Management Reporting Driving Innovation & Entrepreneurship

Chris Catto Putney Breeze Business Advisors

Fit For The Future Conference

19 March 2015

Sydney Harbour Marriot Hotel

Circular Quay

30 Pitt Street

Does the Business know how you are positioned enable innovation and entrepreneurship?

Perceptions – The Face Value

UnknownKnown

What you Know you Know!

What you Know you don’t know!

What you Know and you don’t know how you

know it!

What you don’t know you don’t know!!

Denning & Kruger effect

Known

Unknown

What is innovation and how does innovation happen?

Innovation is the introduction of something new or different. The act of innovation is the introduction of new things and new methods. Macquarie Dictionary

1) Dissatisfaction with the status quo2) Inspiration from other sources 3) Invention4) Internal and External validation

http://sloanreview.mit.edu/article/how-management-innovation-happens/

1) Dissatisfaction with the status quo

TPS, Target Costing, Jidoka, Kaizen, Lean

2) Inspiration from other sources

Sir James Dyson3) Invention !4) Internal and External validation

What is Entrepreneurship?

Someone who organises and manages any enterprise, especially one that involves considerable risk; an employer of productive labour Macquarie Dictionary

• Desire• Belief• Life Experiences• Imagination• Planning for the purpose of action• Decision making mastery• Persistence• Influencing the subconscious mind (trust)

Problem solving and engaging others to action accordingly

Think and Grow Rich – Napoleon Hill

Entrepreneurial Mind Set

Great Innovative and Entrepreneurial Organisations create new needs through innovative products!

– Motor Car

– Walkman

– Cyclone Vacuum Cleaner

– iPad

Great Innovative and Entrepreneurial Organisations

Where is CPM and management reporting heading?

1) Office-of-finance CPM — largely involves the improvement of financial processes

2) Strategic CPM — supports organization wide transformation and growth

Strategic CPM — supports organization wide transformation and growth

How do you leverage Management Reporting to;

1) Highlight dissatisfaction with the status quo 2) Act as a catalyst to see inspiration from other sources3) Advance those who organise an enterprise that involves risk and employs productive labour

What is your Entrepreneurial Value; what is your product or service that facilitates organisation wide transformation and growth?

Communicate the Problem

Highlight the destination

Communicate the Solution

Provide the path to the

Solution

Implement and solve the

Problem

Where are we now? The Responsibility holders problems and challenges and

fears.

Where we need and can be. The benefits of alternative

scenario. Clarity in information, improved

communications, aligned goals, improved decision making , higher personal esteem amongst peers

Outline the benefits of a driver based budget and

forecasts for decision insights, forward planning and

managing communications with key stakeholders

Provide a budgeting and forecasting process that

enhances decision insights, forward planning and

communications with key stakeholders

Enhanced Budget &

Forecast Buy in and

collaboration

Budgets and business influencing a framework

It begins with Trust!

The framework provides a starting point from which the end goal can be achieve through a logical sequence of action.

However to engage your internal stake holders, your clientele, the establishment of both perceived and real goal congruence will be a critical factor.

• Do you understand the key motivators of your clientele (internal)• How are they rewarded?• What are their measures of success?• What are their short term goals?

Have you asked the question? Or have you made assumptions?

By asking the right questions you begin the process of establishing goal congruence

Is a framework enough?

• Enhance interdepartmental understanding through transparency

• Friend v Foe - moving from gate keeper to solution provider

• Alignment of Culture and common goals.• Underpinned by consistent delivery of

reporting, commentary and insights

Ultimately delivering actionable information in the appropriate context to facilitate the goal achievement of your clientele.

Every Month End, Business Case and Tender evaluation, Finance project provides and opportunity to build trust. The establishment of consistent service provides a platform from which to enhance engagement in the budget and forecasting process

Leveraging Goal Congruency

Enhanced Budget and Forecast engagement

underpinned by Singular objective

Facilitate Goal Congruence

Deliver Consistency in

ServiceBuild Trust

Enhance Budget and Forecast Engagement

facilitate organisation wide transformation and growth

Align Culture

Case - Kyocera Amoeba ManagementDrill Down

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

0.0

50.0

100.0

150.0

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250.0 Profit from operations

Profit from operati...

（ Unit: Billions of yen ）

Founded by Kazuo Inamori Kyocera has never recorded a loss in 54 years of

operations

► Amoeba Management Accounting Philosophy

► Business Units Fiscally independent, self contained and aligned with overall corporate goals

► A principle of Cash basis management

► Monthly Profit management focused on forward activity

► Key measures at Business Unit Level - Hourly Efficiency System

Case - Kyocera Amoeba ManagementDrill Down

Facilitate Goal Congruence

Deliver Consistency in

Service

Align Culture

All business units “Amoebas” focus on improving the “Effective Hourly Rate” measure as the all encompassing measure of progress. Transparent calculation and collective understanding of implications.

Philosophy - Segregates company into autonomous self managed “Amoebas” who operate on a share philosophy of continuous improvement challenging the status quo in competitive environment, underpinned by “Good citizen” culture

Forward focused reporting that facilitates action plans for the week/month ahead on requirements to return to goals or embed advantages . Reporting underlined by collective problem solving outcomes

Facilitate Goal Congruence

Budget - “The Fiscal Year Master Plan”- A summary of objectives for the entire company- Management objectives are represented as goals in clear

numbers for each Amoeba unit (Sales, net Production, and Hourly efficiency )

- Amoeba leaders are left to create their own master plan on how the objectives will be reached.

Monthly Reporting- Forward looking, focused on action planning for only the

immediate month ahead- Clear link between activity and financial numbers must be

made.- Monthly plan must make reference to annual plan goals.

Adapted from Kazuo Inamori – Amoeba Management: The Dynamic Management system for Rapid Market Response

Case - Kyocera Amoeba ManagementDeep Dive – Budgeting and Reporting

Principles

“a lot of the time, people don’t know what they want until you show

it to them”

Steve Jobs