Thursday Mar 27, 2014

Customer Lifetime Value: Viewing Customers as an Investment


In this age of customer-centricity, do you really know how to put a value on your customers? I had the pleasure of interviewing Gary Cokins, the founder of Analytics-Based Performance Management - an advisory firm in Raleigh North Carolina - for a Thought Leadership podcast on this topic. We discussed Customer Lifetime Value and how to view customers – not only as profitable or unprofitable to a business – but similar to investments for a business like in an equity stock portfolio. The objective from a shareholder’s view is increase the return on investment from the customers. Gary has written a dozen books on Enterprise Performance Management, Activity-Based Costing, Quality Management and more.

Many of you likely already have a firm grasp on the concepts of measuring and reporting profitability, but may be less familiar the concept of Customer Lifetime Value. Gary defined it for us this way: “Customers and consumers pass through life cycle stages. For example, teenage girls become young adults, then mothers, and so on. At each stage, their consumer needs change. Each type of consumer’s future profit potential needs to be understood based on which stage in their life-cycle they are. The marketing and sales functions have begun exploring what is basically a math equation that calculates Customer Lifetime Value in monetary terms. The equation is intended to measure the future potential level of profitability of a customer or consumer to a supplier.” In essence, Customer Lifetime Value is a forward-looking view of shareholder wealth creation possibilities.



So how are these calculations different from customer profitability calculations, such as from last month or last year? Gary explained that most profitability measures are historical and do not consider the products’ and customers’ prospective profit contribution. Customer Lifetime Value math is trickier, because it also considers the probability of losing some customers (or churn). In addition, the calculation of future streams of revenue and their associated costs, which would include the net present value of discounted cash flows, are taken into consideration. This involves time value of money principles and math that considers both the timing of future cash inflows and outflows, as well as the weighted average cost of capital. A lot to think about when considering Customer Lifetime Value!

Customer classifications come into play as well. Some customers are high maintenance types with substantial demands on a supplier and some are low maintenance - often referred to as demon customers and angel customers., The substantial costs-to-serve incurred below the product gross profit margin line (i.e., channel, marketing, sales, and customer service costs) for high maintenance customers obviously erodes profits. But Gary explained that understanding the amount of the cost-to-serve for each customer is very important. A shift is needed from being product-centric to customer-centric. Suppliers need to understand the unique preferences of and differentiated services for each customer, as well as different distribution channel expenses to service their existing customers, and desirable, prospective customers to acquire.

So how does this affect spend by the suppliers? According to Gary, the key is to spend “the next dollar” on consumers who will most likely generate a relatively higher incremental increase in sales relative to the incremental expense to “lift” those sales. And this analysis should focus only on the impact of interventions with consumers independent of how the consumer might increase their volume of purchases from a supplier simply due to their progression through their life cycle.

I highly recommend listening to the entire podcast as we covered a lot more content in the interview. But the long and short of it is that suppliers must consider Customer Lifetime Value when understanding profitability to get a complete picture and determine which best actions to retain and grow profits from consumers. They must view customers as an investment – the financial return on customer – and not just a short term gain.

To listen to the entire podcast, click here.

To learn about Hyperion Profitability and Cost Management, click here.

Friday Feb 21, 2014

Oracle Planning and Budgeting Cloud Service -- What's All the Buzz About?

Earlier this week, Oracle announced the general availability of our first EPM application in the Oracle Public Cloud, Oracle Planning and Budgeting Cloud Service, thereby extending our existing portfolio of on-premises and managed /hosted applications with a SaaS offering.

I had the pleasure of speaking and demo’ing our solution to a group of customers that day at an event in Dallas, and there was clear enthusiasm about the ability to access world-class planning functionality in a SaaS-based model.  Our announcement also generated excitement in social media and news articles.  In addition, existing Oracle EPM partners, as well as partners who have worked with us in other product areas, are lining up and are in the process of becoming specialized for Oracle Planning and Budgeting Cloud Service.  Some have already launched their rapid start offerings.

So, why are customers and partners excited about Oracle Planning and Budgeting Cloud Service?  What’s new and differentiated about this offering?

Fast Adoption

This application is built for SaaS adoption to meet cloud user expectations around ease of use and self-service.  It includes a number of cloud-specific capabilities that make it easy to roll out planning and forecasting to your lines of business across the enterprise.  These include:

+ Extensive online help and video tutorials
+ Best practice design templates and guides that are based on years of experience with Hyperion Planning implementations
+ Guided application navigation features that literally take a new user through the whole process of building an application
+ Plus diagnostics and governors that assist with building and monitoring an application from the administrative side

During the 3-month customer and partner preview program that we ran last year, we received very positive feedback about how users could get up and running with virtually zero training needed.



