Ron Dimon, Managing Director of Analytics and Information Management at Deloitte, talked about building better business models by demonstrating interconnectivity.
At the outset of his thought leadership presentation at the 2016 Chief Financial Officer Leadership Forum held in Los Angeles on June 28, Dimon announced he was going to change the direction of his presentation after listening to earlier discussions and would talk about working with the business and being a strategic business partner. “I’m going to talk about how we make finance the change agent—how we provide insights and ‘aha’ moments to the business.”
“I’m going to talk about how we make finance the change agent—how we provide insights and ‘aha’ moments to the business.”
There are four primary questions that business asks, said Dimon:
1. Where are we right now? What are the real results?
2. Why did we get what we got? Why did we miss our variance or the target? What’s the root cause of that?
3. Now what do we do, given the information and reasons for the current situation?
4. Once we’ve agreed on what’s possible and what the targets are, who’s going to do it, by when, and how?
Finance asks the fifth question: Are we doing this the right way? Are we governing and controlling efficiently, effectively, truthfully, and auditably?
“Here’s how to do that,” said Dimon. “When working with clients, I put all the elements of the business on one sheet of paper to make it easier to think about things holistically. I have each of the business functions in a column, and then I divide this into three layers: strategic management, operational management, and tactical execution. We’re the interrelationship agents, and our job is to show how each business function impacts all the others. This demonstrates to the business why it doesn’t want silos of data, processes, or rules. Every part of the business affects every other part.”
Dimon said he makes a point of asking the CMO of an organization, “From your unique perspective, what drives value?” He writes down their answer on the sheet of paper about the business. “The answer will fit into one of the 100 to 200 boxes on that sheet of paper. If the CMO’s response is, ‘Market share,’ we look at what drives market share—brand recognition, pricing, product quality, competitive pressure. I pick his or her brain about what they know about the business and we document that in a standard, repeatable format. In that process, the CMO will have a bunch of aha moments, because what’s revealed in the one-sheet business model is how, specifically, various business functions relate to market share,” he said.
“This is our role as CFOs—to orchestrate these connections across the business. It’s up to the CFO to expose and understand those connections,” said Dimon. “We take those insights into a process that I call enterprise performance management. We use historical data and drivers to build a number of ‘what if’ scenarios. Engaging the business with these data-driven, fact-based models enables a debate in the organization. You choose one of these models and use it to generate your targets, which you run into the operational and financial budgeting, planning, and forecasting processes. As you push these targets down through the organization, you’ll learn about constraints you weren’t aware of. These constraints should be captured and put into your model to improve it.”
“This is our role as CFOs—to orchestrate these connections across the business. It’s up to the CFO to expose and understand those connections.”
In sum, said Dimon, the job of the CFO is to gather up raw data and turn it into useful information by consolidating and aggregating, eliminating, converting, and transforming it into the one version of the truth. “Once we create a scenario we’re confident about, we assign some predictive capabilities to it and run it back into a financial and operational analytics scenario to generate a new model.”
ABOUT RON DIMON:
Ron Dimon is a Managing Director of Analytics and Information Management at Deloitte. He has been helping clients wring value out of their reporting, analytics, modeling & planning processes, and technology investments for more than 30 years. Ron is the author of Enterprise Performance Management Done Right (John Wiley & Sons, 2013), and focuses on bringing together integrated business planning with the insight-driven organization. Ron lives in Chicago and, for fun, he likes to decompose value drivers into metrics that matter.