Why Your Business Planning Process Needs More Edge Answers

By Michael Huthwaite, Founder and CEO at FinanceSeer LLC

The long-standing narrative of Enterprise Performance Management (EPM/CPM) has been squarely focused on the effort to steer organizations away from spreadsheets by embracing Enterprise Performance Management suites (i.e. platforms).  
Yet, the dirty secret that is rarely spoken about is that most organizations continue to remain heavily reliant on spreadsheets even after spending huge sums of money on EPM solutions.  
So, why are so many organizations still deeply dependent on spreadsheets?  The answer to this question lies at the Edge.  

Understanding the Relationship Between Core and Edge

 Any network, whether it be a social network or a computer network has activity occurring on both a centralized (core) and decentralized (edge) level.  This is because data live in the Core, but it’s often conceived at the Edge.  
Information that is managed at the Core level tends to represent data that can be highly leveraged (i.e. reused or accessed by others).  Examples of Core data might be the latest forecast for an established product line or business unit.  
Conversely, Edge level data tends to represent high-growth opportunities, which is often the life blood for your organization’ s future.  An example of Edge level data might be the evaluation of a new investment/acquisition opportunity or the risk assessment of a big swing in the market (a proverbial black swan).    
Despite the distinct differences between Core and Edge, you’ll never eliminate the symbiotic relationship that they share.  Therefore, in order to optimize the overall network, it’s best that organizations take a holistic view by addressing the need to harmonize both the Core and Edge.  

Real World Examples of Core and Edge

The concept of “core and edge” has been well documented for decades.  The notion exists in many technical areas, including, but not limited to Enterprise Performance Management.  

Recent proliferations of “core and edge” harmonization can be seen with the rise of Mobile, the Internet of Things (IoT) or Wearable technology.  In all three cases, it’s the people and devices that operate at the Edge that creates incremental value while the centralized or Core infrastructure acts to leverage or unify an established ecosystem.  In my opinion, this helps explains why as individuals, we are often hopelessly addicted to our devices and mobile apps.  Our brains pick up on the perceived incremental value that we create at an Edge level, while the Core level helps organize and maintain our lives over time through robust centralized infrastructure.

What are the Hallmarks of Core and Edge

In general, the tell-tail-signs of Core and Edge look like this:


At the Core level, technologies are often marketed as “platforms” and require a great deal of IT involvement and specialized Admin to operate.  Furthermore, these solutions tend to have the higher number of users, remain relatively static in their configuration and to a large degree focus on database storage (often associated with a “single version of the truth”).

Conversely, Edge level applications are just that, applications.  They’re not platforms per-se, but self-service solutions that focus on supporting small teams of individuals working together to drive new ideas. Edge level applications are typically installed locally (much like a smartphone app or a desktop application).  These applications are not web portals that enable users to enter and submit data, but rather, highly focused solutions that enable end-users to evaluate or try alternative configurations in order to maximize value creation.  
In addition to having full control of these Edge level applications, end-users must also have the ability to freely share their ideas and findings among their small team of peers in order to build consensus.  The speed and fluidity at which these business processes occur mean that IT and System Admins aren’t directly involved, but their ability to indirectly enforce governance must remain in place, if the ecosystem is to thrive.  
Edge level data differs from Core level data because the business processes occurring at the edge simply don’t require data to be centrally stored or accessed at such an early stage.   Rather, the speed and flexibility of the data is what enables end-users to think more creatively and begin the process of building credibility around that data.

Integration is quite literally the silent partner in the Core and Edge Paradigm.  Integration is often, but not always, managed by IT or System Admins and often requires stronger technical skills that are not necessary for end users.  A great deal of intelligence and validation must go into establishing a strong integration approach.  Integration includes data mapping, but should also include a broader range of communication between the Core and Edge.  
As the proliferation of Core and Edge increases, I think we’ll start to see more integration level concepts flourish such as Artificial Intelligence (AI) and Predictive Analytics where information captured at the Core is suggested to devices at the Edge, which in-turn enables end-users to take action.  For example, when Google Maps tells you that there is traffic on your current route that is a great example of tight integration between Core and Edge.  Slow moving traffic is captured on mobile devices and sent to Google’s Core servers and then passed back to the Edge devices of other users who are heading on the same route.  These motorists can then elect to go a different route or ignore the suggestion altogether.

How Does Edge Work in Business Planning and Analytics?

The Core and Edge Paradigm is prevalent in all areas of business planning.


Edge Analytics
This is the one area of Business Planning and Analytics that has a strong record of embracing the Core and Edge Paradigm.  Self-service solutions that capture data and empower end-users to visualize data by running their own unique queries, applying their own custom filters and formatting in a way that uncovers data so it can be fully discussed and debated is quite prevalent in the market today.    
As a result, we should look to these solutions as examples for how businesses can begin to adopt better Edge level applications for business planning.  Sure, the technology won’t be the same across all areas of business planning, but there are a great deal of similarities that business planning can learn from Edge Analytics that can push the needle forward.  