First-in-Class Functionality

While Oracle Planning and Budgeting Cloud Service is a new product, it leverages the code base of the market-leading Hyperion Planning application, which has seen rapid adoption over the past 10 years, with close to 4K organizations implementing it.  Many of these deployments have become quite large with over 1000, and some even over 5000 users globally.  This is what sets Oracle apart in the marketplace -- proven on-premises technology, now optimized for the cloud.

+ Powerful multi-dimensional analysis capabilities and sophisticated rules framework for fast processing of complex calculations
+ Collaborative workflow and plan management capabilities, including powerful annotations, commentary, document attachments, task, workflow and burst reporting capabilities
+ Intuitive web interface with full MS office integration for driver-based modeling, rolling forecasts and analytics
+ On the fly models that can be created and shared collaboratively and validated against sophisticated predictive capabilities
+ Built-in management reporting capabilities

Flexible Deployment

Many companies today are assessing cloud options in parallel with traditional implementations of on-premises solutions.  They are concerned about potentially locking themselves into a single approach from vendors that can only offer either a cloud solution or an on-premises solution with no way back.

For most organizations today, flexibility of deployment holds the key to the way forward.  That is, the ability to adopt mixed mode deployments (public, private and hybrid clouds) as desired and to alter the mix when business circumstances dictate it.  Moreover, the Oracle Cloud offers security and encryption at every layer of the tech stack, utilizing the latest physical and logical data security and protection solutions. Oracle is the only vendor who can deliver this, leveraging our own hardware, database, and applications technology, plus the Oracle Cloud infrastructure.

Customers I’ve spoken with welcome this flexibility of deployment and see the Oracle Planning and Budgeting Cloud Service as an additional option to meet their planning and forecasting needs.  Customers have the ability to move applications back and forth between Planning and Budgeting Cloud Service and Hyperion Planning on premises, through Lifecycle Management (LCM) packages, which is proven technology from the Hyperion applications portfolio.

And, unlike niche cloud vendors, Oracle lets you decide when upgrades happen, so you don’t have to go through planned downtimes at a critical time. With Oracle’s flexible upgrade schedule, you can choose an upgrade window that best fits your business. Customers also have the ability to specify the 1-hour slot for daily maintenance and backups performed by Oracle.

So what’s all the buzz about?  Simply put, Oracle Planning and Budgeting Cloud Service offers world-class functionality with the simplicity of the cloud.


For more information about the Oracle Planning and Budgeting Cloud Service click here.

Wednesday Jan 22, 2014

Scorecards in the Wild West?

Oscar Pardo, a Solutions Consultant for Oracle, works with Federal, State and Local governments helping them to herd their wild KPIs and establish scorecards to meet US requirements from the President. I had the pleasure of interviewing Oscar during a podcast and he gave some sage advice on what to expect when building scorecards.  He described how Oracle Scorecard and Strategy Management is just the Sheriff you need to help tame your runaway KPIs, and manage your performance.

Oscar began the interview by defining what public sector organizations are trying to accomplish with their business scorecards. Agencies like the Department of Homeland Security, the Veterans Administration, and Health and Human Services are enormous (the size of some of the largest companies in the world!) and need tools to help them understand where they are performing well, and where they are underperforming. Basically, they are trying to accomplish the same things that private sector companies are striving for. Things like:

Transparency to their public
Insight into how well they are running and where they can take actions to improve
Accountability for their funding. With the close scrutiny of funds and cost cutting in budgets, agencies are more accountable than ever for their funding
A better grip or control of what is occurring and what actions they can act on  
A way to monitor those actions and make sure they are working

Oscar also mentioned the most challenging aspects of creating scorecards were:

Developing the right KPIs, and getting consensus. This is like walking around in the Wild West. Everyone wants KPIs for themselves – there is often little organization and few rules around choosing them or deciding how to use them.
Defining the Key Performance Indicators. This takes a lot of time and effort
Locating where the information resides. This takes the longest amount of time. Federal Agencies have a harder time of it, because they have a greater volume of data because they are larger organizations. Information resides in many different systems and is measured at different levels.

Interestingly enough, the most challenging aspects were not software related!



So what part does software play in scorecards? According to Oscar, scorecard software acts like a Sheriff would in the Wild West, upholding the laws. Without the Sheriff enforcing the laws, in this case guidelines, executives will ask for more and more KPIs – then the data collection activity, reporting, and subsequent activities will get out of hand. Here is some advice Oscar shared to help:

Have a single champion, group, or department that is in charge of determining what makes sense to capture and what will have the greatest impact to the organization, because there is a big cost in collecting and maintaining this information. – The champion is like the town Mayor; setting the rules that the Sheriff enforces.
Develop an Office of Strategic Management (or other performance management governing department) or appoint individuals to appropriately define KPIs and objectives. They can then help the Mayor so KPIs can be implemented quickly and uniformly across the organization.
Don’t wait. Too many times I hear customers say, “Let’s wait until next year” or “After the next reorganization or administration”.  With a strong governing agency that is responsible for scorecards, those excuses are no longer valid.  The job of an incoming administration would actually be easier because they have visibility into the organization on Day One.

