Profitable vs Unprofitable Decision-Making

Oracle finally gets it, at least in words. Frank Buytendijk’s blog on “Management Excellence and Oracle EPM part 1” suggests that Oracle may have tried to solve the challenge of making profitable Operational decisions by including the underlying Financial data. He further suggests that Oracle is two years ahead of their closest integration competitor. While I don’t believe the latter and have evidence as to its untruth, I do believe that Frank is focused in the right direction to suggest that a diet of pure financial data or pure operational data is drought or famine, but certainly not a balanced meal. A truly healthy business will make vital decisions that combine up-to-the-minute financial data with the operational systems data to ensure a data-enriched decision process. Decisions in a financial vacuum are anemic and life-threatening when variables such as gas prices, finance rates, currency translation and inventory levels are critical to a decision process and have a delay or periodic update cycle that is out of synch with the decision-making continuum. Multi-dimensional data still lags behind transactional data in its ability to be accessed in a time-sensitive manner due to the very systems that created the data. The power of the cube, such as delivered by Hyperion, created a one-way flow that is now antiquated in theory. The strong financial instincts of today’s CFOs and rising finance stars begs the use of this cube data downstream, co-mingled with the operational decisions of the lines of business. This is the innovation of which we speak; the ability to ask for more and initiate change to older patterns of behavior to uncover a fresh use of data, propelling the business forward into leadership.

BI Competency Centers: Do CFOs Help or Hinder?

Intelligent Enterprise Editor-in-Chief Doug Henschen moderated a webinar last week titled “Business Intelligence Competency Centers (BICCs): Many Choices, Many Pitfalls” sponsored by Forrester Research. With BI now considered “table stakes,” panelists Boris Evelson and James Kobielus of Forrester, BI consultant Claudia Imhoff and Capgemini’s Joe Moye discussed how enterprises can drive greater value from their BICC investments.

One recommendation was to cross-pollinate BICCs with other CCs in areas such as Business and IT Governance; Enterprise Architecture; Data Warehousing, Data Quality and Data Integration; ERP, CRM, Supply Chain Management, etc. While this makes perfect sense, doesn’t it seem ironic that we still need to encourage coordination after the costly lessons we (hopefully) learned from propagating BI application stovepipes?

Side note: With many of the CCs above revolving not just around competencies but applications and processes, it was interesting that James suggested BICCs be renamed BISCs (BI Solution Centers). We'll keep an eye on a Forrester report in queue on this topic for October.

The idea of coordinating CCs reminds me of conversations I’ve had with an aerospace and defense company that extended their BICC with specialized data integration technology for key applications. As a result of tapping into finance data, the company is supporting deeper BI analytics based on time-sensitive operational insights.

To boost synergy between CCs, one panelist suggested overlapping them and allowing personnel on the teams to create hybrid roles. This brings to mind the success story of a cosmetics company that adopted a war room approach to unite IT and line of business experts for projects.

The most interesting part of the discussion involved who should own a BICC: IT or line of business. Not surprisingly, opinions varied, with Evelson advocating for ownership by C-level business executives and Imhoff taking a more IT-centered approach. Evelson added that most of the successful BI environments he’s seen have had strong business ownership (for more check out his keynote at the Computerworld BI Perspectives conference Sept. 8th). Imhoff underscored the need for technical acumen beyond the skills of the business analyst – areas such as data integrity, data quality and database performance. (Rajan Chandras takes this a step further on his Intelligent Enterprise blog post, urging readers to explore the qualifications needed to influence BICC success)

Imhoff asserted that CCs should not report to the CEO’s or CFO’s offices, going so far as to suggest that CFOs may infuse too much of a finance or accounting flavor. It’s hard for me to imagine many business decisions that don’t impact profitability, competitive advantage or shareholder value, but since time ran out on the webinar, let’s open up that part of the discussion here.

What do you think? Are CFOs the best stewards of these BI centers?

Jumping Ship or Just Jumping?

I just read that Wachovia's Chief Risk Officer, Donald Truslow, is on the way out the door just a week after CFO Thomas Wurtz announced his resignation. Given the sad state of the banking giant, I wouldn't be keen to stay, either. It makes sense. And I'm sure that it makes very good sense if you are sitting in what are probably two of the hottest seats in the house when the risk around one major M&A activity, in this case the Golden West Financial Corp acquisition, may scuttle the company. So in Wachovia's case, the run for the door makes sense.

Then I read the following list of CFOs on the Move, which covers just the week of August 1: Wachovia, Campbell's Soup, The Children's Place, Navigators, Forbes.com, United Plastics Group, Icahn Enterprises, Hayes Lemmerz, ARI, Orisis, Michaels, JP Morgan Cazenove, EnBW, Friends Provident, Ascom, AP Moller Maersk, Sistema.

While I've been posting about the changing role of the CFO recently, I haven't written about the individual impacts of that changing role upon CFOs. According to Heidrick & Struggles, 106 CFOs at Fortune 1000 companies left their positions in the first half of 2008. What the heck is going on here? Where are all the CFOs going? Are these voluntary resignations, jumping ship like so many of the Wachovia team, force-outs, or is this a trend brought about by the expanding nature of the role.

Are CFOs leaving companies when there is little opportunity to participate as a contributor at the strategic level? As regulatory compliance becomes stricter, the risks associated with the CFO role increases. Well beyond job pressure, CFOs are putting their legal necks on the dotted line every quarter. I believe in this time, when the CFO manages such a large portion of the corporate risk, that the benefits of the position have to outweigh the risks they're been forced to assume. If data is accurate and trusted, performance management systems well-designed and implemented, and the business practices sound, much of the fear of compliance is eliminated.

Companies that are focused on innovative ways of running their businesses, with Finance as a key contributor to the strategic and operational vision, tend to be exciting places to work. If the CFO can trust the accuracy of data coming from their systems (and with a 3-5 year CFO tenure at the best of times, unless it's a startup, you can assure that most CFOs have inherited their accounting, G/L, performance management etc. systems), then they are freed up to focus on contributing to the company at a more strategic level.

My opinion: perhaps the incredible CFO turnover that we've seen in the past several years has less to do with the company as the role.

Thoughts?