The great news is that all finance professionals can use validated
As FP&A professionals, high value output should be our ultimate objective and to really drive the value in an organization we must focus on 3 main areas: Strategy, Business and Data.
The challenge is these are often in addition to all the other requirements in our job description including: Consolidations, Budgeting, Forecasting and Monthly Reporting. Yet, as we accomplish these tasks at hand, we need to also drive forward the value cycle as this is where the real business value lies.
Strategy – the direction of the company including the long term vision and shorter term missions with tactical goals.
Business - the partner and customers externally and Sales and
Data – the data that is held in an organization internally or external data sources. In larger organizations there may be an
Between Strategy and Business, FP&A’s role is to lead as a strategic partnering. Strategic partnering is taking the agreed strategy and helping the organization translate this into action, ultimately drive business success and shareholder value in line with the vision. Finance teams have always played a role here especially as they have adopted an independent advisory role and a custodian of the company. Remaining independent from the rest of the business can mean that ideas and strategies are fresh but aligned to the vision. In my experience, a key part of decision-making is looking at new proposals from all angles. Finance teams must remain independent to ensure that they have a distinctive perspective.
Between Business and Data we have insight generation. The role here is working to translate business needs into queries. How often do you get a request from the business to pull a set of numbers together, and this inbound request from the business doesn’t have many details or even make sense. It’s our role to question the request and understand the true need, so we understand the drivers and are better equipped to find the right data to answer the questions. Here I often go through a process of problem diagnosis, customer analysis and data identification. A great tool to help you with this is the “5 Whys” technique. The “5 whys” technique was created by the Toyota Motor Corporation and is an iterative question-asking technique used to explore the cause-and-effect relationships underlying a particular problem. 2
Finally we have value creation, one of the key learnings that helps guide a business through uncertainty. These decisions are now supported by data and can ultimately determine the direction of the business, its vision, mission and tactical goals. Value creation often takes the form of a data visualization, but it is the wisdom in knowing that only once we understand what question we are trying to answer and figuring out the right data to answer that question, will you be able to interpret the insight into business direction. Too often I see in FP&A professionals creating reams of reporting without thinking “What question I am trying to answer?” or “What action do I hope the business will take as a result of my interpretation?”.
In the perpetual cycle Value Creation keeps the spin going - Between Big data and Strategy is the sweet spot for FP&A. Now, successful companies take a more analytical approach, moving away from a “Gut Feel” to a “Validated Learning” decision, as Eric Reis calls it. With validated learning, can we influence the direction and strategy of a division, business groups or enterprise? Yes.
The Value Cycle is our approach at redefining FP&A’s role in the organization. To take a
- http://theleanstartup.com/principles
- http://en.wikipedia.org/wiki/5_Whys
James Myers
CEO & Founder
FP&A Strategy Consulting LLC