Making Better Decisions Faster EN0426

7/30/2019 Making Better Decisions Faster EN0426

1/12

Making betterdecisions fasterUsing driver analytics to changethe game and boost performancein consumer products

Brand new order


2/12


3/12

Our management data came in the form of a 700-pagej]hgjl g^ fYf[aYd daf] al]ek& O] kh]fl 1( g^ gmj lae]playing detective trying to assemble the data andYkc l`] ja_`l im]klagfk Yf\ )( gf l`] akkm]& L`gk]proportions needed to be reversed.

CEO , global consumer products company

1


4/12

2 Making better decisions faster | Using driver analytics to change the game and boost performance in consumer products

Slow decision-making is compromising yourcompanys agility

Consumer products companies that stay flexible and make quickdecisions are more likely to succeed in todays brand new order a highly complex and fast-changing environment.

Are you confident you can make the right decisions against abackdrop of continuous change?

Although the vast majority of consumer products executives 0) Y_j]] l`Yl ^Ykl]j \][akagf%eYcaf_ [Yf aehjgn] gj_YfarYlagfYdagility, they struggle with planning, decision support and decision-making because information is too detailed and too slow. Oftenthey focus on items listed in the financial statements rather thanthe forces that drive value in their business.

This means they are unable to link strategy, resource allocation,planning and reporting. They must rely on a combination ofinstinct and experience, supported by one-off analysis. Thispersonal, somewhat ad hoc approach rarely optimizes decisions,and the rest of the organization may struggle to understand andsupport decisions because the rationale is unclear.

Whats the issue?

If you cant make decisions quickly, you cantcompete effectively

Kdgo Yf\ af]^[a]fl \][akagf%eYcaf_ ak Y j]Yd [gf[]jf af l`] ZjYf\new order, where two-thirds of consumer products companies feelunder pressure to reappraise their operating models and almostl`j]]%imYjl]jk Z]da]n] ka_fa[Yfl [`Yf_]k Yj] f]]\]\ bmkl lgsustain historic margins. 1

In particular, ineffective analysis and information exchange betweenlocal units and central headquarters fail to generate insight atthe corporate level and enable autonomy at the local level. Instead,they keep everyone tied up in unproductive detail and encourageproliferation rather than streamlining of decision-making layers.As a result, companies miss the ripple effects of issues that impactthe whole organization, fail to spot operational improvements andare unable to test the what if scenarios that improve tactical andstrategic decision-making.

1 Disrupt or be disrupted: creating value in the consumer products brand new order ,

Ernst & Young Global Consumer Products Executive Survey 2012


5/12

3Making better decisions faster | Using driver analytics to change the game and boost performance in consumer products

What are the pain points?

Root causes

unclear

KPIs notcorrelated

Executives relyon gut feel

Poor linkage betweenstrategy, planning,resources and reporting

Decision supportak af]^[a]fl

Lack ofleading indicators

Business unitsoperate in silos

DY[c g^ [gf\]f[]

af eYcaf_ \][akagfk

Hggj eYfY_]e]fl

afka_`l

;gehjgeak]\

gj_YfarYlagfYd Y_adalq

Too much data

Financially focusedinformation


6/12


Turning data overload into strategic insight requiresvision and stamina

The biggest challenge in making better decisions faster is toa\]fla^q l`] eYjc]l$ [geh]lalgj$ gh]jYlagfYd Yf\ fYf[aYd ^gj[]kthat really drive value creation, and then correlate them to eachother and to outcome metrics like market share, revenue or margin.We call this driver analytics.

Many businesses understand the forces that drive value. But thelevel of effort required to continually and consistently correlatel`] aehY[l g^ l`] egkl ka_fa[Yfl \jan]jk Y[jgkk Y nYja]lq g^dimensions (including product, channel, geography, market, segmentor business unit) and to understand their impact on outputmetrics is a level of insight that few companies have achieved.

Although some leaders will say that value drivers are built intoplanning models or that market analytics are built into thefYf[aYd \YlY$ l`] j]Ydalq ak l`Yl ^]o `Yn] l`] [YhY[alq gj l]fY[alqto perform such analysis continuously.

Why does it matter?

Failure to identify the critical drivers and to correlate their impacton performance means companies struggle to understand whya performance metric has moved. So while they may know, forexample, that sales have fallen in Brazil and risen in Uruguay, theywont know why and dont respond. Or they might conclude thatexceeding a revenue target means a job well done, but in fact itcould be hiding poor performance.

Why is it so challenging?

Drivers add insight when performance metrics are misleading

Revenue targets exceeded

RevenuePlan = 1,000

Actual = 1,200

UnitsPlan = 100

Actual = 200

Net pricePlan = 10Actual = 6

Market sizePlan = 1,000

Actual = 3,000

DiscountsPlan = 2

Actual = 6

Standard pricePlan = 12

Actual = 12

Market sharePlan = 10%

Actual = 6.7%

Driver-based analysis reveals

root causes:

Units are twice the planned amount,yet the market size is three timesthe planned amount

Market share is lagging plan despiteaggressive discounting that hasdriven down net price

Strategic focus: invest more in thisgrowing market?