So what benefits are public sector agencies experiencing with scorecards? Is it worth their while? Oscar told us YES, it is worth their while and here’s why:

Monitoring performance is so much simpler. The Oracle Scorecard and Strategy Management product gets you up and running quickly.   You don’t have to build it, and it comes with the Oracle Business Intelligence Foundation Suite.
Scorecards and Business Intelligence naturally go together. Scorecard initiatives work well with a formal Business Intelligence / Data Warehouse in place.  
Mobile scorecard capabilities.  Having scorecard information available on your mobile device enables you to take this information with you and act upon it without being tied to your desk or office.
Build it with market prevalent Scorecard methodologies like Balanced Scorecard or Six Sigma.  It has an easy to use interface to help agencies define goals and objectives, then facilitate the building of KPIs to track and meet these goals and objectives – all within the same tool the organization uses to do its BI reporting.
Informative visualizations like Contribution Wheels, Strategy Trees, Watch lists, Cause and Effect Maps, and Strategy Maps are available automatically.  

Oscar told us that Oracle made a great decision in making Oracle Scorecard and Strategy Management part of the BI Foundation which marries technology with the scorecard methodology (the Sheriff).  Add the Mayor and other constituents to work with Oracle Scorecard and Strategy Management, and you too can tame YOUR Wild West.

To listen to the entire podcast, click here.
To learn more about Oracle Scorecard and Strategy Management, click here.

Friday Jan 10, 2014

The Deeper Realities of Implementing Shared Service Costing with Hyperion Profitability and Cost Management

You may have heard this one before, but it remains true. Many companies around the world are still fighting to understand what their true costs and profitability are – by region, by customer, by product etc. I caught up with Stuart Croucher, Senior Associate at Marsh & McLennan Companies, and Mike Killeen, Vice President of Technology with Edgewater Ranzal, an Oracle Platinum Consulting partner, to talk about Mercer, a Marsh McLennan Company and their understanding of cost and profitability. Until recently – they too were struggling with this business issue.

Marsh & McLennan Companies are the premier global professional services firms providing advice and solutions for risk management, strategy and human capital management.  They are comprised of four companies:

+ Marsh- a global leader in insurance brokering and risk management  
+ Guy Carpenter- a global leader in risk and reinsurance intermediary services  
+ Oliver Wyman- a global leader in management consulting and
+ Mercer - a global consulting leader in talent, health, retirement, and investments

Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people.  Over the last several years, Marsh & McLennan Companies has seen transformational change with the establishment of a new shared service center to support the finance and information technology functions.  However that did not come easily.



Stuart shared with our listeners that two years ago, Mercer’s senior leadership changed overnight. In the new CEO’s  first town hall to the company, he spoke of the urgent need for Profit and Loss statements  by line of business and by country level.  He could not believe if he asked a business leader in Brazil what his profit was, that he didn’t know the answer.

How were they measuring cost? Previously, all Mercer measurements had been performed on a contribution margin basis; this simply meant that each LOB was judged on how much it contributed to Mercer’s central costs. Function costs were all held centrally and not allocated to the businesses. This was simply unacceptable to the new leadership team because it did not allow them to understand which businesses and countries were truly profitable.

As you might expect, under new management, finance was given the immediate task of implementing business/country level profit and loss statements, as the new CEO had made it one of his top priorities. This meant developing a rapid (like yesterday) solution using Excel. Eventually, with extraordinary effort, they were able to build and deliver a successful solution using many, extremely large MicroSoft Excel workbooks and MicroSoft Access - but they ran into all the usual Excel model based issues, after go live: 


+ It was very difficult to answer questions from the business -  in other words,  why did I get this allocation 
+ It was impossible to keep track of changes to the model 
+ It was difficult to re run the model for a different scenario --  for example,  running it for Budget and now wanting to run it for Prior Year Restated.

What Mercer wanted for the future was to deliver an allocation solution that combined the Oracle Hyperion Planning and Hyperion Profitability and Cost Management approach providing a platform for future growth and the ability to easily run multiple versions. Also key was low IT involvement when running the model -- they wanted Finance to completely own the day-to-day running of the model.

