How integrated business planning works

Essential building blocks of integrated business planning

To create an effective IBP, five essential building blocks need to come together:

• Process design.  The IBP system design needs to reflect how the business operates. 
• High-quality process management that covers inputs and outputs for each function including the planning process
• Accountability and performance management that supports business-wide integration
• Tools for the effective use of data, data analytics and technology are a prerequisite for powering the IBP process.
• Specialized organizational capabilities and roles that support and power the process. 

Let us examine how exactly each of these critical components contribute to the success of implementing an IBP system within your business. 

The process must be designed for the P&L owner  who bears responsibility for the operations at the highest level. In effect IBP process design must serve the Chief Executive Officer (CEO) and the C-suite. The process ownership and eventual success and effectiveness rests with the CEO. In instances where this is not possible, companies may assign the process ownership to a strong coalition of department heads on the condition that they develop clear ground rules and define boundaries for collaborating across functions. 

Design must also ensure deep coverage of the midterm horizon —3 to 24 months—and be interconnected with the company’s short and long term planning. 

Most of the companies that use an BP process fail to gain optimum benefits from its true potential. According to a McKinsey survey, less than one third (29%) of companies surveyed use IBP with long-term time horizons with top leadership chairing decision meetings.  If that is the way you want to go about it, reconsider whether an IBP system is worth the effort and the cost.   

The planning process needs to enable strategy implementation through targets and a high-level operational plan.  The process must be designed to provide an overview of the entire business portfolio of products, services and projects, supply and demand patterns as well as financial reconciliations and executive roll up. Your IBP process must also align the geographic spread and the supply chains across the company, and support the creation and implementation of risk mitigation strategies of your business. 

It pays to follow standardised business rhythms. Require all attendees of IBP sessions—cross-functional decision makers—to prepare for meetings in advance. McKinsey research further shows that only one fifth (20%) of companies that have adopted integrated business planning diligently employed data, insights and potential decision scenarios as inputs for their IBP meetings. No wonder that IBP fails to deliver true benefits to the 80% who do not follow this critical requirement for success.

Use all possible means, including agile forums to make optimal decisions and to resolve issues as they arise. With integrated business planning in place, you are bidding goodbye to a business culture that uses the rear view mirror to evaluate its performance at the end of a planning period, be that month, quarter or year. Instead, you will be empowered by the new IBP process to take a proactive stance to managing your business. You can use the data streams, analytics and technology tools that come with the IBP system to identify and highlight trends that may prevent you from achieving your forecasts. You can troubleshoot operational issues as you go. Such proactive planning makes it easier to transform well defined corporate strategies into tangible results, profits and growth.  

The management culture of the business must be moulded to regularly define, refine, monitor and discuss business metrics. True integrated business plans must include forward-looking business drivers among its business metrics. The companies that succeed in business over the long term need to be contextually ambidextrous, in the sense they are able to manage current revenue streams while also seeking to grow future revenues.

Reaping the true benefits of integrated business planning is only possible in a business where all systems and data are integrated and updated live, with information at any level of depth can be accessed on demand. 

Analytics must support long range planning, including scenario plans and include real-time tools that link supply constraints, future demand determinants such as global trends and gross margin risks to the business.

The data and analytics supporting integrated business plans need to optimise operational execution with system detection and notifications to support real-time decision making. 

Integrated business planning calls for the appointment of a clear process owner who has the clout and the authority to integrate the process across all functions. The IBP process owner needs the support of data scientists that own the analytical engine for real time integrated business planning covering inputs, scenarios and outputs. 

Promoting functional excellence, cross functional collaboration and problem solving are necessary requisites for implementing an effective integrated business planning process. When you hear about failures in implementing IBP, remember that less than one in ten companies (9%) that adopt the approach have shared metrics for accountability that promote cross functional collaboration according to McKinsey. 

The benefits of integrated business plans are many. Here are some of the key benefits you can gain by adopting integrated business planning. 

Employing IBP enhances revenue growth by better aligning strategic goals with tactical business plans. The integrated approach makes it easier to implement plans across the board. Visibility of operational results across the business makes it more dynamic.  Integrated business 

planning and performance management looks forward rather than merely backwards. As such it becomes possible and easier to address troubling issues as they arise, rather than wait for the end of a planning period.

Integrated business planning considers potential risks and trends across multiple time horizons. It compels businesses to build resilience with contingency plans and risk mitigation strategies. All of these require a company, overall, and at each business unit level to adapt to the changing world and to adopt sustainable business practices. When viewed from a company-wide angle, sustainability becomes a whole of company endeavour rather than a matter of limited-scope projects. Attention to sustainability at the highest level naturally translates to long term business resilience. 

