How IBP promotes enterprise collaboration, flexibility, and resilience, mitigates uncertainty, and achieves superior business results.
By: Andrea Montecchi and Ben Sellers
Integrated Business Planning
Integrated Business Planning (IBP) has been the subject of a fair amount of buzz in the business world in recent years, and yet, it remains largely misunderstood. It is often viewed through the lens of functional process improvement and consigned to an enterprise’s supply-chain organization — an approach that sells IBP short. In other cases, it is promoted primarily as an information technology implementation, which reduces IBP to a tool, fails to capture IBP’s potential, and tends to delay realizing IBP’s benefits.
Process improvements usually seek to streamline supply or other functional activities, such as production or quality control. Such a narrow approach fails to grasp the enterprise implications of IBP. IBP is, in the larger sense, about transforming organizational behavior and culture to make planning and strategic decision-making more effective —across departmental and functional silos. As for the IT approach, those implementations can take years to develop and roll out while IBP efforts should see measurable results within months.
As initiatives compete for limited resources, IBP advocates often find the process and software approaches are easier to sell internally. Process improvements can demonstrably improve efficiency. Information technology also promises tangible benefits, making it easier to get approved by corporate higher-ups. IBP’s benefits are more difficult to quantify up front as they tend to be cross-functional and stem boundaries — which is why they are easier to challenge when evaluated against other potential initiatives. To make truly informed decisions about whether an enterprise should embark on the IBP path, it’s important to gain a deep understanding of IBP and its challenges and benefits.
So, what is IBP anyway?
Integrated Business Planning (IBP) is a holistic approach that integrates strategic, operational and financial planning within an organization. It brings together sales, marketing, finance, supply chain and IT functions to collaborate and make informed decisions that drive business success. A robust IBP capability is the best way to ensure organizations (and the executives leading them) “make their numbers.”
The IBP process projects operating plans over a (minimum) rolling 24-month horizon, focusing on changes from the previous period each month. These monthly reviews foster an environment that allows senior management to hold functional teams accountable for performance, resulting in superior business results.
“It’s really about building trust and capability in the organization,” says Sellers. “It’s the leadership’s process to realign the business as things are changing. So, every 30 days you get to say, ‘What’s changed and how does it impact how we go forward?’ What’s really powerful about IBP is it gets everybody back on the same page to those new priorities and realities.
Critical Attributes of IBP Implementation
This brief description of IBP highlights several crucial attributes worth focusing on. One is that senior enterprise executives must buy into the process and run the show. IBP is a top-down approach to developing coherent strategic thinking and planning throughout the enterprise. Another is that IBP shifts the enterprise planning mindset away from static goals embodied in unchanging numbers and towards thinking about business planning in dynamic terms. In that way, IBP also addresses the uncertainty that has always prevailed in the business environment — nowadays, perhaps more so than ever.
Oliver Wight Business Advisors have many years of experience guiding organizations through IBP implementations — and literally wrote the book on IBP decades ago — successfully coaching business leaders on using the process to improve business results. One Oliver Wight client, a consumer-packaged goods (CPG) food company, has seen significant business improvements since implementing IBP.
“IBP is mostly about the four- to 24-month planning horizon,” says the company’s chief supply officer. Planning meetings shouldn’t “bring in short-term issues,” he adds. “It is not meant to be a problem-solving session. It’s meant to be a decision-making session.”
The Advantage of IBP
The main advantage of IBP is that it connects company functions and executive teams that are often isolated from one another. Separate functions become aligned and integrated, creating a seamless operating plan for the entire business.
It may seem obvious that enterprises should promulgate a singular business plan, but that situation doesn’t prevail in many organizations. In fact, most companies rely on the assumption that disaggregated plans and incentives align the organization. It is common that companies often have siloed or stove-piped organizational processes that produce multiple plans in different departments, often working counterproductively to each other and to enterprise planning more broadly. Therefore, an objective data-based assessment of performance and assumption-based forward-looking plans are lacking. As such, the focus of most IBP processes devolves to the numerical explanation of the recent past and a fairly narrow (short-term) perspective of the future.
It is common for a company’s finance organization to have its own planning and forecasting while the sales, marketing and supply-chain groups engage in similar duplicative efforts. Each doesn’t trust the other’s planning processes — and the result is that the enterprise can end up with eight or nine different sets of plans, all of which exhibit different biases, all of which are flawed, and none of which reflect an enterprise view.
