Around a quarter of UK SMEs don’t have any business plan whatsoever. This is, of course, a worst case scenario.
If you’re like the other 75% majority of SMEs businesses, you have a variety of different business plans; a strategic plan, a financial plan, a sales and marketing plan, an operations plan.
What this amounts to is an overwhelming amount of information and documents to keep track of. Moreover, these documents are so often completely disjointed from one another. Financial plans may not align with larger strategic goals, sales and marketing may forecast far more than operations can feasibly cope with and so on.
There is another way and it comes in the form of integrated business planning, or IBP.
Why is Integrated Business Planning Crucial for Improving Business Productivity?
The world? Volatile, to say the least.
The planet is on fire, economies are unstable and to top it all off, we’re all coming out of the back of a global pandemic. It’s only natural for these events to create incredibly difficult circumstances within which businesses need to operate.
The technical term for this is a VUCA environment. This stands for volatility, uncertainty, complexity and ambiguity. In other words, businesses and the countries and economies within which they function are in a constant state of unpredictable change.
It is almost impossible to plan for. Business leaders need to plan strategically for sustainable long-term growth, whilst simultaneously being able to react to ever-changing external circumstances.
It’s a tall order, even for the most experienced business owners and leaders and it’s one that requires a new approach and a new way of thinking.
Integrated business planning can be an excellent solution to drive profitable and sustainable growth in the face of increasingly complex external and internal challenges.
What is IBP?
Integrated business planning or IBP is a cohesive approach to business planning. It is a single integrated and continuous process of planning that allows businesses to better strategise through collaborative, data-led decisions.
This means IBP seeks to combine and align business planning in a way that traditional business planning has not yet managed to do. A large number of big contenders like Heineken, Nike, Unilever and Johnson & Johnson are already using IBP.
This is because IBP has roots in sales and operations planning (S&OP). This first cropped up in around the 1980s as supply chains became increasingly complicated. At the same time, technologies had developed to allow for better forecast demand, so businesses could better align manufacturing and supply plans.
It is because of this origin that IBP is so often confined to large corporations with supply chain planning needs. IBP has evolved significantly since its S&OP roots and is now a valuable and proven solution to business-wide planning.
For many businesses demand, supply and forecasting are still a key factor in integrated business plans. But the scope of integrated business planning is wider than this. It seeks to align all operational planning with both financial plans and strategic goals. This includes aspects such as performance management
Part of this evolution is thanks to the technology now available that can allow for various data from different departments to be collated more easily. This has allowed for a more integrated approach to planning, with real-time data that allows for adaptability and reactivity to changing circumstances.
Integration is a core tenet of an IBP framework. Instead of many separate business plans, integrated business planning is one single continuous process to create an enterprise wide plan that is well aligned with all needs of the business.
This is what’s known as cross-functional alignment. It enables businesses to see and plan for wider internal and external contexts to better strategise to maximise profitability and business resilience.
What are the Differences Between IBP and Sales and Operations Planning?
We touched on this above, but it’s worth expanding on further as IBP is so often thought of only as a process to balance the supply chain. This is, of course, important for huge corporations and indeed many SMEs. But there are several key differences worth pointing out which can help further highlight the key elements of integrated business planning.
First is the scope of IBP. IBP is not only concerned with supply chain management. It is one single, unified business plan.
S&OP is typically owned by the head of planning, perhaps with input from other senior demand and supply managers. For IBP, it is vital that the C suite and senior executive team have a shared ownership to ensure the proper alignment of departmental KPIs with larger strategic goals.
This shared ownership is another key feature that differentiates the two planning approaches. Cross-functional collaboration and alignment is at the heart of a successful integrated business plan. It does not consider just one function of the business.
The Key Elements of an Integrated Business Planning Framework
So you know what integrated business planning isn’t… but what is it?
We’ll get into the nuts and bolts of the integrated business planning framework by looking at the core structures behind the process.
Short and Long Term Strategic Planning
So often businesses have a business strategy in place, but it isn’t reflective of short-term circumstances. There is a long-term vision, but little thought to the shorter term challenges that may occur beforehand.
One of the key aspects of integrated business planning is that the process is a rolling or continuous process. This means, while there is a longer strategic view - usually between 24 to 36 months - there is also a shorter 3 - 6 month view. Better still, this plan is reviewed monthly by the relevant stakeholders, alongside current data, to allow for increased agility, helping companies maximise business resilience, reduce risk and increase opportunities.
Improved Data-Led Decision Making
A strong IBP is always data-led. The importance of quality data shouldn’t come as a surprise to any business.
For businesses, this means investing in the correct technologies to not only provide this data, but to make it accessible to all those who need it. A huge issue with current data management practices is that data ends up siloed within departments. So for example, the IT department understands their own KPIs, but they have no idea how sales KPIs impact their own.