IBP paves the way to faster, better-informed decision making at all levels by enabling decision makers to see an end-to-end view of the business impacts of their decisions across all time horizons. A well designed IBS system supported by modern technologies can help them see the impacts in a dynamic real time context. 

Companies that adopt integrated business planning put in place technology and analytical tools that enable them to gain optimal use of business data. Giving easy access to these tools and analyses empowers managers and decision makers at all levels. As they use data driven analyses in their day to day work, it builds organisational capability and enhances organisational knowhow. Easy sharing of information and analyses paves way to operational excellence, provided it is made clear that is the way the business culture is expected to evolve. 

The dynamic nature of integrated business planning shortens the length of planning processes, making them almost real time. Of course, realising this goal requires the adoption of technology that can deliver results. 

Adopting an integrated approach to strategy, planning and implementation makes businesses more efficient. Well designed and structured IBP systems enable dynamic, real time responding to the changing business environment. In this sense, IBS is a superior planning process to its alternatives in terms of how quickly a plan can be collaboratively completed, how resources to support it can be mobilised and the plan seen through to execution. 

Integrated planning approach does not stop at implementation either. It naturally extends to performance measurement and evaluation, with key performance indicators (KPIs) and monitoring.   

Sales & Operational Planning, a limited version of IBP, has long been recognised as a way to improve customer satisfaction through better aligning supply to market demand. But a company-wide IBP roll out offers even more opportunities to enhance business performance because all functions are integrated into the system. 

For example, in a manufacturing business, the IBP system would bring together and integrate plans at all levels, from individual, product and team sales targets to, marketing and promotional plans to demand planning, manufacturing and operational plans, including supply chain, logistics and inventory planning. These linkages, and the ability to take a whole-of-company view of operations and results enable companies better align their product and service portfolios and volume plans to evolving consumer and market trends and changing demand patterns.

A well designed integrated planning platform should ideally include tools that enable the company to integrate external data sources that have a direct bearing on its performance.  

Although at a glance this may not sound like something businesses should welcome, it certainly enables top level executives and the Board of Directors to get a holistic view of the linkages between the strategic plans, operational performance and implementation and the ultimate financial results of the business. 

Traditionally, business have been used to viewing and treating these areas in isolation. Seeing them as parts of a whole provides epiphanies  and insights that could never have been possible using traditional siloed approaches to running a business. 

In an integrated planning environment all of the operations are also linked to all support function plans, such as working capital plans, cash flow planning and management, human resource planning and other functions. All of the operational plans then flow through to overall company costs, revenues and overheads. These are integrated into strategic and operational decision support systems and business intelligence. The integrated planning also lends support to internal audit and operational monitoring, performance evaluation and financial results, including the Profit and Loss statement, cash flow statement and the balance sheet. 

Provided the necessary planning tools and analytic and decision engines are there to support decision makers, an IBP system can empower leaner business processes. Integrated business planning calls for much effort and collaboration across functions. Using traditional tools would take away from the potential benefits of IBP. 

Versatile planning tools, business modelling, data driven management decision making, performance evaluation and monitoring all become possible with an appropriate IBP system that reflects the needs of your business. We will talk more about this later under practical considerations. 

IBP leads the way to enhanced product life-cycle management and improved inventory turns. More effective working capital management as well as integrated product design and development leads to better life cycle management. Integrated planning must necessarily consider sustainable business practices and, therefore, makes it more amenable to consider a cradle to grave approach to product development and product life cycle management. 

Effective management of global supply chains calls for monitoring systems, risk mitigation strategies and contingency plans for improving business sustainability. With such systems in place, companies can easily and effectively identify and respond to supply chain disruptions within an IBP environment. 

A well designed integrated business planning process encourages and increases ownership of targets, faster commitment to any plan revisions and quick implementation. 

Some of the disadvantages of an IBP can stem from the strengths of the approach itself. 

IBP requires change and adopting new technology and tools company-wide. Any change within a business context, whether in approach, new tools or technology, encounters resistance. Therefore, any business that wants to adopt IBP, especially as their primary means of managing its business operations, will encounter significant resistance. 

A true integrative approach is key to effectively overcoming that resistance, and sustaining momentum until the new systems become entrenched within the business. The change management efforts need to be sustained over time until “the new” becomes part of “how we do things in this company”. 

The new IBP system must be designed with careful attention to the five key building blocks we have outlined earlier in this article. These include:

• A well thought out IBP system design that reflects the way the business operates,
• High quality process management covering inputs and outputs for each function, 
• Accountability and performance management capable of supporting business-wide integration, 
• Tools and technology for the effective use of data and data analytics, and a clear focus on developing specialised organisational capabilities and roles that support and power the process. 