A Unified Approach to Integrated Business Planning
As Patrick Lencioni wrote in The Five Dysfunctions of a Team: A Leadership Fable, teams cannot achieve success without trust. Besides an absence of trust, Lencioni names fear of conflict, lack of commitment, avoidance of accountability and inattention to team objectives as other dysfunctions. A lack of trust is at the nub of institutional ineffectiveness. IBP seeks to coordinate efforts among organizational departments, processes and functions to create a unified planning process that produces results that all can buy into and, ultimately, trust.
Departments often view the analyses and planning processes of their cohorts with a jaundiced eye because, from their perspective, they provided inaccurate guidance in the past. IBP seeks to correct this situation by having departments and functions collaborate on enterprise planning to make this a flexible process based on a range of possible scenarios — and not one meant to come up with a single set of numbers that turns out to be “right” or “wrong.”
All plans and processes affect business performance. For IBP to be effective, all stakeholders of each process must understand how each plan within the IBP process works. For example, if sales in a company are down, the manufacturing organization may be inclined to let some production workers go. But it’s possible that, in the meantime, the sales organization is hustling to create the replacement business that will require increased production capacity and personnel. One end of the enterprise can only know what is going on elsewhere with coordinated processes.
Besides divergent planning processes, departments left to their own devices don’t conform their plans to the higher-level company strategy because that strategy is often not communicated or understood below the senior level. Even if senior executives go to lengths to articulate yearly and multiyear objectives, there is often a gap at the lower levels in understanding how to actualize those goals. By bringing together diverse company functions and departments and requiring the leadership of senior executives in the process, IBP helps to operationalize enterprise strategy.
IBP Top-Down Methodology
The IBP methodology insists upon not only C-suite buy-in but also the proactive involvement of senior executives in ensuring that IBP is practiced and adhered to down the line. It’s the leader’s responsibility at the organization’s very top to see that there will be no separate sales, finance, operations and supply chain plans going forward. They must demand that departmental heads get on the same page before planning and forecasting processes proceed.
These leaders no longer accept the excuse that, for whatever reason, the various teams are unable to work together. For IBP to work, the enterprise leadership team must own and drive it.
Driving Success Through Uncertainty
At T. Marzetti, an Oliver Wight CPG client, product management, demand, supply and finance are each considered to be the “pillars” of the business. Executives assume leadership in each pillar. Pillar leaders need to be “knowledgeable” and “open to change,” says the company’s Director of Integrated Business Development. The company’s CEO adds that she made it “explicitly clear” that IBP was how the business would operate. In turn, the pillar leaders communicated this direction to their team members.
This client’s approach was to update product plans and communicate these to the supply, demand, finance and strategy organizations, ensuring that the company had the production capacity to deliver new products while supporting demand for existing business. That way, the company’s sales force didn’t have to worry about insufficient inventory to sell. Instead, they have a green light to sell according to the company’s IBP plan.
That approach increased sales and demand for the company’s products. It also reduced raw material and packaging inventory, lowered expedited shipping costs and decreased unplanned internal transfer costs. All of this is attributed to the company’s execution of IBP.
IBP is fundamentally a dynamic process that addresses changes in the enterprise and the environment in which it operates over time. For all the efforts to predict the future, the future is fundamentally unpredictable. Companies operate in an uncertain world — and that uncertainty, it seems, is growing.
That’s why enterprises must take precautions to prepare for the unexpected. Anticipation and proactive planning can be the key to a business’s success when faced with uncertainty and unexpected bumps in the road.
The Oliver Wight Approach to IBP
Oliver Wight’s approach to IBP advocates scenario planning — which helps businesses identify and proactively address future uncertainty. Scenario Planning can help all functions within the enterprise anticipate potential changes and evaluate an organization’s capabilities and gaps to address those changes. When everyone is on the same page and working from the same set of plans and assumptions, they can develop a more credible plan that proactively addresses future uncertainty.
Scenario Planning seeks to divert decision-makers mindsets away from operating from a single set of numbers and instead to focus on a range of potential conditions and outcomes. This approach promotes trust within the organization, because focusing on a single number, if it turns out to be inaccurate, will breed distrust in the planning process.
Scenario Planning, by contrast, breeds flexibility and resilience. People with experience and understanding of the business can determine the range of scenarios and numbers that the business should be considering. Instead of insisting that the business chase a false sense of accuracy, which could be dead wrong, the enterprise is enabled to deliver predictable results based on a set of plans built on a range of assumptions about the future, including risks and opportunities.