Financial Planning at the Edge
I think it’s fair to say that everyone has a natural distain for Budgeting.  It takes up too much time and is outdated the minute it is published.  So maybe we should not give Budgeting all the credit in the world, but does that mean we should completely abolish it?  
This debate reminds me of my days as a student when I learned that the Income Statement is based on accounting, not cash.  I was shocked, but does that mean that we should abolish the Income Statement?   Probably not, but we should recognize it for what it is and what it isn’t.  
What is important is the need to set a unified plan (Core level functionality) while at the same time empowering individuals and small teams to recognize whether the ongoing market turbulence is significant enough to warrant a reforecast or not (Edge level functionality).  
Having the proper discussion and debate at the Edge level can help to regroup the individuals and small teams responsible for sounding the reforecasting alarm.  This saves the organization a ton of effort by enabling unaffected parts of the business to continue on without getting caught up in lengthy and continuous planning exercises.  
Some people may advocate for a Rolling Forecast approach that initially appears to eliminate the Core and Edge Paradigm.  However, based on my experience, I would argue that it probably doesn’t.  Rather this middle-ground approach is probably a significant reason why so many Rolling Forecast initiatives don’t achieve the level of success they were hoping for.

Operational Planning at the Edge
Spreadsheets are currently responsible for a lot of the analysis that end-users perform in the realm of Operational Planning.   To be fair, a good deal of these spreadsheets should probably be replaced with Core level technologies.  This will enable organizations to have more “Connected Planning” capabilities that will enable for better horizontal planning.  But that will still never eliminate the need for Operational Planning at the Edge.  
At the “task” level, for example, there will always be a need for individuals and small teams to tie their daily activities with their personal and team operational targets.  This could be achieved with greater integration to numerous Edge level applications that would be managed and updated by end-users (not System Admins).

Strategic Planning at the Edge
Strategic Planning is an exercise that is largely performed at the Edge.  As a result, this is why most companies continue to rely so heavily on spreadsheets to perform Strategic Planning regardless of their investment in EPM.  
The need to evaluate competing strategies (concurrent) or combine alternative scenario variations together (inclusive) is not the sweet spot of EPM.  These days, every EPM suite is quick to refer to their solutions as “models”, but does that mean that the end-users are experiencing greater “modeling” capabilities?  No.  Modeling is an Edge level activity that requires rapid reconfiguration of models in order to screen for potential business opportunities.   
Once the strategic plan is set, the need to execute strategy (using Strategy Management tools and methodologies) switches the conversation back to a Core level functionality.  

What are the Challenges of the Core and Edge Paradigm

If the Core and Edge Paradigm was so simple to achieve, then I think the EPM market would already contain a wide variety of Core and Edge solutions to choose from (which it clearly does not).  So, what is holding us back?  
I think the answer to this question cannot be pinned on one single reason, but rather it’s a shared problem that needs to be addressed across business users, IT and solution vendors.

Business Users
Business users waste an enormous amount of time trying to deal with Edge related business processes using inadequate tools.  Sure, spreadsheets, presentation tools and other personal productivity applications can enable business users to get the job done, but at what cost?  Business users need to recognize the advantage of Edge level solutions and start creating a greater demand for these alternatives.  
Like spreadsheets, Edge level solutions put end-users in control of their business processes, but they can do it in a way that provides more integrity and pre-built intelligence that will save end-users an immense amount of time and effort.  

IT has numerous considerations to take into account when dealing with the purchase of new software technologies.  ROI, security and ongoing support are just a few of the most common considerations.  
As a result, it’s natural for IT to want to limit the number of solutions.  This makes perfect sense when dealing with “point solutions”.  Point Solutions are software applications that address specific problems without trying to address the concerns of any related or adjacent business processes.  This creates disjointed processes that often increase both total cost of ownership and end-user inefficiencies.  
However, it’s important to realize that Edge level solutions are not point solutions.  Rather, they are solutions that operate on different architectural levels and as a result, actually complement each other by furthering capabilities that cannot be optimally achieved by a single level architecture.  
Therefore, it’s important for IT to consider a multi-level architecture (Core and Edge) as part of their formal IT policy (sometimes referred to as Line of Business applications).  Failing to do so, will only limit creativity and increase reliance on generic personal productivity tools.

Software Vendors
If there was going to be any blame placed on a lack of Edge level solutions, I would have to put the onus squarely on software vendors.  Their natural tendency to focus on database driven technology and old Enterprise Sales models is skewing their view of the Core and Edge Paradigm.  As a result, they are too heavily focused on defending their existing Core level solutions rather than embracing and actively developing Edge solutions and opening secure APIs to other 3rd party Edge applications.    
Traditional on-premises vendors often associate Edge level requirements as ad hoc activities that can be addressed using Office add-ins.  However, Edge level applications are not one-time business processes.  
Cloud-based solutions are often quick to point out their intuitive UI, making it easier for users to perform logic changes, yet their centralized architecture still addresses Core functionality.  Just because it’s less of a barrier to make logic changes, doesn’t mean that all end users are free to do it.  

What Should Be Done to Address the Edge?

As I pointed out in the beginning, the result of not addressing Edge level architecture means that spreadsheets continue to have a strong foothold in Business Planning and Analytics.  
Yet, reliance on spreadsheets is not the optimal solution for end-users, IT nor software vendors.
End-users will still suffer from inefficient and error-prone spreadsheets, causing a tremendous amount of wasted time. 
IT will continue to lack the security and governance that eludes them with spreadsheets.
Software vendors will never fully realize the unanimous adoption of EPM/CPM that they have been trying to convey for the past 20+ years.  
This problem will only truly be solved when end-users, IT and software vendors come together and establish a balanced response to dealing with both the Core and the Edge.  
Like most initiatives, it all starts with awareness.  End-users need to do a better job articulating their pain-points.  IT needs to clearly establish their policy on “core and edge” and software vendors need to challenge themselves to develop safe and secure technology that clearly addresses both the Core and Edge and stop relying on slick marketing messages to pull the wool over the eyes of their customers.  
Until then, I’m afraid the spreadsheet will remain an integral and error prone element of our Business Planning process.