Nowadays, we speak a lot about business value. This article is about the FP&A value proposition.
“Make something people want and sell that, or be someone people need and sell you.”
– Ryan Lilly
Currently, the development of FP&A is a much-discussed topic. But before thinking about how to change the current FP&A practices, we need to understand why an FP&A function is required in the first place and what value it brings to the business. I have already discussed the challenges with FP&A optimization in one of my previous articles. Now I would like to go a step further and discuss the value proposition of FP&A. I will use the business canvas model to get some new insights that originate from Business Architecture.
Although this technique is used initially to analyze the whole business in general, I have found that it works perfectly for FP&A separately. So here are the ten main lessons I’ve learned from it, and I hope you will also benefit from it.
Using the business canvas tool to assess FP&A business value
Business Canvas is a tool that can be used for business building blocks and will help you evaluate them. At the same time, it can help you realize who your key business partners are. Usually, the tool analyzes the whole business, but in this case, we will only apply it to FP&A.
The analysis is made by filling in each box, moving from right to left, and from top to. By doing so, you analyze what you (as an FP&A professional) are doing to satisfy your customers. Let’s make such a journey together and develop our shared vision. The example’s content is produced in collaboration with Larysa Melnychuk, Managing Director at FP&A Trends Group.
Customer groups
You often use the word ‘customers’ to signify external customers. But in this case, you might first think of an internal customer to whom you deliver your FP&A product. At first glance, these are managers on different organizational levels, including strategic and operational ones. In the example above, we only considered these functions. Although in your case, you could include external stakeholders, such as shareholders, authorities, the public, etc.
Value proposition
First, let’s agree on the definition: in this article, by ‘value proposition,’ I mean a product or service offered to customers to satisfy their needs. This definition can be translated into one of your key questions: what can you offer your managers that would look valuable in their eyes? And you know that we are not talking about reports themselves: your expert assessment of the information that can be found in the reports, your advice, and your support for decisions they have to make!
Customer relationships
Think in what form your customers would prefer to receive your expert advice. This is probably a level of collaboration that still needs to be established. You must initiate and maintain effective business communication to’ sell’ your professional opinion.
Key supplier
These are people who supply the resources that you can then use to deliver your value proposition. But what are your essential resources? It is data from all your business stakeholders, the delivery of which is supported by the IT function. Be careful not to put all business units from your organizational structure in this box, but only those responsible for the information you need to receive.
Key activities
Think simply of the tasks you need to do daily to deliver your value proposition as a result. Try to zoom out. Could your main activities and core capabilities be planning, budgeting, and forecasting? Or is there anything else?
Key resources
Think of everything that enables you to perform your key FP&A activities. In our version of the table, we have entered ‘business partnering’ as one of our key enablers. Your advanced professional knowledge is also part of the resources. It would help if you also thought about such business capabilities as financial analysis, advanced analytics, data delivery due to proper data management, corporate performance management techniques, etc. Other business functions in your company might deliver these enabling capabilities.
Channels
You use specific channels to reach your customers. And yes, we really entered ‘meetings’ three times; this is not a misprint. We stress that real face-to-face communication is far more valuable and effective when exchanging information and opinions, reaching mutual understanding, and conquering your influencer status. Of course, reports, dashboards, emails, and other communication types should not be excluded but used only to deliver information. Your professional opinion and advice should always be given in person.
Cost structure
To deliver your value proposition, you must cover the cost of your key resources. Ultimately, the cost structure will contain all of your resources, not only the key ones. We have entered the essential expenses in the table, including professional staff and supporting IT systems.
Revenue streams
This topic is the most tricky one. We all understand that FP&A does not generate direct revenue. What it does cause is all of the additional revenue earned due to correct and timely business decisions. And you are among those who have made all of this possible!
What’s next…
This thought experiment has reached its end. The example of the canvas illustrates how you can use this technique in your own FP&A practices. Now it is your turn to finetune all that was discussed according to your company’s ways and make an input into this discussion. In one of my following articles, I will show you how to use this technique for further elaboration, so keep in touch!
For more insights, visit the Data Crossroads Academy site: //academy.datacrossroads.nl/courses/how-to-bring-data-management-into-finance-practices/lesson/data-management-fundamentals-for-finance/