Then and only then can the business reap the many potential benefits of adopting an integrated business planning approach. 

It is a challenge to transition from a siloed business to an integrated business. Many organisations fail to make that transition effectively. Transitioning to an integrated business planning approach across the business is a challenge that must be overcome with expertise and principles of organisational change and development. It calls for integrating theory with methodologies and a technology platform that supports the transition. Unless the company attains competence and capabilities that enable the transition, IBP may become another project failure.

Attitudes, knowledge and skill bases must be updated to fully benefit from integrated business planning. Technology plays a key role, but technology alone, on its own, may not help get over the silos and various other business practices that have built up over time. However, new technologies that help ease the pain points in each function may help convince the tech stragglers.

Introduction of new technologies along with the transition to integrated business planning calls for attitude change, learning new skills and rethinking of the former ways of doing things. Training and support, combined with organisational change methodologies will help ease the transition across the company. Company-wide transitions, when championed and supported at the highest level, will help your business get there, despite stumbling blocks along the way. 

Moving from manual or spread sheet based planning to an online, collaborative planning platform, such as the one offered by MODLR will help smooth the transition. But technology alone cannot change a business culture, practices and siloed thinking. 

A transition to integrated business planning must necessarily be well planned, and implemented with discipline and commitment across the board. The new system and the transition to it needs to be championed and driven by top management, cutting across functions, previous technologies and practices. 

Any change in existing businesses that must cut across boundaries and break down silos requires a top down approach. This is why the best practice in integrated business planning calls for it to be driven ideally by the CEO or alternatively at the C-suite level. 

You are considering a new IBP system with a vision for the future. The investment of time and money must deliver expected results. Company wide collaboration and roll out of a new integrated planning system needs to be effectively managed. Confident, effective leaders that champion the process and who can recognise and navigate the challenges are a critical component to new IBP implementation. Without capable, dynamic leaders and champions to drive organisation-wide change, the IBP system too can languish like many other failed business initiatives. 

Organisational transformations are extremely difficult on a personal level for everyone involved, both leaders and their followers. A team of researchers found that in successful transformations, the leaders made sure their teams had the processes, resources, and technology they needed to change but did not stop there. The successful leaders also worked on creating the right emotional conditions and the emotional support to help teams and individuals navigate the transformation period. A recent HBR article—6 Key Levers of a Successful Organizational Transformation—describes the levers that these leaders used. 

• Leaders’ willingness to change was critical. You have to demonstrate your willingness to change and set an example. To do so effectively, each change leader   needs to look inward first and examine how they deal with change. This makes leaders more empathetic and offers them insights on how to guide others in navigating change.  
• A shared vision of success was seen as a key factor by half of those involved in successful transformations in the survey. A shared vision of where you want to get to helps leaders and followers go the extra mile in making change happen. Clarity of vision offers an incentive to change. Researchers found that a unified shared vision is lacking in most low-performing transformation efforts.
• A culture of trust and psychological safety.  Successful transformations happen when there is a culture of trust and psychological safety for all involved. Showing you care about the challenges, difficulties and even fears about the transformation in your team members, individually and as a group, helps make transformations more emotionally manageable. When people can trust their leaders and company management, they will express unvarnished opinions and contribute to the change willingly and openly. In contrast, in a firm lacking that trust, that fails to offer psychological safety, or has exactly the opposite conditions, transformations are more likely to fail than succeed. Employees will remain defensive, rather than open. This makes them less amenable to change. 
• A transformational process that balances execution and exploration  makes the difference. Researchers found that, while task orientation and disciplined project management are necessary to drive the transformation efforts, successful transformation leaders also paid attention to people's emotional needs. They "created processes that balanced the need to execute with giving employees the freedom to explore, express creativity, and let new ideas emerge. This empowers the workforce to identify solutions or opportunities that better meet the long-term goals of the transformation."
• See and show technology in its true context as the means to achieve the desired transformation, rather than as a roadblock. The leaders must recognise that technology changes also come with their own emotional journeys. In fact, most leaders in the study ranked technology as their biggest challenge. Transformation leaders must navigate a host of emotions—from stress of learning new things, doubts of their ability to change, fears over giving up a system that worked well, productivity or pay loss and even concerns over job losses—while supporting their teams.
• A shared sense of ownership over reaching the goals is also key to successful transformations. This is also why collaboration and buy-in are considered key building blocks to effective IBP implementation. When your team has a say in the success metrics that they would be judged on, and are looking forward to realising the goals they themselves contributed to create, the shared sense of ownership can help overcome doubts, fears and other concerns. There is strength as well as confidence in unity. When everyone around you is looking forward, even stumbling blocks will not be too difficult to navigate. Everyone has the confidence that others will help and, therefore, it is possible to reach the goal together as a team.