Mike further explained that Marsh & McLennan Companies needed to put together a new shared service center to support the controllership and Financial Planning & Administration within all of their operating companies. A key component of that shared service center was the selection and standardization of a performance management platform to create a consistent user experience for their users, and to lower the firm’s Total Cost of Ownership. For this reason, Hyperion Profitability and Cost Management was evaluated and selected as a tool that could meet the needs of this solution for the F-A-S-T requirements - specifically Flexibility, Audit and Control, Shared Methodology, and Transparency. For most of Mike’s clients, the F & T tend to be the most important.

The flexibility of Hyperion Profitability and Cost Management (HPCM) was critical to Mercer in the development process, because it allowed the business users to see the impact of an allocation methodology or attribution change. Mercer couldn’t have done that with a traditional “take the requirements and build it via a calc script” type approach. Additionally, the traceabilty maps in HPCM were helpful in getting sign off on the allocations, and additionally answering questions that came back from the Planners regarding where a charge came from. Finally, by moving the older model in Excel to an Oracle EPM packaged application, they were able to offer the audit and control needed to ensure confidence in the numbers, and additionally, provide an ability to run the models via shared methodologies for budgets, actuals, and forecast scenarios. Mercer took advantage of features that allowed them to run 2013 budget data through 2012 methodologies and 2013 methodologies, and seeing the impact of methodology change alone on results.

It became apparent quickly that there were deeper realities of implementing Shared Service costing with Hyperion Profitability and Cost Management. To hear more, click here to listen to the entire podcast.

To learn more about Hyperion Profitability and Cost Management, click here.

Wednesday Nov 20, 2013

Alignment of Ever Shrinking Budgets in Federal, State and Local Government

According to Josh Kahn, the Federal, State and Local government agencies are facing austerity, uncertainty and the need for accountability and transparency now more than ever. Josh Kahn, a Solution Specialist  Director at Oracle, and James Antisdel, Manager with Deloitte Consulting, joined me for a podcast to discuss using Oracle Hyperion Profitability and Cost Management to align the ever shrinking budgets in government. Both James and Josh have a deep knowledge of and practical experience with the US Public Sector, particularly in government agencies.

We started off talking about the issues that government agencies are currently facing. Josh indicated that the agencies are facing many similar issues as the private sector in that transparency and efficiency are needed to help combat uncertainty and austerity. He felt that creating and using shared service centers enables organizations to provide a common product or service to a number of other organizations, thus increases efficiency and reducing effort. But without robust cost models to capture, analyze, and report on costs, it is difficult to measure and account for the new efficiencies, and equally difficult to explain the shared service charges.

So, I asked Josh what the barriers or limitations were to accomplishing this challenge. Josh explained that there are really three categories of limitations:

1) Legacy cost models are generally spreadsheet based. They rely on highly manual processes, lack transparency, lack a robust reporting solution and generally make analysis very difficult.
2) Data governance and quality. Many solutions rely on data that is sourced from disparate systems and commonly rely on data requests that require labor intensive processes and error prone manual transformation.
3) Cost models are generally kept simple.  Simple models limit analysis such as transaction level costing and commonly require a delay in producing results -- reducing the usefulness of data because it is likely old and irrelevant due to the delay

According to Josh, a good enterprise-level costing system like Hyperion Profitability and Cost Management can address all three of these limitations.

Next, James and I discussed how he had seen Hyperion Profitability and Cost Management used by his Federal, State and Local government customers. He told our listeners that he had seen it used for:

+ Cost allocations
+ Customer bill calculation/generation
+ Service center performance management
+ Assisting with planning and budgeting
+ Financial and operational analysis
+ Decision making

I was very impressed with the versatility of this application.

Digging deeper into a costing model for government, I asked James to tell us what an agency could hope to gain from implementing a costing system. James told our audience  that “development and management of the cost model can provide greater insight into the full cost of services provided to an agency’s customers, and can enable more informed decisions aimed at optimizing resources, increasing value, improving performance, gaining efficiencies, and reducing costs."  Furthermore he explained that Deloitte’s customers, armed with this new information, can begin taking next steps to improve business processes and work to refine their model to gain more insight into particular areas that offer opportunities for savings and improvements.  As a result, an agency will have the capability to accurately identify current and projected costs, formulate and justify budgets, and support operational process improvement and managerial decision making.

James emphasized that an enterprise costing solution can enable an agency to more readily pinpoint cost variances at a detailed-level and be far more responsive to requests for information from customers and other stakeholders.  It is a powerful analytical tool that can be used to support an agency in becoming transparent, efficient, and a Shared Services Center of Excellence.

So it seems that a powerful, versatile,  enterprise-level costing system can go a long way in helping to align the ever shrinking budgets in Federal, State and Local Government.

