Just adopting EPM won’t automatically turn your company into an innovation superstar. But if you try to become more innovative without adopting EPM, that task is much harder.
Few business leaders today would argue with the phrase that legendary management consulting guru Peter Drucker made famous years ago: “Innovate or die.” Understanding why companies need to innovate is easy. You need to constantly innovate if you don’t want your products or services to become the same or even inferior compared to competitors’. The hard part is actually becoming more innovative than you already are. It’s hard work and there are lots of barriers in your way. Old habits are difficult to break. Doing something new invites failure and failure reinforces old behavior. Successful innovation may threaten existing revenue streams and political constituencies. True innovations by definition have never existed before, which means they tend be hard to explain both in terms of their value and how to use them.
And unlike problems with solutions you can buy — like cloud computing as a solution for technology disruption — no off-the-shelf solution exists for the problem of how to become more innovative. What does exist, however, are solutions like EPM that make innovation easier. You can’t automate yourself to greater innovation like you can automate, say, routine financial accounting tasks (which EPM is really good at, by the way). But what EPM can do is accelerate the implementation of seven key strategies successful innovators employ:
- Make time to innovate. An obvious trait of non-innovative companies is that they don’t have time to innovate because they are too busy only doing non-creative work — like the financial close and end-of-period reports. EPM lets you do such tasks much faster, leaving time for the tasks that innovation requires — like researching opportunities, brainstorming with colleagues, doing what/if financial analysis, and so on (much of which EPM also accelerates).
- Eliminate the fog. Another trait of non-innovators is that there is a lot of confusion among stakeholders about the financial numbers and what they mean. Different stakeholders will have their own spreadsheets and different ways to present data; there is no single version of the truth and no clear view of the truth. That is an environment that, again, makes doing anything creative or developing consensus very difficult. EPM solves this problem by tying together disparate data sources and ensuring that everyone has a single version of the truth. It also provides the tools to present data and its implications clearly.
- Re-frame problems quickly. Good innovators know how to ask the right questions, play off various what/if scenarios against each other, and construct different analytic models to gain new insights from the same data. EPM’s advanced visualization and model building tools were created just for those purposes. The tools are also self-service so problem re-framing can happen widely across the enterprise (by people who know what to look for) versus only in a central analytics department (by people who may not).
- Enforce best practices. Unintended actions have unexpected consequences. That is why innovation requires an EPM-like systematic approach to managing resources. That approach streamlines getting things done fast and correctly because systems are in place that make it harder to do things incorrectly. It also means that when you do innovate that the only things that change are the things you want to change. So, if the innovation doesn’t work, or doesn’t work well, you can more easily isolate further changes you need to make for improvement.
- Focus on the right things. Of course, innovation will not help if stakeholders don’t focus on the key factors that impact performance — like what customers want and where process and supply chain bottlenecks exist. EPM gives stakeholders that insight so they know where to apply their creative energies.
- Collaborate. Some of the most successful innovations occur when there is easy, frequent, and widespread sharing of ideas and information among stakeholders across departmental boundaries and functional silos. EPM provides for this too.
- Be agile. “Fail fast,” and “build – measure – learn” are matras often heard in the hallways of innovative companies. These companies understand the value of testing lots of new initiatives, learning what you can as soon as you can, and then using that knowledge to either improve something or try something new. So, if you are going to cycle through this process quickly and repeatedly you need a mechanism, like EPM, to collect, apply, and react to new information quickly.
The sum total of implementing all seven strategies is the most important strategy of all — and EPM’s most important role: to build a culture of innovation. Because both enterprise performance management and a culture of innovation require the same thing: enterprise-wide change — which is exactly what EPM enables you to do.