By Hans Gobin, Interim Finance Director, FP&A Leader and International FP&A Board Ambassador
What is extended planning and analysis (xP&A), and how does it differ from traditional business planning? In the Digital Nordic – Benelux FP&A Board, we explored how to move from Traditional Business Planning to Extended Planning and Analysis (xP&A). The discussion was led by an experienced panel of senior FP&A professionals from across multiple industries.
Extended Planning and Analysis (xP&A): FP&A Trends Definition
The main emphasis of xP&A is that planning and analysis goes beyond finance and its traditional accounting practices, to all functions of the entire organisation.
xP&A is an agile and collaborative planning approach that:
- Integrates strategic planning, business planning and forecasting (FP&A), and operational planning and forecasting.
- Performs planning and forecasting. Makes use of advanced analytical capabilities (artificial intelligence (AI) /machine learning (ML) / predictive/ prescriptive).
- Allows FP&A to play a key role within the organisation to enable fact-based decision-making.
Traditional FP&A vs New FP&A
Chris Stiebel, Regional Director Nordics at Jedox, believes that organisations are now moving from departmental data silos, with separate, non-integrated, segregated data, and metadata to an integrated cross-organisational, cross-functional extended planning and performance management model, and set of systems.
With the help of technology and so-called enterprise performance management tools, you can more easily make the jump from traditional budgets created once per year to continuous, real-time forecasting and granular, data-driven, driver-based scenario planning.
Combining the above with artificial intelligence (AI) / machine learning (ML) and human intelligence, we can truly make a shift and go beyond the boundaries of traditional FP&A to xP&A.
Leveraging predictive analytics in xP&A
Gianluca Capuano, Finance Director Controlling at Janssen Europe, Middle East & Africa shared with us how Janssen has leveraged Predictive Analytics to help towards their xP&A transformation.
The four predictive models in the toolbox:
- Historical pattern model – more traditional time series with artificial intelligence and the best analytics on analysing five years of internal data in producing a forecast.
- The clustering model starts from one assumption that launches of new brands have a typical behaviour and uses AI to analyse the data and produces launch codes for use in the forecast.
- Analogue model assumes that similar brands behave similarly. The advanced analytics and the engine behind the model produce 10 different relevant curves to use in forecasting.
- The US model uses data from other launches in other markets to predict launches in new markets.
The results of our poll showed the key to unlocking xP&A opportunity is strongly believed to be in integrated FP&A Process (36%) followed closely by Effective FP&A Business Partnering. Flexible system ranked at 18% and Predictive. Prescriptive, AI/ML tech at 14%. It is important to think of how you can combine all 4 options to maximise impact.
Main Skills Required for the Transition to xP&A
Marco Bordignon, CFO Germany, Japan Tobacco International (JTI), provided information about traditional FP&A skillsets and how we need to evolve to achieve the xP&A transformation:
- Technical dogma vs Open to change
- Silos thinking vs Business partnering
- Financial focus vs Business acumen
- Excel paradise vs Use of technology
Why should we transform FP&A? Marco believes that the ultimate goal of this journey is summarised in the following statement: “No more commercial decision followed by financial analysis or financial decision followed by commercial implementation BUT integrated business decisions driving sustainable successes.”
According to Stéphane Bonutto, CFO Europe, OERLIKON BALZERS, there are four key drivers and enablers for an xP&A organisation: technology, data, organisation and people.
To get ready for the new stage of xP&A we need to:
- automate and digitalise the technology
- leverage skills and capabilities of the people
- re-tranche and redeploy organisation
- understand what is going on in our businesses and become an effective xP&A business partner.
A Recruiter’s Perspective on xP&A
To end the round of presentations, Menno Boss, senior manager at Robert Half, gave us a recruiter’s perspective on what skills organisations are looking for in new candidates.
According to their survey, the top concern for the C-suite for 2030 is the need for businesses to upskill existing employees and to work with the increasing level of digital technology. In the top 10 risks for 2030 is the ability to attract but also the ability to retain talent and plan succession.
Marco also mentioned that some organisations are concerned with their inability to compete with “born digital” competitors who can respond very quickly and use data more effectively to drive decision making. This drives the need for integrated DNA analysis, quicker and more meaningful insights across the business. It has never been more important for companies to have an integrated approach as it is today.
Conclusions
In times of uncertainty, we found out that traditional business planning does not work very quickly. Budget and forecast become irrelevant whereas multidimensional and integrated scenario planning is a must-have. This is where you see the importance of the concept of xP&A. Adoption of xP&A is key to the survival of organisations. So, for those who have not yet embarked on this journey, “Now is the time”!
We would like to thank our global sponsors and partners Jedox and Robert Half for their great support with this Digital FP&A Board.
Also, we are very grateful to our panel of experts for sharing with us their keen insights and to the FP&A Board attendees for their valued presence!
To watch the full Digital FP&A Board recording, check out this link.