To listen to the entire podcast, click here
To learn more about Hyperion Profitability and Cost Management solution, click here

Monday Oct 28, 2013

Taking Your Business Scorecard Golfing

Our workplace world is definitely changing. Not only are we taking work home, but we are working during odd hours in some very strange places.  I had the pleasure of interviewing Jacques Vigeant, Product Strategy Manager for Oracle Business Intelligence and Enterprise Performance Management, on a Podcast, and he enlightened me about how our mobile devices and business scorecards are enabling us to be more accountable and keep a watchful eye on business – even while on the golf course.

Business scorecards have been around for many years - so I asked Jacques if he felt they had changed significantly due to technology. His answer was, “Yes, and no.”  Jacques agreed that scorecard enthusiasts are still passionate about executing the company strategy and monitoring Key Performance Indicators (KPIs), but scorecards and Business Intelligence (BI) as a whole have changed.  He explained that five to six years ago, people did BI work at the office and, for the most part, disconnected from their computer and workplace when they went home – with the exception of checking email and making a phone call or two. But now, that is no longer the case. People are virtually always connected with work and, more importantly, expect their BI and scorecards to be ‘always on,’ regardless of whether they are at their desk or somewhere else.

Basically, the BI paradigm has changed from a 'pull' model, where employees are at their desks querying or pulling information from the system, to a 'push' model where employees expect their BI and scorecard systems to reach out (or push information) to them when there is something of note to learn or something on which they need to take action.

I found this very interesting. However mobile devices do have their limitations with respect to screen sizes – does it really make sense to look at your strategy/scorecard on tiny devices? What kind of scorecard activities can you really expect to be able to do? Jacques’ answer was very logical. “When you think of a scorecard, it is really comprised of an organization of KPIs that are aligned with the strategic objectives of your company. KPIs are the heart of how you will execute your strategy. So, if you decompose that a little more, each KPI is well defined with the thresholds that you should keep an eye on and who is responsible for them. When we talk about scorecarding on a phone, we aren’t talking about surfing the strategy and exploring the strategy map like we do on the desktop. In a scorecarding context, we use the phone more as an alerting mechanism or simple monitoring device for your KPIs.”

Jacques gave a great example of an inventory manager who took part of an afternoon off to go golfing before winter finally hit, and while on the front nine holes, his phone vibrated. His scorecard was alerting him that the inventory levels for one of the products was below some threshold that he had set.  From his phone, he had set up three options within Oracle Scorecard and Strategy Management (OSSM) for this type of situation:

  1. Contact the warehouse manager directly by phone and work it out (standard phone function)
  2. Tap/hold the KPI and add an annotation to the KPI in OSSM using the dictation capabilities of the phone and deal with it more fully when he gets back to the office
  3. Tap/hold the KPI and invoke a business process from OSSM to transfer product from another warehouse with higher stock levels to the one that needs it 



Being on a phone should still give you options to quickly deal with situations as needed, but mobile phones are not designed for nor should try to replicate the full desktop experience.

We covered other interesting subjects in the interview, including how Oracle is keeping pace with mobile innovation and new devices such as Google Glasses, Galaxy Gear, Pebble Watches and more, and how Oracle is handling mobile security– which is great news for our mobile workforce.

To listen to the entire Podcast, click here.
To learn more about Oracle Scorecard and Strategy Management, click here.



Tuesday Sep 10, 2013

Mastering the Cost of Higher Education with Hyperion Profitability and Cost Management


There is a perfect storm going on in the world of Higher Education right now. Over the last few years, the cost of higher education has been outpacing the consumer price index. To learn more about this important and disturbing phenomenon, I had the pleasure of interviewing Ida Quamina, Principal Solutions Consultant for EPM products at Oracle for our AppCast Series. She has a deep knowledge of and practical experience with Oracle’s Education and Research customers.

Parents are starting to ask how and why this perfect storm is happening. Well, both US college endowments and state appropriations are decreasing, while university expenses and enrollments are increasing. Yet universities are being forced to keep tuition costs flat. Ida also told us that Federal and State Governments are now starting to take a look at costs at institutions. President Obama, during his State of the Union address in February 2013, asked Congress to include affordability and value as a factor in determining which colleges receive federal aid. States are starting to require cost containment measures as part of their performance based funding models.

So how can Higher Education intuitions better understand and manage these issues? Ida told our listeners that Higher Education institutions already have good visibility into total operational costs and total revenue collected, but little or no visibility into individual program, degree and course costs, or the cost per student. Currently, colleges and universities have not implemented activity-based costing which is used in many commercial enterprises. Activity-based costing goes beyond the traditional allocation of overhead and provides institutions with better insight into information needed to make strategic decisions about cost containment and allocation of resources. With governing and regulatory bodies currently recommending (and likely soon requiring) this type of analysis and reporting, it is becoming critical for higher education institutions to have this type of insight for both long term and short term planning and reporting.

