Welcome to this article that is part of a four-article series for Finance where we explain how to build a culture of analytics, how to build insights and foresight, and sharing of some cases. In combination with the Business Partnering Institute, our aim with the series is to further push the finance function in its on-going transformation towards being a strategist with the business.
Part III of IV: The Art of Turning Data to Insight Explained
Most everything you read these days about what Finance must do differently is about the need to bring insights to its business stakeholders. However, much is left to be said about what insight is and how insights are generated. If you have built a culture of analytics like we described in our previous articles, then creating insight is second nature but, we believe, that it’s necessary to go one step deeper. To peer into the roots of the culture and explain how this process of creating insight works.
Time to spill your guts – what is this insight you keep talking about?
In its simplest form “Insight” is when you tell someone something that they didn’t already know. This will lead them to become wiser about the situation at hand and make better decisions. If they already know what you’re telling them you’re just stating the obvious and, frankly speaking, wasting their time.
The starting point for Finance is the numbers and standard reporting. Your standard reporting tells you variances between actuals and various comparison scenarios like budget and forecast. The variance is the WHAT happened at a high level and is obvious to everyone using your BI dashboard. With a few drill downs you can quickly identify WHERE this variance happened i.e. what customers, geographies, products, etc.Again, this is nothing your stakeholders couldn’t derive themselves.
So, when do you start to add value? Your value-add starts with the WHY. WHY did this variance happen? It’s still likely that your stakeholders can tell you WHY the variance happened right away but often the information must be pieced together from various sources.
Next, more information is gathered from various stakeholders that can shed more light on what happened in the business during the given period. Gather all this information (the numbers, the non-financial measures, the conversations with business stakeholders, etc.) and you might have something that could be called Insight.
However, if you have a true culture of analytics you’ll be able to take it one step further. Through advanced analytics you should be able to tell what WILL happen with the variance if you do nothing further than what has been done up until now.
It could be that mitigating actions have already been taken and that the variance is a non-issue. It could also be that the market is turning for the better, so it will sort itself out.
Knowing the future of the trend will help you guide your business stakeholders towards variances and issues that needs attending to improve or not deteriorate further. It will also reveal variances yet uncovered in places where you’re currently ahead but will soon fall behind. This is a step beyond insight to foresight!
Insight helps focus management resources to the right issues
The job of Next Generation Finance is to focus the company’s management resources on the right issues, as in most companies there are more issues than time to deal with them. If management needs to spend time getting to the WHY and then understanding what should change and what should stay the same, there’ll be many critical issues undealt with. This is what insight is all about.
Analyzing the numbers, understanding what needs to change and what needs to stay the same, and telling management where to focus its time and resources optimizes business performance. Of course, it doesn’t stop there, as we also need to discuss what should be done to change what needs to change. This is about creating foresight and answering the WHAT MIGHT happen IF we do so and so.
Once you’ve gotten your predictions in order, it’s about figuring HOW TO get the change done. We’ll tackle that in a coming article and leave you with thoughts about how to start generating a lot more insights. Insights get you a seat-at-the-table and, without a seat, you’re likely not creating any impact at all.
This article is a collaboration between the Analytic Intelligence Institute led by Robert J Zwerling and Jesper H Sorensen, and the Business Partnering Institute based in Denmark led by Michael Bülow and Anders Liu-Lindberg.
This new concept of a “college” style summit has a coordinated syllabus that provides a roadmap for companies to develop a culture of data driven decisions through the use of analytics. The program methodically takes participants through structured tracks of lecture and hands-on workshop to deliver a step-by-step approach to implementing analytics. For more information and registration please link to: https://jpkgroupsummits.com/product/chiia2018