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More speed in the strategy

Therese van Wyk
By Therese van Wyk
Johannesburg, 11 Jul 2011

The turtle outraced the hare, so the legend goes. The turtle was slow but steady and its strategy paid off. There are limits to turtle tactics, though. Planning much more slowly than global competitors, and then taking longer still to implement strategy changes, is rife among large South African businesses, according to a recent global survey.

It doesn't help that South African managers know they are working on old data, with a large number admitting to working on data more than six months old. And then they rely more heavily on spreadsheets for planning than managers elsewhere in the world, says Thomas Popp-Madsen, director of EPM at Oracle MEA.

“In SA, it takes 202 days to gather planning data. In the UK, 55 days.”

Thomas Popp-Madsen, Oracle

Popp-Madsen bases his statement on Oracle's Enterprise Performance Management (EPM) survey, 'Performance management, an incomplete picture' of 1 499 large enterprises, 100 of those operating in SA.

Of the businesses surveyed, 43% had at least $1 billion turnover, the rest at least $100 million. Since Oracle has always had a sneaking suspicion that Excel is the most widely-used performance management tool, says Popp-Madsen, the survey aimed to find out how well corporations manage their businesses with EPM systems in general.

"I expected the UK would be a good indicator of what is happening in SA in the survey," he continues. "I thought the maturity of the South African market is fairly closely related to the UK because of historical bonds, the maturity of its ERP systems and transactional systems in general.

Quality Excel time

"I was shocked to find that SA does not score well in the survey,” he says. “We all say managers spend too much time in spreadsheets, but in SA, 48% of the work week is spent modelling data in spreadsheets. That has two implications," says Popp-Madsen. "Firstly, it wastes their time; they should be analysing data, not pulling it together. Secondly, this is risky, because spreadsheets have flaws, leading to not-so-good decisions."

Spreadsheets do not have change controls, or dimensionality, he says. "If I want to analyse the company because we are not doing well, I want to break it down by margin, product or specific geographic areas, but Excel is not built for that. It doesn't give uniform calculations. If you ask two people to do similar calculations in Excel, they will come up with two different ways of getting there. Excel becomes the tool of doing what you can, as opposed to doing what is needed, since it does not have the flexibility."

Managers end up in boardrooms discussing who's got the correct Excel sheet, airing differing opinions on whether or not their business units are doing well. Meanwhile, their basic assumptions and calculations could be wrong, or there could be errors in the data.

"By putting in an EPM system, you can at least make the planning process more efficient, which can hopefully lead to more productive discussions on what we need to do, while working on the correct data," explains Popp-Madsen. "But end-user acceptance of an EPM system is critical. It has to be made simple. That simplicity is the best argument for standardising on an EPM platform."

Playing turtle

Sadly, time spent gathering information to plug into spreadsheets isn't helping companies be more agile.

"In the global market, it takes corporations an average of 160 days to get the data they use to make their decisions. In SA, it takes 42 days longer: 202 days to gather data. In the UK, 55 days."

This means that before a South African company can react to its global competitors' moves, it's already 42 days behind.

There is another hurdle to keeping up with competitors: once data is gathered and analysed, the company needs to implement its required strategy changes. Again, SA trails. The global average is 195 days for strategy change implementation, but on average, South African companies take 238 days.

In contrast, UK companies surveyed are among the fastest in gathering data (55 days), and faster than average in strategy execution.

Why are the surveyed South African companies so slow? "I think Excel and de-centralised systems giving no common view are probably a big factor in this. If a big part of your strategy execution is to explain step-by-step what you want to achieve, it's going to take longer," argues Popp-Madsen.

Another aspect in the survey surprised Popp-Madsen. South African managers are not convinced what they are doing operationally is actually linked to company strategy, on the survey's 'Vertical Integration' component, he says.

Disagreements about key performance indicators (KPIs) used for EPM could contribute to this, but he is much more concerned about another possible factor.

"The companies I am worried about are the ones where they just distribute the dashboards, and departments in different parts of the value chain all assume they are doing the right thing, while nobody is looking at it from a corporate perspective. If you have at least tried and put EPM systems in place, you can then start saying, 'Is this really true? Does this KPI really add to our strategy?'

"If we are at least discussing how well we are living up to our strategic objectives, and we find some common denominators, then we are on the track to having the right discussion."

South African businesses may well need to speed up their planning processes with some sort of centralised EPM, just to remain in the race with global competitors eyeing a continent filled with the next billion consumers.

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