There is no shortage of data in businesses these days. What is more, is that it can be accessed easier than ever. Simply pop into your company’s data lake and retrieve whatever you need. This is great, right? In general, yes, but danger looms on the horizon if FP&A does not tackle this newfound data availability well. There are a couple of challenges that FP&A must address to increase the data efficiency and effectiveness in the company. Here are some of the main ones.
- Too much data can lead to information overload
- Too much availability can lead to several versions of the truth
- Self-service makes it hard to govern what data is used for
- Too much data can cause a lot of time wasted doing useless analysis
In this article, we will try to address each of these challenges and give suggestions for how FP&A should handle them. We will show how a simple data governance model can solve most of the challenges and discuss how FP&A can drive data effectiveness up using the model and deliver on the “less is more” cardinal rule.
The Federated Data Model
Most companies today deploy what is termed a “Federated Data Model” in which the data from multiple source systems flows into data repositories such as a data warehouse or data lake. From there it can be used in reports and various BI tools. A great intermediate step between the data repository and reports and tools would be to map all data to a value driver map. You can see the process below taken from the Gartner Data Management Model.
This creates a very efficient data management model that is governed by the company’s value driver map. This is very powerful and does well to address many of the challenges that today’s data abundance brings. Let us review how it solves the challenges we outlined at the beginning.
- Information overload: You still have all data available but because it is linked to the company’s value drivers it is easy to zoom in on specific elements and not be overwhelmed but tackling all value drivers at once
- Too much availability: In principle, it does not matter how many people around the company can access data and use it for their own purposes. The key is that it is governed by a central model allowing anyone to trace the data back to the source.
- Self-service: When you know the structure of the data and how it is made available you should have no concerns in democratizing it and making it available to all stakeholders. Due to the data model’s governance manipulation is not possible or at least very easily detected.
- Time wasted on analysis: This is always a risk but again having the data model governed by a value driver tree you should easily be able to spot where you have challenges in your business. Zooming in on these challenges greatly reduces the need for exploratory analysis and guides you in the right direction from the beginning.
As can be seen, the federated data model greatly increases data efficiency and mostly addresses our concerns about having too much data available.
One step closer to true data effectiveness
Another key benefit of this data model is that it allows FP&A and its business stakeholders to truly focus on the key pain points in business and financial performance that should be solved. Instead of spending countless hours analyzing data to find the pain points they now stand obvious in front of you! This is what you can call true data effectiveness and enabling a less is more approach.
FP&A can now start the right discussions every time driven by data and would rarely have to go back to the numbers and the analysis to answer questions. Simply use the value driver map to dig into the issues all the way to the root cause metric. Then discuss with business stakeholders what has caused this metric to deteriorate.
What data model does your company use? Is it linked to a value driver map and do you have this visualized in reports for easy drill-down? It is essential that you can focus your time and efforts on the key pain points of the business. Utilizing a federated data model in combination with the right tools will get you there. Just give it a try!
This blog is presented by ValQ in collaboration with Anders Liu-Lindberg, Business Partnering Institute. If you have any good cases for ValQ or stories to tell about how such solution can benefit you, please reach out to us.
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