My areas of expertise
Here are the ideas and people that influence my thinking.
I first discovered Beyond Budgeting at the end of the 1990's as I struggled to work out how to improve the bureaucratic planning processes in my company. It has been a constant presence in my life ever since and has spurred my forays into other fields.
I am the core team of the Beyond Budgeting Institute and continue to write and speak on the ideas.
Although its roots are in Finance, today we are clear that Beyond Budgeting is much more about how to create adaptive high performing enterprises that are healthy places for people to work
To help introduce big and potentially scary Beyond Budgeting ideas into Unilever I needed to find a way in where the resistance to change was likely to be minimal. I hit upon the process of financial forecasting, as it was clear that everyone thought that the existing process was broken, and so would welcome fresh thinking. Once people had confidence in forecasts as a tool for helping them steer the business, my thinking went, they would be less scared of letting go of budgets.
Like most practitioners I had built and run forecasting processes based on ‘common sense’ principles – and there was plenty of evidence to suggest that this approach didn’t work. When I started researching the subject I soon discovered that there was an absence of structured knowledge about medium term business forecasting of the sort that interested me and my fellow finance professionals. The sort of forecasts that are needed to steer a business.
So, I set about creating it, drawing on and adding to ideas from the well-established fields of operational (short term) and strategic (long term) forecasting.
The fruits of this work are captured in ‘Future Ready’, a book I co-wrote with Steve Player.
The Viable System Model is based on the way that the human nervous system is structured and how it handles information
In the early years of Beyond Budgeting we uncovered more and more organisations that managed their business more effectively without budgets. Apart from being consistently successful, the most striking thing about them was that they had independently chosen to do the same kind of things. Why was this?
This started me on a quest to discover the source of the principles or management that they had intuitively adopted.
This led me to systems ideas and especially to the ideas of Stafford Beer whose Viable System Model was the subject of my PhD and the intellectual underpinning of everything I have done since.
It is difficult to overstate the profundity and importance of these ideas that few people know about and even fewer understand, and I will not consider my work to be finished until I have done something to make good this deficiency.
Making Forecasting Pay
One of the key insights from my work on Business Forecasting was that if you can’t define what success looks like then you shouldn’t be surprise if you fail. But having defined ‘success’ for business forecasting it was the pursuit of an answer to the follow up question: ‘how do know if we have achieved it?’ that led me to developing a completely novel approach to measuring the quality of forecasts.
It soon became clear that this approach would add most value to short term forecasting of demand because of the amount of forecasts that need to be produced and the clear and direct link between the quality of forecasts and impact on the business – the level of stock and the quality of customer service.
I cofounded CatchBull to develop software to exploit this technology and over time the concepts and techniques were refined and improved with the results being published in peer review journals. At the heart of this thinking is that the ultimate measure of forecast quality is the amount of value that the process adds to the business, rather than abstract measures based on simple error measurement.
CatchBull now has the only product in the market capable of analysing the value added by forecasting and helping practitioners to improve their performance
Signals, Noise and Cognition
One reason why budgeting has been so resistant to change is that the way that businesses have become accustomed to measure performance – by comparing the outcome for a discrete period to a target.
The artificial and unhelpful nature of fixed targets is well understood in Beyond Budgeting. And my work in forecasting had awakened me to the pervasiveness of noise in data and the need to use trends to uncover signals – what is really going on. So it was clear that we needed new ways to understand performance.
My work in designing software also brought me into content with the advances being made in data visualisation, both as a means of discovery of insights and a medium for communicating them to an audience, drawing on the Ideas of Edward Tufte and Steve Few. And nobody in software can ignore the challenges and opportunities provided by ‘Big Data’ and advances in machine learning technology.
What has become increasingly clear to me is that to help us make sense of performance in a world of super abundant data and communicate these insights require some understanding of the process of human cognition. We need tools to help us exploit our brains strengths and mitigate its weaknesses. Currently I am working on another book to bring together these ideas to provide a framework and tool kit for practitioners.