Who Will Win the Battle of the Numbers at your Company?
Have you ever found yourself in a meeting, whose primary purpose was to make some key decisions about your business, and yet you find yourself in a heated debate about what numbers to use to make the decisions? Believe it or not, it happens more than you might think. Over the past couple of weeks you might have seen my posts on pricing. A meeting about pricing strategy is usually, if you’re doing it the way you’re supposed to, a meeting where you will have participants from sales, marketing, finance and operations…so pretty much the key members of your leadership team. Why? It’s mainly because pricing requires input (read numbers) from all of those organizations to provide a complete picture from which you can make an intelligent decision, especially if you’re using it as a competitive weapon.
So, what’s the problem? Unless your company is a surprisingly rare phenomenon and you’ve got all that data in a centralized data warehouse, the data’s structured in a manner that makes this kind of analytics possible and, this is the most important one, every one of these organizations is using that same warehouse you’re probably all working from a different set of numbers. Worse, none of these numbers are likely to reconcile with one another. Instead of having a productive discussion about how you’re going to take it to your competition, you’re arguing over whose numbers are correct. Everyone’s jockeying for position to establish their version of the numbers as THE set of numbers. It’s amazing how emotionally attached people can get to a set of numbers. Needless to say, it’s not going to be a very productive meeting.
The real issue is that at some point, you really do need a set of numbers that does accurately reflect what’s going on in your business from every perspective. It’s not an easy problem to solve. If you read enough business intelligence software collateral, you’ll be led to believe that it’s just a simple matter of aggregating all the data from your line of business applications into a data warehouse using their software. What they’re not telling you is that you have to provide a different perspective to each of the organizations for their day-to-day activities. These perspectives usually require some level of analysis unique to that particular target audience that only they will be interested in.
Silos of Information
Many companies have addressed these requirements by creating separate data marts, one for each target audience. And now you have disconnects because, while some of the numbers are the same, many others are not and it’s very difficult to reconstruct the links in a manner that would allow you to see how they fit together. Having worked with databases in some form or another for the past 25 years, I could probably come up with a solution, but it’s not going to happen in a meeting.
One of our clients, Elkay Manufacturing, faced a similar issue. Their senior finance executive, John Hrudicka hadn’t even made it through his job interview at the company when he was told, “Your numbers suck!” Like many of you reading this, I might have thought twice about signing on, but John had a plan for A Total Remodel. He started with his vision for a Discreet Product Costing (DPC) system as the centerpiece for their executive management system. DPC, for Elkay, represents the single version of the truth upon which they base many of their decisions at tactical and strategic levels. The rest of the executive management system, which is loosely based on Robert Kaplan and David Norton’s version they describe in their most recent book The Execution Premium, is rounded out with components such as their strategy framework, their business performance management component (for planning) and their CRM component. Each of these will be integrated with DPC in a manner that provides transparency and guided knowledge in real-time. What’s even more remarkable is that he’s decided to build this system with components from different vendors because he (and the rest of the Elkay Management Team) believe that “technology has matured to the point where you don’t need to buy a fully integrated suite that possibly forces you to sacrifice functionality that’s necessary to meet a business need. “ Elkay is seeing results, too. They are arguably in one of the hardest hit industries in the past recession, yet they’ve been able to improve profitability and gain market share. As Adam Sandler would say, “not to shabby.”
The key to their success has been the level of transparency John’s been able to bring to the table with his DPC system. They are no longer arguing about which numbers are correct because everyone’s using the same set of numbers. Even more important is the fact that everyone’s actually bought into the numbers in a way that makes you think they actually own the numbers. They’ve achieved all of this in less time than you might think. So, the next time you’re in one of those meetings that loses its focus and turns into the battle of the numbers, remember what John Hrudicka did. It’ll dramatically change the way your company does business, I guarantee it!