In IBP, data should be understood and shared between all relevant parties involved in the integrated business planning process. This transparent, shared view of data allows different departments to better understand each other’s outputs, giving them a wider context in which to understand risks and opportunities. It can also help employees become more aware of the impact they have on the wider business.
Businesses that want to be a market leader need to invest in cutting-edge, quality data. The exact data needs will come down to your unique business needs, but real-time and predictive analytics with accessible dashboards are all game changers for better reactive and strategic planning.
The Modern Finance Function Becomes More Commercial
We’ve already discussed the developing function of finance. But in short, finance is evolving from traditional accounting management responsibilities to actively driving business performance.
The alignment of finance with strategic goals and operational resources is one of the key tenets of integrated business planning. This means the function of finance within integrated business planning is vastly different from the traditional finance function.
This new function is all led by the finance leader, whether that is the CFO or finance director. It is their responsibility to lead and drive this change alongside the rest of the C-Suite.
As well as this, data management has often naturally fallen into finance’s lap. Many finance teams and leaders now have a better understanding of business intelligence, performance and financial data than anyone else in the business. It therefore naturally makes sense for finance to be the leaders of data management within the business.
This means finding the best technologies to leverage the data needed and ensuring that data is transparent and accessible to all stakeholders. From here, it is also the responsibility of finance to ensure every department has clear and collaborative performance KPIs, strategically aligned with larger business goals.
Finally, the finance function must develop to be not only that of an advisor, but an influencer. Finance is best placed within the business to be able to understand how businesses can align their strategic goals with operational resources thanks to the wealth of data available to them, alongside the strategic thinking necessary for the role.
Senior Leadership Own and Drive the Planning Process
We mentioned above how the finance leader must sponsor and have ownership over any integrated business plan. But the reality is it isn’t solely the finance leader responsible for this. While they may be able to provide the unique analytical insight necessary for a successful IBP, this isn’t the only IBP framework element needed for a successful adoption of IBP.
Many of us know how difficult transformation or change is within a business. It breeds uncertainty and often, outright chaos. For many, integrated business planning is a huge step away from traditional business planning and into the unknown.
While it is only natural to be apprehensive or nervous, senior leadership are responsible for leading and owning this transformation. They must fully sponsor the adoption of integrated business planning and role model the new mindset and behaviours they want to see throughout the business as IBP becomes the new norm.
Cross-Functional Collaboration and Communication
As integrated business planning spans the entire breadth of the business, it is so vital to ensure there is collaboration and communication across the business to achieve the best alignment.
Communication should be regular and transparent, with as many involved as possible. As a minimum, senior leadership and senior management from each department should be involved, but to get everyone in the company committed to the same plan, the more transparent and open the communication the better.
This kind of bottom-up communication can bring the best of ideas to your integrated business plan. Your frontline staff are able to spot the inefficiencies and pain points that both they and customers deal with everyday. If these are fed back to those in senior positions, the performance gains could be vast.
A Singular Approach to Business Planning
All of the aspects above allow for one singular approach towards business planning; where strategic plans and operations are integrated and aligned to finance.
This alignment of all activities across the business allows for one complete vision of what the organisation wants to achieve. Departments can see where their activities fit into the bigger picture. Finance can see where operational activities can be strategically aligned with the shared goal for the business. Leadership can see overall business performance and productivity and better strategise to continuously improve that performance.
Why is IBP More Important Now?
We talked above about the external challenges businesses are facing; markets are more volatile, the economy is brutal and to top it all off, customers expect a better experience than ever.
But the internal challenges businesses face are vast too. Departments are increasingly siloed, with little knowledge or care for what goes on outside of their own day-to-day role.
Businesses in the UK are also struggling with a lack of business productivity, caused by a lack of employee engagement.
It’s estimated only around 8% of UK employees are engaged, which would explain why as a country we’re one of the lowest in the G7 in regard to business productivity, with a 17% lower output than France or the USA.
What these challenges combined mean is that businesses need to:
- Provide outstanding customer experience at reduced cost
- Be adaptable and resilient to economic uncertainty
- Leverage data to drive strategic decisions
- Engage and inspire employees with purpose and vision
- Have strategic consistency despite a VUCA environment
It’s a tall order, but one that integrated business planning can tackle given the chance.
For external and internal challenges, IBP can aid businesses in developing a deeper understanding of the different circumstances impacting business performance through better quality data and regular review. This helps them make better decisions and adapt to changing markets and economies in both the short and long-term.
For internal challenges, the cross-functional collaboration and communication involved helps employees feel valued and motivated. Their opinions matter. They understand the clear goals of the business, they helped contribute to them after all. They understand how their own role and responsibilities aid the shared vision for the business.
