As business leaders make their way through 2011 and look toward 2012, only a few things appear certain. Growth has returned, albeit slower than the historical trend. But opportunities are coming from unexpected and often uncharted quarters. The business world is more volatile than ever before, making it more challenging to predict everything from demand to raw materials costs to exchange rates. And finally, business risk has structurally increased. These factors and others are driving many companies to focus on improving their Enterprise Performance Management capabilities.
According to The Hackett Group's 2011 Key Issues Study, revenue growth acceleration is clearly the top strategic objective of large global companies. Continuing fallout from the recession, political turmoil in the Middle East and even natural disasters, such as the recent epic earthquake and tsunami in Japan, make it clear that revenue growth can't be managed with a narrow view of controllable, internal performance drivers. Indeed, most of today's top business objectives are highly dependent on external factors.
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Over the past few years, many companies have gone as far as they can to support the bottom line through cost cutting, so revenue growth is critical. But the greatest opportunities for revenue growth through 2014 are not in the traditional markets of North America and Europe. China and India are booming as are smaller markets such as Brazil and Indonesia. In 2011, China will represent 39% ($550 billion) of the total GDP growth of the world's major economies. Overall, growth rates and the overall size of the domestic economy in China and India will combine to create tremendous economic growth engines and opportunities for companies.For companies that already have established global operations, this look to global markets as the primary source for revenue growth represents an evolution or reorientation of their business strategy. For others, looking outside their traditional Western markets is akin to a new startup, and represents uncharted territory. In addition, high levels of volatility in key performance drivers such as demand levels and input prices increase the challenge of "planning for growth" and "managing the plan" in these new markets.
As 2011 unfolds, companies are being tested by a seemingly endless set of challenges. Even as the extreme unpredictability of conditions affecting companies during the recession subside, companies expect a permanent increase in the volatility of business conditions.
Furthermore, in addition to volatility, business risk has also increased. The threat of parts shortages at U.S. automakers due to the earthquake in northern Japan this past March underscores that risk is always looming. More structurally, companies are anticipating higher levels of government regulation and increased global competition as the two main business risk drivers in the foreseeable future.
Against this backdrop, The Hackett Group's Key Issues Study found that finance's 2011 priorities are heavily skewed toward strategic enablement of the business in an uncertain business environment. In particular, the emphasis is on supporting external growth objectives, developing a competitive cost structure and changing the operating model of the business. The high ranking of customer satisfaction/service improvement is perhaps a tacit admission that customer service suffered at many companies during the recession. All the issues, however, are at some level dependent on companies redesigning their operating structure to succeed in a global marketplace.
As part of the study, The Hackett Group also asked executives about where they are targeting their performance-improvement initiatives in 2011. The results clearly confirm that companies see the need for better analytical and decision-support capabilities to enable finance to help their organization through today's historically difficult business environment. Most are planning to improve the efficiency of their budgeting process and boost their forecasting performance. These processes, as well as management reporting, fall under the umbrella of enterprise performance management (EPM). Given that business partnering also has a distinct EPM element, it seems clear that the vast majority of companies, if not all, are looking to enhance the performance of at least one EPM process. Most are tackling multiple EPM processes simultaneously.
Improving EPM-related capabilities dominates the finance agenda for 2011 but which specific service delivery components have CFOs targeted to receive special attention? Inspection of EPM focus areas most cited in our key issue study shows companies' priorities revolve around EPM process improvement, including forecasting, planning and reporting. Also important are information architecture-related initiatives.
But a wide variety of other issues, including business partnering and talent management, are on the radar for at least 40% of companies, foreshadowing a very high transformation activity level across the EPM planning and control cycle in 2011. Business intelligence/analytics tops the technology investment priority list, closely followed by data management initiatives. There is a pronounced gap between these two priorities and all other finance technology investment plans cited (most of which involve some element of ERP investment).