So which institutional processes benefit the most from understanding costs more? Ida explained that budget and spending decisions need to be based on data and not assumptions. Financial ERP systems and the current structure of institutions’ charts of accounts are not set up to support the type of analysis needed. Using activity-based cost and revenue modeling enables academic institutions to answer crucial questions and, more importantly, analyze many business scenarios to determine their best courses of action.

Ida further explained that for this type of process to be successful, collaboration between the academic and administrative teams in institutions is foundational and critical. These two groups need to start the discussion about how, and to what level, costs and revenues are to be allocated and which drivers are going to be used. This is the starting point to begin a good model. It is an iterative process and institutions will build upon this and create additional model scenarios as economic and academic conditions change.

So how can Oracle help? Ida told us that to survive, Higher Education institutions need to either make programs financial sustainable, or ensure there are other programs that have enough surplus to make up for the deficit of programs. Oracle can help with:

+ Transparency that enables institutions to ensure resources are aligned correctly based on actual measurable information
+ Understanding the true cost to implement new programs and the ability to make pricing decisions based on those costs
+ A thorough understanding of costs at a more granular level and the root cause of the costs. This information enables institutions to make informed decisions
+ Creating accountability that enables departments to understand the resources they consume as it relates to the revenue that they generating
+  Addressing concerns and questions from various stakeholders, e.g. CFO, Provost, Board of Trustees, State and other governing boards and accreditation bodies.

To stave off this perfect storm, it is imperative that our institutions now master the cost of Higher Education.

To listen to the entire interview, click here
To learn more about Oracle Hyperion Profitability and Cost Management in Higher Education click here
To learn more about Oracle Hyperion Profitability and Cost Management, click here


Tuesday Sep 03, 2013

Align Cost with Revenue for Profitable Growth in Diversified Industries

Historically, growing revenue typically equated to increased profitability for most organizations, but in this economy this statement is no longer true. On this subject, I was very fortunate to interview Ralph Canter, Managing Director, and part of KPMG’s Diversified Industries Practice (an Oracle Platinum Partner) and Bart Stoehr, Senior Director of Product Management for Oracle in an Oracle AppCast podcast. 

According to Ralph, diversified industries – which includes global manufacturing – has had a roller coaster ride in terms of profitability over the last 20 years. Post 2008, many experienced slowed, stalled or even reversed growth so much so that companies had to focus on how to stop the bleeding and reduce/control costs rather than focusing on increasing revenue. Growth for growth’s sake was no longer sustainable so companies had to adopt what KPMG calls ‘profitable growth’. This is growth with a lens or focus on serving many market segments and many demands on product, supply chain, and customer satisfaction.

I asked Ralph to tell us about the biggest hurdles to profitable growth and being able to measure it. He told us, “The biggest hurdle has been that the game has kind of changed. Systems have been developed over time to support the measurement of how growth used to be – which was more regional and stable and long term – and you had a timeframe in which to build the system to address a certain growth period. Today, in a global environment, the global view is segmented by customer, by product, by channel, by region, by market, by sales channel – all kinds of dimensions. And what’s happened since 2008 is that the revenue picture has become a very, very sophisticated analysis that is very aligned to tell you where you’re growing. What’s been left behind is the cost view of that growth. So while I have really good aligned OLAP cubes analyzing my revenue growth, I do not have an associated, detailed cost model that can align with that revenue to create a profitability analysis of the revenue growth view. What we see is a limitation in the maturity of cost to keep up with the maturity of how you are analyzing your revenue and your profitable growth.”

So what became clear was, in this economy, profitability is no longer as simple as subtracting cost from revenue!


Once we were clear on the issues, I asked Ralph to tell us more about how Oracle Hyperion Profitability and Cost Management and KPMG can help organizations with profitable growth.  Ralph told our listeners, “Our point of view starts with revenue and not cost. We help customers understand how they want to measure their growth and then help them design their cost information ‘content’ to make sure we can answer the profitable growth question. In most cases this means reconstructing a cost view that matches up to the profitable growth questions. This is where the functionality of Hyperion Profitability and Cost management is leveraged to not only support the reconstruction, but also keep cost and revenue aligned and reportable”.

I asked Bart if he could talk about some Oracle Customers that are practicing profitable growth and he specifically mentioned Leggett and Platt (invented the bed spring in 1885) who are now quantifying the cost of delivering special services to their customers, assessing the value of those services, improving product portfolio management, attacking cost reduction opportunities and streamlining operations (to mention a few objectives). Bart told our listeners that Leggett and Platt are using a combination of Oracle Hyperion Planning and Hyperion Profitability and Cost Management to push GL costs to align them with revenues by pooling the costs, moving them to activities where they are consumed by the various products, customers and customer segments, and then driving them down based on product consumption characteristics. Leggett and Platt are using some of the costs derived by Oracle Hyperion Profitability and Cost Management to perform driver based planning in Hyperion  Planning - the power of the two working together are simply unmatched.

