Dynamic Business Planning

In Best Practices, Finance, Strategic Planning // on December 20th, 2016 // by // No comment

Business PlanningDynamic Business Planning

The plan must be dynamic to respond to changes in the industry, the economy, the competition, key commodities and other planning assumptions. A dynamic plan enables the organization to adapt and grow to meet changing competitive conditions.

Analytic Tools and Predictive Models

Analytic tools and predictive models are excellent methods for enabling organizations to adjust to changing conditions. They require fewer inputs than traditional planning and help to automate and shorten the annual budget cycle. Analytic tools incorporated into the business planning process enable finance to generate scenarios needed to question old assumptions. They also stimulate new thinking by churning through internal and external data. Analytic tools challenge the idea that professional experience and intuition are reliable substitutes for fact-based decision making – it takes all three.

Predictive models enable organizations to design models that focus on leading versus lagging indicators and provide much greater insight into what’s happening in the organization. In addition, predictive models enable planners to evaluate alternative scenarios based on driver fluctuations.

Predictive models should be designed and implemented using a driver-based planning model. The models should incorporate critical operational data or drivers that influence financial outcomes. Over time they increase the predictive accuracy of plans. A driver-based planning model is not purely financial in nature; the model captures the inter-dependencies of the business and provides a better-rounded picture for the future of the business.

Value drivers include market share; service and products – existing, new, mix; customer channels – channels, segments, service; and market growth – contract life cycle. These value drivers are owned by business managers to drive the focus across the organization. Clearly defined value drivers measure progress against targets that are linked to the organizational strategy.

If you’re new to designing predictive models, start small, use model-based forecasting to support target setting and build your experience using data to create meaningful scenarios.

Retain Best Practices

In the end, when it comes to designing your planning blueprint, determine what works for your company and confirm with stakeholders. Retain practices that add value and eliminate the rest.

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