This was amply demonstrated during the COVID-19 pandemic when companies had to transform their operations to new and online platforms quickly in order to keep operations going, customers happy, to preserve jobs and to beat the competition. 

Transitioning to an integrated business planning system calls for careful attention following the best practice of organisational change and development. 

Creating company wide awareness is an imperative for a successful IBP rollout. Individuals and teams need to clearly understand the benefits of an integrated business planning process together with what their leaders are expecting from it in terms of each manager's contributions  and discipline in the decision making process. 

One company that transitioned to IBP employed a series of town halls to educate and share information with both employees. It was an effort to show the company commitment to the new IBP process from the CEO and down. 

Awareness campaigns need to be supplemented with structured capability building of both soft and hard skills. Capability building efforts must cover all participants, including leadership teams, in the IBP decision cycle.

Training enables people to learn how an effective IBP cycle is run. It helps them see good process management in action and makes it easier to internalise their decision authority as well as thresholds and escalation paths. 

Collaboration calls for developing an effective set of soft skills in addition to technology capabilities and other hard skill sets. 

Teamwork, knowledge sharing, collaborative problem solving, negotiation skills, strong communication skills and interpersonal skills, positive attitudes, adaptability, critical thinking, effective time management are all necessary to work collaboratively and succeed in achieving shared performance metrics. 

The effectiveness and success of any integrated business planning system depends on how successfully the company manages to foster collaboration among functions and how committed the company and its leadership is to a new system of performance management. 

Collaboration may be encouraged by redefining the company performance management system to include clear accountability for metrics at each functional level and also for shared metrics that cross functional boundaries. Developing shared metrics and collaboration oriented KPIs help reinforce buy in. 

Buy in at all levels across the business is vital for successful implementation of IBP processes within a business. Buy in comes from being convinced that there are clear benefits from the new way of doing things. . 

As a means to demonstrate these benefits, it is necessary to 

Develop dashboards that track and monitor benefits as they are realised for individual business functions. There need to be dashboards that demonstrate benefits of the change for all, including regional leadership and the global team owning the IBP process across the company. 

Finding data management and analytic tools and technology platforms that best reflect the unique needs of your business is critical to a successful IBP implementation. 

Getting a technology and business consultancy to develop a tailor made IBP system for your business is the most expensive route you can take. The costs of this approach can be exorbitant, and is viable and affordable only to large businesses and global multinationals. This path is not an option for small and mid-sized firms anywhere in the world. 

A more practical approach for small and mid-sized businesses is to seek technologies and platforms that can be tailored to suit their unique business needs. 

For companies that wish to take this route, the MODLR business planning and budgeting module offers an ideal solution. Running your business using an integrated business planning approach would become even better if you adopt the MODLR platform and the suite of solutions across all business functions. The integrated design of MODLR on the cloud, with easy collaborative planning, versatile analytical tools and dashboards that can be tailored to suit specific and unique requirements is ideally suited to companies seeking to adopt integrated business planning. 

Over the next few paragraphs, we elaborate more on how MODLR can help you effectively put in place an integrated business planning system. 

Traditional financial and operational planning practices are too disconnected. They are overly complicated and far too manual for growing businesses. They are labour intensive, and therefore, costly in the long run. 

If your goal is to implement an integrated business planning system in your company, you need to consider how to optimise your labour to technology interphase and how to get the necessary work done in the most efficient, effective and economical way, without boosting up your running costs. IBP, after all, is a support function, even though it can increase business efficiency across the company. 

If you wish to transition to integrated business planning and to get best results you want to find a solution that is easy, powerful and fast. Integrated business planning takes much longer and calls for more time and effort, if done in the traditional ways. Businesses choose MODLR to achieve superior results with an optimal cost base because MODLR delivers on their expectations, enabling them to get the true benefits of integrated business planning.  

MODLR combines a dynamic corporate reporting solution that includes all features that you would wish for to implement integrated business planning within your business. 

MODLR’s reporting module is supported by a collaborative planning platform that can be scaled up as your business grows. You can include all business functions, multiple business units, and unlimited users and geographic locations to the planning module. . 

MODLR’s powerful business modelling platform integrates smoothly with external and internal data sources and other cloud platforms. MODLR empowers business decision makers by enabling them to understand the potential impacts of decisions by testing them on a range of scenarios.