To help the listeners understand how Hyperion Profitability and Cost Management specifically helps with profitable growth, Bart and Ralph emphasized some key features used for this purpose. There are many of them, but their favorites are:

+ Any costing method or combination of methods that represent an organization well can be used. Nothing is prescribed but practicality is recommended
+The traceability map enables you to understand where costs come from, how they are consumed and where they go. This is important to help all members of the value chain understand what is going on
+The pre-configured ability to deal with excess capacity (Provides fully loaded view and incremental views of cost to help support current and future decision making)

There is much more to the interview, but it was certainly clear that many kinds of diversified and product-focused industries can benefit from using this method of growing profitably, and Ralph and Bart provided very interesting insight into the practicalities of growing profitably by aligning cost with revenue.

To listen to the entire podcast, click here.

For more information about Oracle Hyperion Profitability and Cost Management, click here.


Tuesday Jun 11, 2013

Actions Speak Louder in Scorecards

I had the pleasure of interviewing Jacques Vigeant, Product Strategy Director for Oracle Scorecard and Strategy Management for Oracle Corporation, about the use of embedded actions in scorecards and their effect on organizations. Most discussions about scorecards typically focus on traffic lights or maps, grids of numbers or objective definitions, but this discussion had an interesting twist. Jacques told our audience how actions, defined and embedded into scorecards, can improve individual performance and improve the ability to execute strategy.

We started the discussion with Jacques’ definition of a scorecard. Jacques told us that scorecards are a set of tools and techniques that extend the Business Intelligence (BI) system to provide a language that can be used to define a corporate strategy and to define the goals and objectives that support achieving that strategy. Scorecards also provide a set of tools to enable businesses to define key business metrics or key performance indicators (KPIs) that are in support of the strategy. All of this is to effect change – if you cannot effect change, then you are wasting your time.

So how do actions fit into this definition? Jacques told us that actions are a complementary technique to effect change – you define actions with objectives, goals and KPIs, enabling the user of the scorecard to perform the action complementary to the status of the object based on who they are. What kind of actions are we talking about? According to Jacques, there are three basic types of actions:

     + Navigation to another system or website
     + Trigger scripts or Java methods to invoke sophisticated tasks
     + Trigger any Oracle Fusion Application workflow

“Actions are a real strong suit for Oracle,” said Jacques. They are also a differentiator. All key business workflows from Oracle Fusion Applications are available as web services and because of this, Oracle Scorecard and Strategy Management can surf through and use a repository of thousands of Fusion Application business processes and workflows. With this in mind, business users can choose to associate workflows with objectives, KPIs and initiatives, and trigger them based on who is viewing the scorecard object and the status the object is currently in.

Actions in Oracle Scorecard and Strategy Management

Some actions are as simple as linking to another system to dig deeper into a KPI to understand the roots of the data, or launching into the HR system to look at an HR record for an employee whose scorecard you are currently viewing (with permission, of course). But you can also do much more sophisticated things like trigger a true workflow. Jacques gave the following HR example. Let’s say your competitors have been pillaging your staff and hiring them so your headcount KPI is in steady decline. Based on the status of the KPI and the fact that you are logged into the system, from your dashboard or scorecard you can trigger a workflow action to open a job requisition in another system. And because this business workflow is available as a web service with Single Sign-On to OSSM, you do not need to leave the OSSM environment. 

Jacques also gave other examples of workflow actions that can be triggered such as presenting forms to fill out to adjust a forecast or some kind of data capture that makes sense. Actions can be reactive or proactive in nature and you can choose to do different things based on the data. Actions can support individual jobs, departmental functions and/or corporate strategy.

In short, actions do speak louder in scorecards.

To listen to the entire podcast, click here.

To learn more about Oracle Scorecard and Strategy management, click here.

Wednesday May 08, 2013

Gaining Strategic Alignment with Business Scorecards

Recently, I had the pleasure of interviewing Mr. Trey Robbins, Managing Director for Technolab, a Platinum Oracle Partner, for a Podcast. Trey and I discussed the implementation of Oracle Scorecard and Strategy Management (OSSM) at Technolab, and the important results they have achieved.

Trey told our listeners that Techolab wanted to translate their Balanced Scorecard framework into an online tool so that they could align their corporation in all the countries and hold people more accountable for achieving goals and corporate strategy. Managers update their measures and part of the corporate strategy manually, and then meet on a quarterly basis virtually (via phone and webcast) and in person on an annual basis. They walk through the overall corporate objectives and how they are tracking including the budgets and targets they have set.