Tactical focus: share growth andpricing are poor


7/12

I asked the team to identify the drivers of market share. They all had an answer. ThenI asked them to correlate the drivers of market share to each other mathematically.Fg gf] `Y\ l`Yl Yfko]j& O] cf]o kge] g^ l`] \jan]jk$ Zml o] \a\fl cfgo l`Yl 0( g^our market share correlates to promotional spend and consumer preference scores.Fgo l`]k] eYjc]laf_ [gjj]dYlagfk Yj] gf l`] \jan]j \Yk`ZgYj\ Ydgf_ka\] fYf[aYddata, and now we have more insight and can make better decisions.Andrew Tivey , EMEIA Driver Analytics Service Offering Leader, Ernst & Young



8/12


Create the single thread that links performancedrivers to performance outputs

In our view, using driver analytics to mathematically linkoutcome metrics with the market, competitor, operationalYf\ fYf[aYd ^gj[]k l`Yl \jan] nYdm] ak ^mf\Ye]flYd lg _gg\

decision-making. This process is what creates the single threadthat enables you to trace the impact of a changed driver forexample a shift in consumer demand across every element ofyour planning and management cycle, from forecast, capitalallocation and operational planning to performance reporting.

How do you get it right?

Executive Summary Market Share Operating Profit ROIC Free Cash FlowRevenue

Driver-Based PerformanceManagement Dashboard July 2012

$125.4MJune 2012

$123.6MVariance

+$1.8M% Change

1.45%

Dimensions

TimeCurrent month vsprior month

ProductCategory A

Product A

GeographyNorth America

US

CurrencyUS Dollars ($)

Revenue Driver Analysis ($M)Product Quality Score (Volume Impact)Net Price per UnitStore Footprint

Trade Promotion Spend EffectivenessConsumer Promotion Spend EffectivenessInventory RefillsConsumer Promotion SpendingDiscounts (Volume Discount)

Trade Promotion SpendingTotal

-1.2-0.6

-0.4-0.3

-0.30.8

1.0

1.21.6

$1.8

Produc t Quality Score (Volume Impact)100.00%

90.00%

80.00%

70.00%

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%

% R

a n k e d S u p e r

i o r

Revenue Trend ($M)

Revenue by Geography ($M)

Revenue by Category and Prod uct ($M)

Product Quality J un 2012 J ul 2012

200

150

100

50

0

Category A Product A

N orth Americ a S outh As ia

150

100

180

130

80

2011 YTD 2012 YTD 2011 2012

J an Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec YTD

1000

500

0

The biggest drivers

of variance areimYfla]\ af l]jekof impact to theselected outcomemetric (revenue).

The trend of the highest-impactdriver is highlighted automatically,but users can select any drivers.

Year-over-yearcomparisonsare enabled toshow monthlytrends.

Drilling intogeographyshows insightsinto revenuetrajectoryfor the NorthAmerica,compared toSouth Asia,for example.

Compare revenue bycategory and product.

Decision-makers can prioritize actions on the highest-impact drivers,as shown in the drill-down revenue driver dashboard


9/12

Strategy, planning, investments andreporting are mostly stand-aloneprocesses

Planning calendar and templates areklYf\Yj\ar]\ gf fYf[aYd klYl]e]flk

Management reporting is standardizedgf fYf[aYd klYl]e]flk hdmk some dashboard elements

Planning and reporting are automated,but analysis is labor-intensive, highlyvariable and overly detailed

Demands for decision support areaddressed by brute force

Spreadsheets are stand-alone withcentralized consolidation

Driver-based analytics enable companies to tune out the noise and connect the\glk Z]lo]]f fYf[aYd gml[ge]k Yf\ l`] eYjc]l Yf\ gh]jYlagfYd nYdm] \jan]jk l`Ylreally matter. They can help you understand the impact of a changed driver and testrevisions to strategy via scenario testing. This means you can spotlight operationalaehjgn]e]flk$ jmf o`Yl a^ k[]fYjagk$ l]kl Yf\ j]f] kljYl]_a]k Yf\ eYc] Z]ll]jdecisions faster.Gregg Sutherland, Global Leader, Strategy Consulting, Ernst & Young

Maturity path for performance management

Value-added

Planning is rudimentary ; reporting isdaeal]\ lg ]pl]jfYd fYf[aYd klYf\Yj\k

Planning calendar and templateschange frequently

Management reporting is inconsistent over time and across the organization

Tasks are highly manual with lowrepeatability

Decision support is not a priority

Reporting and planning take placewithin G/L and spreadsheets

Strategy, planning, investmentsand management reportingare integrated

Rolling forecast shows continuousimprovement

Planning and management reportingshift to a driver-based approach withless detail

Analysis is standardized acrossdrivers and dimensions

Decision support becomes anintegrated part of planning andmanagement reporting

Purpose-built , multidimensionaltools automate entire process and data management

Analysis is driver-based and root cause

Business alignment

Level two:Business intelligence

Level three:Integrated

decision support

Having this kind of insight moves you from a position where decision-eYcaf_ ak \a^[mdl$ lae] [gfkmeaf_ Yf\ af[gfkakl]fl lg gf] o`]j]analysis is standard, repeatable and integrated across your business.

