In this, the fourth and last article of this series, we will take the temperature of where Finance is in its journey towards mastering Analytics Business Partnering.
The information in the article and more will be covered at JPK Group’s 2020 Analytics Academy. Click here for more information.
The Analytics Business Partner = Foundational + Aspirational
The Analytics Business Partner™ operates with a wide range of capabilities & tools and understands how to walk the entire Capability Ladder depicted in the chart below. The Analytics Business Partner advances from providing simple Reporting and Analysis to providing Analytics Intelligence for data driven decisions in the form of Insight to influence decisions and Foresight to impact the strategic direction.
Today, the general discussion about business partnering in Finance is toward the Foundational roles ( The role of the Reporter and Commentator). Roles focused on providing hindsight information that the business largely knows already. Data visualization tools are applied to automate and elevate standard reporting and analysis for better informed decisions. Forecasting and modelling are done using biased input from the business to get to the desired output. Credibility is gained from building a deep understanding of the business operation partially from collaborating with the business and partially through industry studies.
But has that made Finance a better business partner? Well, No. While Finance has moved from providing standard reporting to providing informative analysis, it still has not added value for the business to take data driven decisions.
This needs to change! Finance has to aim for the Aspirational roles where analytics become the catalyst for the generation of Insight as an Advisor and Foresight as a Strategist. As such, more analytics power is needed for both a Capability as well as a Toolbox perspective.
Measuring the Analytics Business Partner
The Benchmark Survey is to measure the business partnering Capabilities and Toolbox on a scale from A-F with a failing grade (F) and the best grade (A). The achievement of The Analytics Business Partner is accomplished when all Personas (Reporter, Commentator, Advisor, and Strategist) have a rating above 2.6.
The Capabilities for the Analytics Business Partner
Reporter – Score D-F
On the Basics of the competencies (vertical axis of the Capability Ladder) Finance barely pass the analysis requirement; i.e. being able to report numbers timely, accurate, and clean, and having a solid understanding of how to utilize financial supporting systems. Finance is failing the other basic competency of communication; i.e. not being able to provide a clean and concise message both written and verbal.
Commentator – Score C-F
Finance is failing the Basics including not being able to turn data into information though data visualization and using trend analysis from times series data to contribute to decisions. Its communication is lacking elements like the ability to adjust the language to meet the business needs, as well as, anticipating possible reactions and questions before presenting financials to business leaders.
Finance is doing better on Business Acumen through a deep understanding of the business operating model. Finance also shows the ability to develop relationship with the business to be seen as a trusted partner but falls just short of a passing grade.
Advisor – Score F
Finance fails on all capabilities. The constant theme of lacking the Basics requirements is more severe. Analytics like correlations, clusters, price-volume-mix analysis hardly exists in Finance. The communication is lacking the ability to challenge and influence decisions
Business Acumen has declined from the Commentator role, as Finance doesn’t have a good understanding of the bigger company strategy. Finance is seen as a passive member of the leadership team that just presents data and don’t participate in the business dialogue.
Intelligence, like developing scenario analysis to assess high and low cases and using an understanding of the competitive landscape and the Industry to provide business insight, is very limited in Finance.
Strategist – Score F
Finance fails on all capabilities. As for the Basics, Finance has neither adopted predictive analytics nor big data analytics utilizing AI. Communication lacks the ability to provide a message that impacts business decisions.
As for Business Acumen, Finance is not seen as the “go-to” partner for business support for strategic decisions. Also, Finance doesn’t understand how changes in market conditions and competitors behavior affects its business performance.
Intelligence, in the form of predictions about events, customer behavior, is not available. Finance does not have access to powerful methods like Monte Carlo Simulation to provide unbiased high and low case forecasts/modelling.
As for Strategy, is most remarkable in that, even though Finance fails significantly on most competencies as Commentator, Advisor, and Strategist, it still (to a large extend) belief itself as Innovating Finance building visibility and reputation as the ultimate analytics thought leaders who provide insight that influence decisions and foresight that impact the strategic direction.
