I think one of best epigrams attributed to Mark Twain is, “Everyone talks about the weather but nobody ever does something about it.” This also has relevance to the situation with corporate planning and budgeting. Bemoaning its lack of value and calling for some sort of change goes back a long way, but few companies have matured their process.

In the 1970s something called “zero-based budgeting” was all the rage in business and accounting periodicals. It was energetically advocated by President Carter to counteract the incremental budgeting that made it so difficult for the U.S. Congress to cut spending. (Of course, nothing changed.) Efforts to reform budgeting gathered steam in the 1990s as software vendors began offering dedicated applications designed for planning and budgeting. more

Predictive analytics can be valuable tools for performance management. When the term is applied to planning or forecasting, many people take it to mean the ability to automate plans or forecasts. It’s true that using predictive analytics correctly is likely to enhance their accuracy, but these techniques do not eliminate the need for judgment.

In practice, many organizations may realize more value from applying predictive analytics to assess results than to forecast outcomes. Moreover, as regards performance management the usefulness of predictive analytics extends beyond planning and forecasting. They also can serve to set benchmarks that can be used to assess performance or generate alerts to accelerate necessary action. Although I advise companies to be more aggressive in adopting predictive analytics, I doubt that they will adopt them as fast as they should because of perceptions that the tools are too hard to use and the data too hard to get at. more

Asset bubbles and their aftermaths were the most prominent feature of finance in the first decade of the 21st century. In the United States, each burst led to a re-examination of the controls that might or should have been in place to prevent the bubble from happening or at least would have limited its size and extent.

Along with this, it’s also caused people to re-examine how best to manage risk. Some are asking whether it’s even possible to measure and model risk. I think the answer is yes, but in many cases the traditional approaches to modeling risk need to be replaced with methods that are more concrete and tied to each and every asset and liability. Until recently, such an approach was not practical because the information technology needed to support this approach was either not there or not cost-effective. Today, however, the lower cost of processing speed and memory, in-memory computing, near-real-time residential real estate price databases, and complex-event processing techniques (to name just a few) have made it possible to bring risk management much closer to the reality of underlying assets and liabilities and make it much less of a theoretical exercise. more

In contrast with the first five decades of the software business, technology innovation was not much of a driving force in business applications over the past decade. It’s not that there weren’t steady evolutionary enhancements, but these did not have a fundamental impact on demand or competitive dynamics. Instead, the lack of a major technological catalyst created the business dynamic that characterized the 2000s: vendor consolidation.

The last big schism in enterprise software took place two decades ago with the introduction of client/server computing. That term “client/server” is misleading because it wasn’t just the architecture that was important in driving innovation and demand. It was wrapped up with several other threads of emerging technologies, including the mainstreaming of the relational database, event-driven programming languages, and the graphical user interface. When combined, these innovations made it far easier to create flexible business applications that could support a wider range of functions and processes. All of these elements reached the market within a couple of years of each other, so in hindsight it looks like one big event, but it was a convergence of several that made the difference.

I believe that innovation in enterprise applications in this coming decade will accelerate. This time around, in the next couple of years what might be different from the 2001-2010 timeframe is that several disparate threads arriving over a longer period of time may accelerate the obsolescence of existing business software. In-memory computing may be a game changer when combined with (for example) cloud computing, server virtualization, open source software, mobility, and tablet computing and other user interface devices that substantially enhance usability, utility, and the user experience. It’s true that each of these things has been around for a while and isn’t really “new.” However, as business computing has matured and become more complex, it takes longer for threads like these to coalesce into products and services that corporations will demand. If these new products prove attractive enough, they could spawn a wave of replacement of existing software.

(This is a shorter version of longer blog that you can read here.) ###

Planning initiatives or (to use a more formal word) projects can be challenging. Most business is process- rather than project-oriented.

Processes are routine and have well-defined inputs. Making a widget requires these materials and so many labor hours. A sales call involves the following steps and these pieces of collateral. You execute the monthly close in a set pattern.

Projects or initiatives, on the other hand, are irregular in both time sequence and resources used. Projects are planned as discrete efforts while processes are recurring and routine and so do not require definition before they are started.

Laying out a project/initiative plan and the budget that goes with it may not be difficult. However, adapting the plan to changing circumstances, calculating the financial impact of those changes, and assessing performance to the plan can be time-consuming and ineffective if you don’t use the right software.

If initiatives or projects have a visible impact on your bottom line, you should look into improving the way you plan and review them. more