And by streamlining decision support you can improve yourcompanys agility and ability to thrive in an environment ofconstant change.


Level one:Ad hoc


10/12

Whats next?

Deliver the insight to change your business

Driver analytics help you understand what drives value in your business, test the impact of different what if scenarios and build the\][akagf%eYcaf_ ]paZadalq Yf\ gj_YfarYlagfYd Y_adalq l`Yl `]dh [gehYfa]k km[[]]\ af lg\Yqk ZjYf\ f]o gj\]j&

No matter what thetechnology or scope,a feature of how wework is that we focusup front on your priorityareas to build supportand momentum.Andrew Tivey, EMEIA Driver AnalyticsService Offering Leader, Ernst & Young

Making better decisions faster | Using driver analytics to change the game and boost performance in consumer products


11/12

Making better decisions faster | Using driver analytics to change the game and boost performance in consumer products

While the principle behind driver analytics is simple, the reality isquite robust, requiring a high level of data integration across manydifferent parts of your business. We understand the results youredriving for and we work with you to get there.

We have a library of drivers for every consumer products subsectorand a proven track record of linking drivers with clients planning,management reporting and decision-making processes and tools.

Why Ernst & Young?

Contacts

Mark Beischel Global Consumer Products Leader, US

+1 513 612 1848 [email protected]

Emmanuelle Roman Global Consumer Products Markets Leader, UK

#,, *( /1-) ).-) [email protected]

Gregg Clark Americas Consumer Products Advisory Leader, US

+1 860 725 3815 [email protected]

Richard Taylor EMEIA Consumer Products Advisory Leader, UK

#,, *( /1-) ,((, [email protected]

Anthony Lucas 9kaY%HY[a[ ;gfkme]j Hjg\m[lk D]Y\]j$ Kaf_Yhgj]

#.- .+(1 0.*0 [email protected]

Gregg Sutherland Global Leader, Strategy Consulting, US

#) /*( 1+) ,,+- [email protected]

Andrew Tivey EMEIA Driver Analytics Service Offering Leader, UK

#,, *( /1-) +.-. [email protected]

Our unique market-tested methodology helps deliver rapid and]^[a]fl hjg_j]kk Yf\ [Yf Z] lYadgj]\ lg ogjc oal` Yfq lggd$including SAP, Oracle, Cognos or Excel.

By drawing on our insight from previous successful projects, wecan help you break down the barriers to faster and more effectivedecision-making for maximum, sustained business impact.

9


12/12

Ernst & Young

Assurance | Tax | Transactions | Advisory

About Ernst & YoungErnst & Young is a global leader in assurance, tax,transaction and advisory services. Worldwide,our 167,000 people are united by our sharedvalues and an unwavering commitment to quality.We make a difference by helping our people,our clients and our wider communities achievetheir potential.

Ernst & Young refers to the global organizationof member firms of Ernst & Young GlobalLimited, each of which is a separate legal entity.Ernst & Young Global Limited, a UK companylimited by guarantee, does not provide servicesto clients. For more information about ourorganization, please visit www.ey.com.

How Ernst & Youngs Global Consumer ProductsCenter can help your businessConsumer products companies are operating ina brand new order, a challenging environmentof spiraling complexity and unprecedentedchange. Demand is shifting to rapid-growthmarkets, costs are rising, consumer behaviorand expectations are evolving, and stakeholdersare becoming more demanding. To succeed,companies now need to be leaner and moreagile, with a relentless focus on execution. OurGlobal Consumer Products Center enablesour worldwide network of more than 18,000sector-focused assurance, tax, transaction andadvisory professionals to share powerful insightsand deep sector knowledge with businesseslike yours. This intelligence, combined with ourtechnical experience, can assist you in makingmore informed strategic choices and help youexecute better and faster. If you want to competepowerfully in your market, well help you achieveyour potential today and tomorrow.

2013 EYGM Limited.All Rights Reserved.

EYG no. EN0426

In line with Ernst & Youngs commitment to minimizeits impact on the environment, this document hasbeen printed on paper with a high recycled content.

This publication contains information in summary form and istherefore intended for general guidance only. It is not intendedto be a substitute for detailed research or the exercise ofprofessional judgment. Neither EYGM Limited nor any othermember of the global Ernst & Young organization can acceptany responsibility for loss occasioned to any person actingor refraining from action as a result of any material in thispublication. On any specific matter, reference should be madeto the appropriate advisor.

ED 0414

Documents

Making Better Decisions Faster EN0426