In this series of 9 blogs, we will be looking at a number of areas that FP&A departments must address if they are to add value to the organisations they serve in this technology-driven age. In this blog, I’ll cover the reasons why change is essential.

“Change is inevitable. Change is constant”, so said Benjamin Disraeli back in the late 1870s.  But what he could not have foreseen was the exponential growth in change that we have experienced in recent years.  Change is primarily driven by technology - not only by what it can do but also by the impact on the speed of change itself.

From an FP&A perspective, consider what technology has provided over the past few years:

Data:

• With the prevalence of the Internet and our ability to collect anything and everything, everybody, including the competition, now has access to huge amounts of data. Data that is both internal to the organisation that covers all aspects of organisational performance, and external information that describes the business and economic environment in detail.  
• New kinds of databases can handle varied formats such as audio, video and documents.  These do not need to store data in any kind of structured form - i.e. the data doesn’t have to fit into a predefined set of fields and records as is found in relational and multidimensional databases.

Analytics:

• Sophisticated, statistically-based data mining algorithms can be used to spot trends in any kind of data, and not just text and numeric information as in the past.   
• Machine Learning capabilities allow models to automatically adapt to changing data relationships which can then be used to provide more accurate forecasts with detailed explanations.

System capability:

• Powerful parallel computing machines that can process terabytes of information in seconds, providing real-time analysis.
• Automated workflow that takes advantage of machine-identified market opportunities and which can direct operators to make the right decisions no matter fleeting the chances may be.

In addition to all of the above, there has been a growth in Cloud-based analytic solutions that provide FP&A departments with the latest developments in technology on any device, in any location and in any language.

As a consequence of these developments, FP&A departments are in a position to adopt new approaches to their role.  For example, they can embrace continuous planning, develop self-adjusting driver-based models for budgets and forecasts, and provide automated alerts and reports to managers, all without the need to involve manual effort. They can also embark on analyses never dreamt of before that use different types of data, for example, in analysing social media comments and news streams from around the globe that could impact future profitability.

At no other time in the past has FP&A had such sophisticated tools whereby they can radically improve the service they offer to management. The only issue is whether FP&A departments have the knowledge of these emerging technologies and the skills required to make use of them, and senior management that recognises the FP&A departments can no longer rely on the skills and level of resourcing from that of a decade ago.

The truth is that these new technologies require skill sets that are far removed from the traditional expertise and tools used in the past, and even today, training can fall far short of what is actually going on in the world of analytics. The situation is so desperate that a radical new approach is required to how FP&A departments are staffed, resourced and directed.

Over this series of blogs, I will be looking at practical ways in which change can be managed. It will require turning away from traditional, accepted practices and reinventing FP&A.  This is not just another ‘scare story’ put about every few years to try and justify more resources for FP&A, but an emerging reality that the world of analytics has changed so much as to invalidate how many departments operate.  

In ending this blog, two quotes from William Pollard the physicist, come to mind that, although written a long time ago, sum up perfectly the current situation:  

“Without change, there is no innovation, creativity, or incentive for improvement. Those who initiate change will have a better opportunity to manage the change that is inevitable.”

“Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow. “

It’s time for radical change.

The article was first published at Unit4Prevero.