What is Spend Agility? Spend agility is the ability for enterprises to rapidly assess, predict & change spend, investments and operations strategy in real time, to capture value-creation opportunities.
Why is Spend Agility needed now?
2020 has been a volatile and challenging year for all enterprises. COVID-19 intensified the unpredictability and volatility of today’s market, and showed how enterprises were unprepared for a systemic “black swan” event. Enterprises entered 2020 roaring with their business plans only to hit an unexpected COVID wall. By the end of the first quarter 2020, the world had changed and customer demand fell dramatically. Facing an unexpected revenue shortfall, enterprises had to rapidly cut expenses, rethink investment plans, shore up balance sheets and reformulate strategy, resulting in layoffs and bankruptcies across the economy. According to the latest Deloitte CFO Survey (Deloitte CFO Signals 3Q2020) , on average, global CFO’s expect revenue to reach 75% of the 2020 plan, leaving large losses and a spend profile that must be adjusted to survive and then to compete in an ever-changing competitive market.
Enterprise Software is Failing the CEO & CFO
The CEO, the CFO, the Chief Procurement Officer and business unit leaders realize the importance of business planning agility and the need for on-demand predictions and scenario planning around spend and cash flow as to weather future disruptions that are likely, like the impending US elections and potential changes in tax policy. Yet, since the advent of enterprise software, finance and IT have chosen enterprise software that requires lengthy implementations, significant customization, and on staff resources to deliver reporting, spend visibility, and forecasts. Current enterprise systems delivered by large technology vendors like SAP, Oracle, Workday, Coupa, and Microsoft reduce the ability for an organization to react in volatile situations. Most of these solutions are implemented by systems integrator partners like Accenture, Deloitte, KPMG and EY, adding more complexity, cost and time. The process of selecting, implementing, and regretting enterprise software purchase decisions has not changed for the past 30 years. As another data point, the traditional software vendors have some of the lowest net promoter or customer satisfaction ratings of any industry, followed by life insurance and cable internet providers (https://info.nice.com/rs/338-EJP-431/images/NICE-Satmetrix-infographic-2018-b2c-nps-benchmarks-050418.pdf)
The C-Suite is Demanding Enterprise Spend Agility
Spend Agility is the ability for enterprises to rapidly assess, predict & change spend, investments and operations strategy in real time, to capture value-creation opportunities. As the world and the marketplace becomes more dynamic and volatile, the enterprise operating system must adapt. The CEO must be able to peer around the corner and able to predict changes to the marketplace. The CFO must be able to analyze and model changes to the financial and operating plan rapidly. The COO must be able to identify and execute on quick wins and longer-term strategies. Unfortunately, the data and intelligence to make these predictions are trapped in siloed, hard to access databases, requiring expensive IT and analytics resources. This causes up to a 90-day lag in analysis. Covid heightened and highlighted this dilemma as no had the luxury of time. Today’s enterprise demands spend agility to survive.
Spend Agility Primer?
There has been much discussion of organization agility, defined by McKinsey as “the ability to quickly reconfigure strategy, structure, processes, people, and technology toward value-creating and value-protecting opportunities.” (https://www.mckinsey.com/business-functions/organization/our-insights/how-to-create-an-agile-organization)
Spend Agility is the ability for enterprises to rapidly assess, predict & change spend, investments and operations strategy in real time, to capture value-creation opportunities. As my business school professor would say, “Cash is king” and understanding your spend and cash flow dynamics is critical to any strategy discussion. Before one can assess strategy, data is needed. Data must be transparently shared across the organization and easily accessible by the entire organization. Teams must be able to collaborate around spend data and then hold the organization and each other accountable to achieving plan or reductions in spend. Finally, in a cloud and AI-driven world, data should be “machine learning ready,” able to provide internal stakeholders with accurate predictions on spend trends, cash flow, and KPI ‘s critical to the executives, the finance team and business leaders throughout the organization.
Spend Agility is driven by data and information. We have identified four key characteristics of data and enterprise systems critical to empowering enterprise spend agility.
Spend Agility is:
- Comprehensive: Leaders need access to comprehensive, clean spend & operational data to make decisions. Your AP data alone is not good enough. With cloud technology, you can easily bring together all of your internal data sets across AP, P-card, T&E, PO, contracts, and operational data and marry that with external supplier intelligence data (risk, diversity, news, financial data) and data directly from the supplier. Machine learning can be used to rapidly cleanse, normalize and categorize this data, moving data from information to actionable intelligence. Perfect data is not required but it should rapidly inform decisions made across the company as leaders are thinking through strategic alternatives.
- On-Demand: The days of spreadsheets, pivot tables, and Tableau visualizations are over. There is too much data. Data needs to be easy to use, presented in a familiar consumer-friendly user interface, with no training required by business leaders, and available when a business leader needs to make a decision. Enterprises should quickly re-evaluate teams, resources dedicated to analytics or in-house analyst team that sit between business teams and the data. Business users need access to accurate data quickly to make decisions given the speed of business and how quickly the market is changing.
- Predictive: Data and enterprise systems must inform the strategy and “next best action” that teams and enterprises should take. Historical data is useful for reporting and KPI. AI can now provide predictive insights for teams to better manage demand, spend and cash flow. Insights proactively assist in scenario planning and identify opportunities overlooked by traditional reporting and processes.
- Collaborative: Teams should be able to collaborate and act quickly on the data, insights and strategy recommendations. Data must be transparently shared across the enterprise. Software systems should leverage algorithms to proactively highlight opportunities and hold individuals accountable to capture opportunities.
Business leaders must plan for and expect volatility and uncertainty affecting the economy and business going forward. According to PWC, 59% of CFO’s fear a resurgence of COVID infections leading to another economic downturn. The enterprises that survive and thrive in 2021 will be agile and able to manage through challenges, but nimble to capture opportunities.
Are you ready for more volatility? Are you ready to embrace Spend Agility?