The range of scenarios considered by any individual enterprise will reflect its risk tolerance and its chosen strategy. For example, a company in the heavy industrial sector may be able to operate in a wider band than a CPG company — which may have to anticipate future consumer demand within a rather narrow range. Since companies in different industries will have varying risk tolerances, their assumptions about their forward-looking projections will vary.
Information Technology Systems vs. Dashboards
Information technology (IT) has its place in implementing IBP — as an enabling system. IT is fundamentally a capability to receive and digest data. IBP uses data as part of a behavioral process designed to improve forward-looking decision-making. IT systems and the data they deliver enable decision-making, but they are not the reason decisions get made.
IT is helpful if it accelerates the availability of integrated data to decision-makers. However, IT can also hinder the IBP effort if it devolves into a science project that seeks deep integration of systems and data throughout the enterprise. While those goals may be worthy, especially when it comes to process automation, they can slow an IBP initiative when the IT timelines are two and three years into the future.
IT solutions often have the “big bang” effect — project teams are formed, and they work, sometimes for years, deploying and integrating a solution. Once the big launch comes, integration issues often cause delays. In the meantime, the business environment and the organization’s specific needs have likely changed — which could make the implemented solution obsolete before too long.
Big IT initiatives also detract from organizational transformation because they are often regarded as a functional responsibility despite having a broad impact across the organization. If the initiative is relegated to the function managing it, ownership of the outcome will likely not be embraced by all departmental leaders, let alone senior executives. For all these reasons, IT implementations simply cannot be the focus of the IBP effort.
When guiding clients through the IBP process, Oliver Wight often implements dashboards tailored explicitly to the important decisions of an enterprise’s C-suite executives. These proprietary tools are developed to anticipate leadership concerns over business planning processes and attempt to answer their questions before they are asked. The data dashboards reflect changes in the company’s performance over time — so executives have information at their fingertips about gaps in the strategy and can drive action accordingly.
At one client, a large manufacturing company, Oliver Wight developed a new, cloud-based technology platform for operationalizing strategy called Ollie Accelerator that included digital dashboard visualizations for key business metrics and an inventory of best practices for gap-closing actions. The visuals were updated and presented at each IBP review, allowing participants to understand changes in the business and to drill down to see the impact on individual functional strategies. Then, they used best practices from Ollie Accelerator to address problem areas.
These dashboards in Ollie Accelerator can be implemented within 30 to 60 days. They are designed to efficiently consolidate important data for the IBP process. Timely implementation ensures that IBP efforts remain focused on achieving their goals without being sidetracked by operational details. No one says that IBP is easy to embrace or to execute. On the contrary, it takes hard work and discipline — the same attributes that athletes need to reach the top of their game. Buying the best sports equipment is not the key to improving athletic performance. Organizations can only improve their performance with their people’s required work and discipline.
And just as it is difficult, if not impossible, for athletes to assess, evaluate, and modify their own performance mid-game, it’s necessary for companies seeking to embark on a transformational path to seek the benefit of some coaching. Athletic coaches bring an external and unbiased perspective that allows for a critical performance assessment, highlighting vulnerabilities in the athlete’s execution, and guidance on how to address them.
Top-performing companies are like athletes in that way. Oliver Wight Business Advisors provide coaching to results-oriented companies and are supported by over 55 years of demonstrated success through education, design, and change management.
Guidance That Delivers Results
Oliver Wight Business Advisors have had IBP experience as clients; before implementation, through the implementation process, and following a successful deployment. That’s why they can meaningfully advise decision-makers on the implications of IBP process elements. Oliver Wight Business Advisors use a knowledge transfer model— they don’t do the clients’ work for them, but they are there to guide them through the process to ensure the client can manage their IBP process.
It all starts with executive engagement. The process must begin with senior executive leadership to determine the behaviors that will effectuate transformational change. Oliver Wight advises that it only pays to start the process if they are on board.
Results matter — and that’s what Oliver Wight focuses on. Clients don’t endure a long, drawn-out engagement before they start seeing results. Oliver Wight Business Advisors draw on their real-life business experience to get IBP up and running quickly — to deliver results swiftly.
Ultimately, the client company must be willing to do the work to make the necessary changes for IBP to be successful. However, no one has more experience than Oliver Wight in implementing IBP — and guiding clients through the process. That’s why Oliver Wight Business Advisors can help their clients in ways that others are unable to — to help them get where they want to go effectively.