COVID punch you in the mouth, too?
“Everybody has a plan until they get punched in the mouth.”
– Mike Tyson
Delta Airlines has been soaring with positive earnings for the past 10 years. Their fleet has grown more than 30% and revenue showed no signs of slowing with 2020 guidance detailing an expected 4-6% growth in the top line. This exciting outlook changed mid flight amid the stateside debut of COVID-19. The airline industry has since seen a 95% drop in passenger volumes, and Delta’s 18% drop in revenue this past quarter is just the beginning of the carnage. The former cash flow prodigy of the airline industry is now tasked with cutting spending from ~$100MM a day to ~$50MM by the end of May. Paul Jacobson, Delta CFO, said on their Q1 earnings call, “With the immediate needs of the June quarter addressed, we’re now beginning to think about how we reset the cost structure of the Company for the longer term. [We] are developing scenario views as to what the revenue environment might look like for the next several years.” The brigade of analysts Delta hasn’t been forced to furlough is now tasked with moving a mountain. Engaging multiple different departments to dispute forecasting assumptions, gathering any data they can get their hands on, redefining metadata, and passing around hundreds of spreadsheets that eventually feed a couple dozen “core” plans and forecasts are just a few tasks in the litany of outdated and time-devouring processes that Delta is likely undertaking just to stay alive.
Sound familiar to you? It’s not surprising if it does, because the vast majority of enterprises are doing the exact same thing. To put it bluntly, COVID-19 caught Delta, and likely your company, with a surprise left hook. The absurdity of what you’ve heard called “the way we’ve always done it” or “the most efficient way possible, trust me” has been exposed. Operating plans need amending. Assumptions need rethinking. Budgets need cutting. Funds need reallocating. Inventory needs optimizing. Forecasts need updating. This needs to be done now, with real time data – not in excel over the next few weeks with data from last quarter that the business analysts had to pry from the IT or administrative teams managing source systems. All the while your company is making decisions based on error-ridden, outdated modeling; and we’ve just got to hope there isn’t an extra comma in an Excel formula 25-sheets deep throwing your forecast off 5%.
The current process, as illustrated by Anaplan, the leading Connected Planning solution provider.
Over the past 10 years while your analysts were trading their affinity to you and your company for grinding away on the ludicrous manual labor and mechanics that slow your business down and make everyone’s job harder, you didn’t think it worth your time to sit through being consultatively sold on a Connected Planning solution because “the idea of connected planning is too good to be true,” you “didn’t have it in the budget,” or your “legacy system still gets the job done.” Now amidst this crisis, your 80 hour workweek, and slog of spreadsheets, you may have realized that something needs to change. That’s why you’re reading this, right?
Patrick Bower from the Institute of Business Planning and Forecasting says of adapting to a recession, “Diving into your data to see how your products and channels reacted to previous economic downturns can help you prepare when disaster strikes.” I couldn’t agree more Patrick, but you’re forgetting that the process of diving into data first involves aggregating that data. Aggregating the data takes time because it’s usually owned by disconnected parties. Then that data modeling will take place 2-dimensionally in spreadsheets, ultimately producing a half-answer regarding the best course of action. Connected Planning, specifically as it relates to Anaplan, involves eliminating these touchpoints by creating a single source of truth and a business-user-friendly access point for your data that you can then model multi-dimensionally to build out plans, budgets, and forecasts that update in real time as your business needs change.
The journey begins with a use case, let’s say, Workforce Planning. Once this model and its various drivers are built out, the next logical step is to ask, “What next?” This is the beginning of the Honeycomb Effect, where your business becomes connected across departments. Anaplan’s breadth of use cases illustrates its flexibility to be the center of excellence for any business unit in an organization – each cell in the honeycomb constitutes anywhere from 5 to 15 proven and effective use-cases.
Anaplan’s Connected Planning honeycomb effect.
It is logical, isn’t it? Your demand and buy plans drive different lines of your P&L, of which your workforce plan also directly impacts. Hence, why not connect them? If you are an FP&A manager that wants to question a demand planning assumption, rather than scheduling meetings and passing around different spreadsheets via email, open your Anaplan model, find the assumptions and have your analysts run a variance analysis based on how your assumptions drive forecasts vs. how the sales, demand planning and other teams’ assumptions fit in. Furthermore, why should your finance analysts need to beg IT for a GUI to access your relational database or CRM, HCM and ERP to feed monthly actuals data? If you’re a Supply Planner, why should you do the same thing to access the same data?
In the words of Ron Dimon, Connected Planning guru, “What happens in a Connected Planning world is that typically there’s a process of debating what the right assumption levers are, enabled by some system, supported by all the data and drivers, to get to a point where we select a modeling strategy going forward so we all agree on what we think is possible for the business. For example, this is the right level of revenue growth, this is the right level of margin attainment, etc. Then, our agreed upon model should generate and inform the targets for our day to day work.” Connected Planning gives you full visibility into your business. This will allow you to have informed conversations, which result in informed decisions and informed delegation of work. Your analysts become true analysts, analyzing and modeling insights to drive highly adaptive strategic decision making instead of performing rote number-crunching and spreadsheet acrobatics.
For example, the COVID-19 crisis has highlighted the problem of cash flow management, as evidenced by Delta and countless other companies. Anaplan and its partners have created generic cash flow models that give visibility into an organization’s liquidity more so than ever before. Analysts and decision makers can identify trends, reallocate cash to various buckets and run various scenario analyses while seeing the runway impact of an LOB, a department, an initiative, or an organization as a whole in real time.
The process after Connected Planning is embraced.
During the financial crisis 136 public companies filed for bankruptcy protection, a 74 percent increase from the previous year. Business leaders had an excuse back then to resort to their manual push-pull processes as they adapted their businesses to the recession: Connected Planning was not well known nor was the technology ready for enterprise-level adoption. The COVID-19 crisis is different. You know better. Connected Planning solutions are presently available in the marketplace, with Anaplan leading the charge. Don’t sweat it too much, though. You are not the only one – most enterprises are still far behind the Connected Planning curve. It takes real investment of time to address these systemic issues. The fact that you have a job to perform is not forgotten. Luckily, there is an elite ecosystem with some of the brightest minds across multiple industries and LOBs ready to collaborate with you to solve these problems through Connected Planning. If you’re ready to begin taking this a little more seriously, reach out to [email protected] and we will begin your Connected Planning journey together.
Tristan Gaynor
Chief Revenue Officer, Certified Model Builder
Anavate Partners
References:
https://www.wsj.com/articles/delta-reports-first-loss-in-five-years-11587553260
https://www.youtube.com/watch?v=Xaqr46dlNRY
https://community.anaplan.com/t5/custom/page/page-id/ApphubApps?q=cash
Great writeup, Tristan. Thanks for sharing.