The multi-dimensional data engine enables MODLR users to slice and dice their datasets into stunning online reports with the pivot-table interface. It is possible to create reports on an unlimited number of dimensions, which will be useful for evaluating strategic business and investment decisions as well as for choosing between risk mitigation strategies for optimal impact.

MODLR's D3 visualisation engine is the world's leading visualisation engine. It can be used for the standard visualisations within MODLR or to create your own diverse custom visualisations to enhance monitoring business performance and KPI analytics. It can also help you easily and conveniently highlight and interpret patterns and trends within your business and external data streams.  

More important than all of the above, MODLR is easy to use, and easily mastered by FP&A professionals and non-finance users from operational and support functions. It does not require coding knowhow or financial wizardry. And since 2013, it has been tried and tested by over 150 companies and businesses worldwide. 

At the beginning of this article, we discussed the five essential building blocks that make integrated business planning a success: 

• A process design that reflects how the business operates. 
• High-quality process management that covers inputs and outputs for each function including the planning process
• Accountability and performance management to support business-wide integration
• Data, data analytics and technology tools to power the IBP process
• Specialised organisational capabilities and roles that support and power integrated business planning process. 

Using MODLR as your primary planning platform would make life easier on all those fronts. 

Sure you have to work on this on your own, especially in preparation for implementing an integrated business planning approach in your business. However, when all of your business data streams from all operational and support functions together with historical data and the external data streams have been added to MODLR on the cloud, that naturally reflects exactly how your business operates. Any authorised user—MODLR enables setting up of multiple user levels—can see how it operates and drill down into details, as necessary. 

Once all operational and support functions have set up their KPIs and requisite dashboards, taking a walk through or calling up reports at any level would be a matter of asking your MODLR platform. 

Once your business functions and reporting are integrated into the MODLR in the cloud, it automatically enables you to link operations to financial performance and KPIs as well as historical data. Depending on your levels of authority, you will be in a position to call up inputs and outputs of any function or business unit across the company, and its diverse geographic locations. 

Discussions on planning, monitoring and operational sessions, including the questions raised, and responses delivered will be stored within the MODLR platform. This is an infinitely valuable resource for future decision makers. It effectively moves organisational learning onto the MODLR platform, from individuals who may or may not be present at future planning sessions. This is a unique feature in MODLR that cannot be replicated without laborious effort when using Excel and other spread sheet based planning tools. [Ben, Please set the context here vis-a-vis MODLR alternatives]

When your company integrates MODLR into the business, setting accountability, defining and fine tuning performance management metrics and performance evaluations and discussions also move to the platform. 

Any authorised user can check on demand the current status, daily, weekly, monthly, quarterly or annual performance in any area against forecasts or strategic plans with a simple query and compare those against historical trends. Variance reports can be called and reasons for highlighted variances found and addressed.  

Company-wide performance metrics and planning effectiveness will improve significantly using MODLR as the foundation.  The transition to integrated planning can become a single exercise in terms of implementing MODLR platform rather than be seen as a separate effort. This would make the change management more amenable even to resistors. 

This is the heart of MODLR's solutions. How to best organise, interpret, report and leverage internal and external data streams is the reason for its existence. When you have MODLR as the primary financial reporting and business management platform, superior data analysis and technology that surpasses expectations is within your reach. It becomes the norm, rather than the exception within your business. MODLR is fully capable and versatile to help power the IBP process of any company, small or large. It can also be scaled to grow as your company grows. 

This requires top management inputs and commitment. It is inevitable that you will need change management and organisational development expertise to finetune your new IBP system to deliver best results. However, the transition to IBP from your current system will be infinitely easier when you choose MODLR as your core business management, reporting and business intelligence foundation. It will be affordable and time saving to implement your new IBP system around MODLR so that you get the best of MODLR solutions and optimise results with customisable analytics, business modelling, dashboards and visualisations. 

As you can see, MODLR can be your core platform around which to build your integrated business planning system. If your business is already operating some form of integrated business planning, even as S&OP or on a broader scale, MODLR can still add value to the process. We can support your transition to company-wide, full scale integrated business planning.

In this article, we discussed integrated business planning, its benefits and potential disadvantages. We also discussed what factors you must consider in implementing integrated business planning and how MODLR's versatile business modules can support that transition. 

Integrated business planning can be challenging, and requires commitment and championing right from the top leaders. You can use MODLR to get the maximum advantages from integrated business planning and to minimise or avoid some of the potential disadvantages. Request a demo.

If you need more information on MODLR, and how our solutions can help your business, and how MODLR solutions  support integrated business planning, we invite you to request a demo session.