Systems Not Living Up To Expectations.
The problem today is that most companies operate with standard costing systems, using spreadsheets to evaluate strategic alternatives and make financial planning decisions. Increased complexity of operations, faster market changes and stronger competition are forcing top executives across a variety of industries to re-evaluate the effectiveness of this spreadsheet approach.
Spreadsheets and other systems such as Business Intelligence, Corporate Performance Management, and Supply Chain Management cannot provide the enterprise-wide information required to effectively evaluate the decisions that yield the best overall financial results for companies. These systems are not holistic, they do not accurately represent or optimise for financial impact of decisions, and they do not communicate the right information to all relevant stakeholders.
A common weakness of many planning systems in use today is that they are not fully integrated. This lack of integration restricts insight and understanding at the enterprise level. Therefore managers cannot evaluate strategic alternatives objectively, nor can they effectively allocate resources. Without understanding the company's collective performance drivers, managers cannot determine priorities and economic 'trade-offs.'
Non-integrated systems and inadequate planning and 'what-if' analysis capabilities force managers to make decisions without understanding the complete picture. In place of information, management is forced to use well-educated guesses and assumptions; and results from assumption-based activities can be devastating.
Too many companies today make assumptions about costs, customer profitability, product profitability, demand fulfilment capacity, and associated cash flow and balance sheet impacts. In addition to repeatedly poor decision making, this overload of assumptions also prevents adequate linkage between strategy and execution.
Most strategies include elements for marketing, sales, finance, production and human resources. While these components may be independent, the actions in one area will have an impact on the enterprise, thereby influencing the value of any given strategy. Missing the impact across interdependent strategic initiatives often causes management to miss important nuances and can cause embarrassing and costly mistakes.