In addition to strategic alignment, Technolab is also experiencing operational and financial benefits from OSSM. Trey told us that when he was first hired at Technolab, he saw lots of good ideas from the company brought forward in meetings and brainstorming sessions, but after the meetings were over and everyone went back to their day to day activities, the great ideas were lost. By using the scorecard tool, they document the good ideas, assign responsibility and track their progress.

An example of an operational improvement that Trey described was tracking the compliance of the entire organization around certifications that their consultants need to have for implementing software for their customers. Certification and re-certification for each region of Technolab is extremely important to the company, but difficult to monitor. Technolab now has software certification as an objective for each region and country and the company expects to see green lights on this objective at each meeting, or have a really good explanation of why they don’t. “When you go in front of your peers and management and you have certain things that you are responsible for, you are going to make sure you are executing on those. You don’t want to go into your meeting unprepared, and you definitely don’t want to go into your meeting with a bunch of red traffic lights,”said Trey.

When asked about some of the lessons learned from the initial implementation, Trey had some good advice. 

    
 1. Understand all the components needed to track strategy, measures and activities before using a tool. If you jump straight into the software, you will be missing components and that will slow you down. Understanding everything your organization wants to track and everything that your scorecard tool needs will enable you to speed through implementation.

     2. At the beginning of implementation, hold executive status meetings on a monthly basis rather than quarterly. The more visibility you have, the more consistent the message you articulate, the easier it is to execute.

    
3. Leverage the use of mobile capabilities more. Enable the executives to review the status of objectives and activities frequently and ‘on-the-go’.

Implementing Oracle Scorecard and Strategy Management (OSSM) gave Technolab a better way to manage their international business activities, align everyone around the corporate strategy and move the entire company towards achieving that strategy.

To hear the entire Podcast click here.

For more information about Oracle Scorecard and Strategy Management (OSSM) click here.


Tuesday Apr 16, 2013

Enrich Your Scorecard with Metadata That Actually Matters

Oracle has released another interesting Podcast – this one is about how Oracle Scorecard and Strategy Management can help you drive behavioural change and improvement at the same time by using metadata that actually matters.

I had the pleasure of interviewing Jacques Vigeant, Product Strategy Director for Oracle Business Intelligence and Enterprise Performance Management and Oracle Scorecard and Strategy Management (or OSSM) about this subject.

After covering the basics about what a scorecard is and how it differs from a BI system or dashboards, we went on to discuss how scorecards should traverse dimensional structures, not just go up and down the hierarchies (like a typical BI system does) but also jump from one hierarchy to another to tie important data together.

Then we got to the heart of the Podcast – metadata that really matters. Jacques told us why accountability is so important – understanding WHO is under or over performing and HOW that performance relates back to the organizational strategy is key to pushing strategy forward. It is difficult to modify behavior if accountability is not included.

Jacques further explained that traditional BI metrics are typically focused around aggregating metadata along a single hierarchy. For example, we all know intuitively that a very high attrition rate in a company can impact the profitability of the company.  Traditional BI metadata focuses on aggregating metadata for HR attrition rates by HR dimensions, like attrition by department or region, but in this example, there is still a chasm between the HR data and financial data. Oracle Scorecard and Strategy Management (OSSM) enables you to draw relationships between your measures that are not necessarily based on aggregate tables or dimensional hierarchies – rather by business insight. You can literally drag and drop scorecard metrics on top of each other to get a better snapshot of what is going on. Jacques provided the following example, “Let’s say my attrition metric has an impact on my employee effectiveness metric, which has an impact on employee productivity, productivity has an impact on cost, and cost has an impact on profitability. You can drag all of these metrics on top of each other to get a whole company understanding of the impact of attrition rate on profitability”. This is new insight about the relationship. Once we understand this relationship, there is now a financial basis for management to ensure that the attrition rate stays within acceptable parameters – which can lead to a change in management behavior.

How does this type of insight help? Jacques explained that OSSM provides a set of metadata that is actually captured by the user using the system, providing new business insight. As more users use the system you are gaining more and more business insight. You get a network effect of new and better business insight as more people use the scorecard tool. This is not the same kind of metadata as traditional metadata that simply describes the existing dimensions.

Near the end of the Podcast Jacques also told us more about how the use of metadata that matters (including accountability) with financial objectives and data and operational metrics and data, can all roll up into the strategy tying everything together. The ability to keep the data current enables users to get a really good picture of the state of the strategy at any time, and which elements are most important to monitor to move the strategy forward. There are really great visual diagrams within OSSM that help you to literally see what is happening.

Jacques provided other interesting examples and useful information about metadata that actually matters in scorecards and how it can help encourage organizational change during the Podcast. I encourage you to listen to the entire interview.

To hear the entire Podcast click here.

For more information about Oracle Scorecard and Strategy Management (OSSM) click here.

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This blog will highlight key EPM market trends, recent events and other news of interest to our field, customers and partners.

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