogs and third party rankings of their brands.
The report also suggests that today’s CMOs need to be better prepared with an empowered consumer that is impacting brands instantly on Twitter, Facebook, and other social channels. (Look no further than this week’s challenge that Bank of America faced when its Google+ channel was “brandjacked”!)
Moneyball author Michael Lewis and Moneyball pioneer Billy Beane closed out Information On Demand 2011 in a rollicking conversation with event host Katty Kay. Among the topics were challenging a century-old business culture with business analytics, the risks of standing still and why it's never a good idea to mess with Billy Beane's mom. Turbo's already done a great summary, so I've distilled their conversation into a few key quotes.
On the meaning of Moneyball: 'This was riveting to me. The number crunching was less interesting than what it exposed about the markets people operate in. The people running baseball considered themselves player experts because they'd been doing things the same way for 150 years. And here was Beane recruiting people the market perceived as defective. He was building a juggernaut out of defective parts.'
On bias: 'People tend to overvalue things that are flashy and easy to see. And they tend to undervalue things that are more difficult to see. You need to understand the forces that are clouding your judgement.'
On Beane and his players: 'He had tremendous credibility with the players because he was a great athlete. Being bigger than them also helped. The players were physically intimidated. It was kind of the law of the jungle in the clubhouse – reason imposed by violence.'
On offending Beane's mother because he left in Beane's profanity: 'She said, 'My son doesn't talk like that.' After the book signing I invited her to a two-hour dinner. It was the most awkward conversation I've ever had. I laid on as much charm as I could and got nowhere. She was just as angry with me at the end as at the beginning.'
On the need for change: 'For us it was out of necessity. Where were we going to get the best return on our dollar? We weren't in a position to trust emotion to run our business. We couldn't invest in the romance of the players. We had to be disciplined card counters.'
On taking risks: 'We didn't think it was risky because the math told us we'd be successful. Over enough games we knew we'd weed out the randomness. There was certainly resistance, but there was more risk in not doing it. Going with our gut would have been the most irrational thing to do.'
On Lewis revealing the secret: 'You could see the market was going move. It was just a matter of time. There was already momentum – you could feel the rumblings. You couldn't ignore the fact that the data was everywhere. The secret now is to keep your expertise in-house.'
On outcomes: 'I believe the best teams make it to the playoffs, but the best team doesn't always win the World Series. Small events in a short series can have a bigger impact; we never try to make decisions based on short-term results.'
On being played by Brad Pitt: 'You tend to hold your breath while they're casting the film. When you hear it's Brat Pitt, you exhale.'
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