The Toolbox for the Analytics Business Partner
Excel & BI Tools – Score C
Standing at the entry to 2020, Finance still uses the same technology as it used in the mid-80s and 90s! Excel was launched in the mid-80s and BI in the 90s. Finance passes for its ability to use excel and BI for value added activities but lots has happened on the technology front since then…
Data Visualization Tools – Score F
In the late 90s to early 2000s Data Visualization tools were launched but, here too, nearly 20 years later, Finance still hasn’t adopted this technology to provide better information as well as automating standard reporting and analysis. Automation, Elimination and Elevation is the backbone for the Commentator to advance to the next persona as it free bandwidth towards more value-added activities in analysis and analytics.
Analytics Tools – Score F
Finance has to rise even further than visualization to follow the evolution in technology utilizing Desktop Statistical Tools (DS Tools) and Discovery, Visualization and Analytics tools (DVA Tools). DS Tools started getting launched in the 2000s whereas DVA Tools are the more recent technology. Common for both is Finance has not yet adopted them. These tools apply advanced mathematics and AI for true quantitative unbiased insights and predictions that can influence decisions and impact the strategic direction. If Finance doesn’t step up its technology it will eventually be irrelevant at the business table due to the lack of ability to provide value added insight and foresight for data driven decisions.
Analytics tools can seems complex but the less mathematical, data science, programming, and database knowledge needed by Finance to use an analytics tool, the better the tool can be used, the faster it will be adopted, and the quicker to deliver benefits from insights and foresight. Analytics tools like LightZ™ from Aurora Predictions have great application for Finance who want to do advanced analytics but doesn’t have a desire to become a date scientist.
The Temperature of Finance 2020
With Finance scoring an ‘F’ in far too many areas, there is quite a way to become an Analytics Business Partner who masters all 20 capabilities in the capability ladder and use the full range of technologies.
It is worth noting that Finance performs significantly better on the “soft” capabilities (Communication, Acumen, Teamwork and Strategic Leadership) vs. the “hard” capabilities (Analysis, Business Insight, Risk Management and Innovating Finance). Finance needs to step-up its hard capabilities to survive as a trusted partner to the business. Mastering only part of the Foundational role will limit Finance to data compilation and hindsight standard reporting. Without aiming for the Aspirational role, Finance is at high risk at getting sidelined and lose its advisory seat activities at the business table as other organizations like operations, sales or marketing will take over the FP&A tasks.
In reviewing 2019 vs 2018 results, there has been no material improvement in the Finance skillset and toolbox since 2018. While this is unfortunate, Finance still has runway to educate itself on moving to become an Analytics Business Partner with the skillset and toolbox needed for Finance 2020. But to accomplish this Finance must know where it stands today – Your Baseline. Finance Analytics Institute provides the Benchmark Survey that assess where you are today and a detailed gap analysis comparing your baseline to your target and to your peers in the External Finance Community. Learn more at http://fainstitute.com/#benchmark
What is next?
We extend a huge ‘Thank You’ to everyone who participated in the survey. Without your participation we cannot keep taking the temperature on Finance. For the ones who participated, we right after new year send you a copy of a larger research paper including extended findings from the survey. For interest in analytics and getting access to the research paper join our LinkedIn group “Analytics Business Partner Forum” at https://www.linkedin.com/groups/13735025/ where the paper will be released as well.
If you are interested in this topic, then join us at the next Analytics Academy!
Click here for more information and to register!
This article is a collaboration between Robert J Zwerling and Jesper H Sorensen from the organization Finance Analytics Institute (www.fainstitute.com) and is an excerpt from their book, Implementing an Analytics Culture for Data Driven Decisions – A Manifesto for Next Generation Finance. Robert and Jesper are the content creators behind the Analytics Academy and will teaching at the Academy in September!
Copyright 2019 Finance Analytics Institute, Robert J Zwerling & Jesper H Sorensen. All rights reserved. No part of this document may be reproduced without this copyright notice.