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Continuous planning and rolling forecasts deliver major league advantages

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Continuous planning and rolling forecasts deliver major league advantages


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In a famous scene from the baseball movie Bull Durham, Kevin Costner’s character, a disillusioned minor-league catcher, tells a young protégé who has just been called up to the big leagues that the difference between a .250 hitter and a .300 hitter is only one hit per week. “Just one more a week,” says Costner, “and you’re in Yankee Stadium.”

Business is not so different from baseball in that regard. A small edge in process capabilities, for example being able to reliably forecast earnings +/- 0–5% or having access to real-time updates to financial metrics, can deliver a significant advantage in performance. Continuous planning is one of the best practices that provides numerous improvements to business processes, which can deliver major (or major league) benefits over time.

The limits of annual planning and budget cycles

Many businesses still base their strategy on annual plans and budgets, a management technique developed over a century ago. Annual budgets were fine when the lines between industries were clear and barriers to entry were high. But today, new competitors can spring up from anywhere. And innovations can become “must haves” for your customers almost overnight. As Jeremy Hope, one of the gurus of modern planning, observed, the “steady, continuous change of the industrial age is giving way to the unpredictable, discontinuous change of the information age.”1

In this environment, plans, budgets and forecasts need to reflect current reality—not the reality of two, three or more quarters ago. Continuous planning is a methodology for shortening the planning cycle and updating plans, budgets and forecasts frequently throughout the year, on a quarterly or even monthly basis. It’s an approach that “enables managers to see trends, patterns and ‘breaks in the curve’ long before their competitors, and thus make better informed decisions regarding products and markets.”2

 

rolling forecast chart

Rolling forecasts enable organizations to adapt to business conditions as they evolve, rather than relying on out-of-date assumptions. This diagram shows a typical 5-quarter rolling forecast.

 

How continuous planning helps

Continuous planning increases the timeliness, accuracy and insightfulness of plans. Managers can alter their existing tactics based on the latest internal and external data from various sources, including monthly actuals, leading indicators such as customer inquiries and sales pipeline and external market events. The process facilitates more informed decision-making in areas such as pricing, product mix, capital allocations and organizational staffing levels. It also helps organizations address emerging threats more proactively and embrace emerging opportunities.

Continuous planning and rolling forecasts are in use by organizations around the world in a wide range of industries. In fact, 73% of respondents in a survey by UK-based research firm FSN “agreed or strongly agreed” that they are developing a culture of continuous planning. So if the concept is new to you, it’s time to learn more. You can do so by joining us for a free online webinar on Thursday, June 21, Embracing Continuous Planning: Time to Move from Annual Budgets to Rolling Forecasts.

Jim Collins, Performance Management Strategy Executive at IBM, and Guy Jones, Global Technical Sales Leader, Data Science and Business Analytics for IBM, will show you how continuous planning and rolling forecasts give decision makers greater insight into the dynamics of revenues and expenses.

You’ll also watch a demo of IBM Planning Analytics and see how multidimensional modeling is a key enabler of continuous planning, helping you examine options and update plans and forecasts quickly and easily.

Register today!

 

1 Jeremy Hope, Planning and forecasting: Use continuous planning and rolling forecasts to support adaptive management, IBM, 2011.

2 Gary Simon, The Future of Planning, Budgeting and Forecasting, FSN Publishing Ltd., 2016.

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