Enterprise Business Planning: From connection to integration
Breaking down organizational silos with strategic planning
Tech-enabled business planning is a capability that’s improved significantly since it first emerged, but for many organizations, it’s rare for business planning to truly encompass areas like supply chain, finance, or marketing. With scaled Enterprise Business Planning, companies can dramatically increase shareholder value through several key drivers.
Enterprise Business Planning: The holy grail of integrated planning
Though progress has been made in the field of business planning, organizations today are operating in unprecedented volatility driven by:
- Rising customer expectations
- Increased competitor capabilities
- Accelerated product road maps
- Never-ending demands for improved speed and efficiency
- Expectations from investors and analysts for accurate and confident guidance from the C-suite
Consequently, companies must improve how they develop, communicate, and execute against plans. The traditional paradigm of integration is insufficient and requires a new model combining the different planning functions in the organization.
In recent decades, the operations-oriented capabilities for basic supply-and-demand planning and material requirements planning have evolved in two major steps. The first was Sales, Inventory, and Operations Planning (SIOP), which better integrated demand planning (as seen from the customer-facing sales organization) with core supply chain planning. The second was Integrated Business Planning (IBP), which expanded on SIOP by integrating key financial planning activities with sales and operations by providing structured, cross-functional “checkpoints” during the development of operating plans.
Key features of Enterprise Business Planning
The EBP paradigm features three major improvements:
- Concurrent planning across the enterprise: With EBP, planning is executed concurrently and collaboratively, rather than sequentially based on a calendar. As such, EBP eliminates the white space between functions and traditional segregated processes through parallel planning processes that are tightly integrated by common data sets, planning assumptions, and aligned performance management routines.
- Integrated execution: EBP eliminates the traditional boundaries between planning and execution by using integrated processes, systems, and data sets to create the plan, issue execution instructions, and monitor performance (using carefully designed dashboards to highlight potential, expected, and/or realized variances). This turns raw data into useful insights, giving managers more time to react and enabling organizations to respond to the inevitable plan exceptions in a synchronized manner.
- Continuous, systematic learning: EBP makes use of embedded feedback loops to systematically address differences between the plan and actual performance, automatically improving itself for the next planning iteration. It also helps employees ask better questions and develop more complex and insightful analyses, including business strategy support and analysis, which is something many C-suite executives are looking for.
With these advances, EBP is more than just an integrated plan for the entire business. It’s the central component of an ongoing management process that fills multiple roles within the enterprise.
- Coordination: One of the biggest challenges for many organizations is coordination of planning and execution across different functions. EBP fosters coordination in a number of ways. First, it helps achieve organizational buy-in by providing a forum where views are exchanged and consensus is developed. Second, it enables a coordinated implementation of strategic business planning through aligned goals, commitments, and performance targets that are continuously monitored to help ensure the whole organization is moving in a consistent direction.
- Target-setting: EBP is forward-looking, helping to establish the goals an organization intends to achieve over the planning period. These goals include both financial targets (e.g., revenue growth, cost reduction, operating profit, return on capital) and strategic targets (e.g., market share, new products). The process involves setting and monitoring financial estimates about capital expenditures and operating budgets, both for the organization as a whole and for individual divisions and business units.
- Decision support: EBP makes decisions more coherent by constraining the range of alternatives to consider and by acting as a heuristic that reduces the searching required to find an acceptable solution to a decision problem. Also, it enables the knowledge of different functions to be pooled and integrated.
Benefits of Enterprise Business Planning and barriers to change
Implementing elements of EBP has already enabled companies around the world to dramatically increase shareholder value through a variety of key drivers.
EBP drives revenue growth and increases market share through improved agility that enables adaptive, value-based pricing models and improved customer service and order fulfillment. It drives operating margins by enabling pricing optimization, improved forecast accuracy, and reduced manufacturing costs. And it drives asset efficiency by providing closer alignment between capital planning, market growth projections, improved working capital positions, and reduced inventories.
EBP also enables other benefits that are less tangible, but still important, such as improved product road map management and better financial guidance in quarterly earnings. Also, it can have a positive impact on total cost of IT ownership by requiring tightly integrated data and collaborative systems, which simplifies the IT landscape and reduces the number of planning platforms. Finally, adopting EBP can increase job satisfaction for employees involved in planning, giving them more opportunities to challenge themselves intellectually and to see how their work contributes to business performance.
"Although the benefits of EBP are compelling, and many leading companies are well on their way to achieving the full EBP vision, many other prominent companies are still struggling to execute even basic sales and operations planning."
Until recently, technology was the main barrier to improved planning and adoption. Today, however, the main barriers revolve around people and organizations. Misalignment of incentives to really transform and adopt new processes and systems resulting in organizational inertia are the biggest barriers to EBP implementation and adoption. Also, organizational politics and functional silos invariably exert an influence. Misaligned priorities and unclear benefits are also common problems.
Fortunately, there are proven ways to address these organizational challenges. Start by aligning performance management elements (e.g., targets, incentives, rewards) with the strategic KPIs and targets associated with the planning process. This applies both to functional groups and key roles, helping to drive behaviors that are aligned around the same shared goals. Integration challenges are addressed through a clearly defined model of roles and responsibilities for key stakeholders.
Steps for enabling and accelerating Enterprise Business Planning
In helping companies around the world transform their planning processes, we have developed a proven five-step approach to enable EBP.
Take strategic planning to its ultimate level
Companies around the world have been pursuing the holy grail of business planning that is fully integrated across the entire enterprise for decades. Now, the methods and technologies exist to make that ambitious vision a practical reality. Enterprise Business Planning converges all critical planning processes in finance, supply chain, and commercial into a truly integrated process, enabling businesses to create and maintain a single plan that everyone is aligned around and can be measured against. The biggest challenges are organizational: having the drive to get started—and the willingness to embrace something different, but better.
Jeroen Kusters