Which Businesses Can Benefit From Integrated Business Planning?
Integrated business planning can benefit every single business, of every single size. Whether you’re a huge corporation with many assets to manage or a small business just starting out.
There are no businesses spared from the VUCA environment. In a similar vein, there are practically no businesses that don’t struggle with internal silos and a lack of alignment of strategies.
IBP isn’t prescriptive.
There isn’t a one size fits all process. It is adaptable to the unique needs and nature of your business. An integrated business planning process can be used to align the departments within your business, regardless of size or complexity.
Integrated Business Planning Vs. Traditional Business Planning
We’re not here to slate traditional business planning. It’s functioned for many years and for some businesses has worked incredibly well.
This said, if there was a better way of doing something, why wouldn’t you try it?
IBP presents this opportunity for businesses.
Research shows 79% of companies continue to use spreadsheet planning, despite only 39% of companies stating that spreadsheets support a collaborative process.
It’s true. Even with cloud solutions like OneDrive, Google Sheets and standalone business intelligence solutions in place, businesses tend to separate and silo in traditional business planning.
Ultimately, the activities for the business end up disjointed. Even where one area may be profitable or productive, other areas are not. It creates inefficiencies and poor business productivity or performance across the business.
The lack of visibility and transparency between departmental KPIs and strategic business goals means there is a lack of understanding on how each activity impacts the bottom line. Similarly, there is a disconnect between strategy and operational activities.
While there may be a business plan in place, it is often one with little flexibility or reactivity. Often they are static, lacking a continuous improvement process to maximise performance.
All this lowers competitiveness for businesses, in increasingly competitive markets. To be a market leader in today’s economic climate, businesses need to take a new approach to business planning.
The Benefits of Integrated Business Planning
For companies brave enough to adopt the new approach, IBP has some outstanding benefits on offer for businesses.
Thanks to the alignment of operations, finance and strategic planning, operational efficiency and business performance is improved. Similarly, thanks to the increased collaboration and shared business vision, business productivity is also improved. The transparency of communication and shared data can equally bolster trust and foster a stronger company culture.
The adaptability of IBP through regular monthly review allows for better planning agility, mitigating risks and increasing forecast accuracy.
Is IBP Worth It?
For most businesses, integrated business planning presents a significant shift in the way things are done. As with all changes in business, there is a risk. However, research into plans who have adopted integrated business planning shows businesses benefitted from:
- Increased sales revenue between 10% to 15%
- Increased business productivity between 30% to 45%
- Increased demand plan accuracy between 18% to 25%
- Reduced inventory by 18% to 46%
Similar research compared businesses using an IBP framework and split them by the top 20%, middle 50% and bottom 30% based on industry performance. Those in the top 20% had a customer retention rate of 91% compared to the bottom 30%. Similarly, the top 20% of businesses had a gross margin of 43% compared to 30% for the lower industry performers.
All this to say, if you’re asking whether implementing integrated business planning is worthwhile, think of what improvements like these could do for your business.
Five Barriers to Adopting Integrated Business Planning
From the statistics above, you’d think every company would be jumping at the chance to move to the new approach to business planning. But with significant change come significant challenges, which we’ll examine.
1. One of the most common challenges businesses face in implementing IBP is a lack of technology investment. Particularly in finance, many businesses have not yet invested the funds necessary to have access to quality data. Similarly, many finance professionals have not yet been trained in advanced data visualisation and analysis.
2. Closely linked to the above, it is the norm for management of data to be siloed in businesses currently. Sales have their performance data, marketing have their performance data, HR have their performance data and so on. This makes combining data sources to present one linear view a challenge to say the east.
3. These department silos don’t only affect data. At times, there are clashes of cultures within departments due to a lack of communication and collaboration between them. They have different goals and different priorities according to their own strategies and projects and it is human nature to be concerned primarily with your own problems, as opposed to the bigger picture. For many businesses, breaking down these business silos to create one unified business vision and company culture presents significant challenges that they do not feel well equipped to manage.
4. Often, breaking out of the status quo business methodology is often the largest challenge that arises when implementing integrated business planning. There is a prevailing idea in business that if things aren’t going badly, then the status quo is working, with little thought given as to whether it could be done better.
5. This comes down to the behaviours and mindsets that drive us as humans. It is so much harder to change behaviours than it is to change a process. But if these behaviours are not addressed in the first instance, the implementation of integrated business planning will not be fully adopted across the business and has less chance of success.
Our continuous business improvement programme can help your business address these challenges, as well as the unique challenges you face with our unique combination of project, people and business management to help transform your business into a productivity powerhouse.