As technology companies plan for innovation, they need to balance their attention between developing profitable new products versus developing profit from the products they already offer.
That balance can be informed by data, but it’s a more complex calculation than in industries where companies only focus on existing offerings. In the tech industry, even the existing offerings are often at various stages of maturity, so they require different metrics and planning.
The current generation of enterprise performance management (EPM) solutions can help tech companies identify these multiple product paths. “One of the interesting aspects of EPMs for tech companies is that they combine your various sources of data, including financial and operational data, even going as far as leveraging AI out of the box, to help deliver new and exciting insights across very similar or very different products alike,” said Grant Thornton Technology Modernization Services Principal Will Whatton.
Today’s EPM solutions can then help you track progress for each of your products from inception through maturity, even as the metrics for progress evolve. “You have different needs from an EPM, if you're analyzing something you've been selling and delivering for 15 years versus a research and development phase for an emerging product,” Whatton said. “And, if you're a multi-product company, your needs will be different and much more complex than a single product.”
Traditionally, EPMs track, forecast and plan for products that are already in market. So, how can tech firms use today’s EPMs to inform the full lifecycle?
Product insight
New product development
“We're seeing EPM platforms start to integrate really specific operational data,” Whatton said. It starts with financial data from accounting, the financial planning and analysis (FP&A) team, or elsewhere. “Getting really granular data from FP&A, and having a platform that can integrate that data quickly, is something a lot of our clients are moving toward,” Whatton said.
“Then, for tech companies, EPM can track what the development teams and agile scrum boards look like on a daily basis,” Whatton said, adding that these metrics can answer important planning questions. “Consider how many user stories are getting processed through, and what that projects for your release dates and your marketing campaigns.”
Operational data can inform the new products and also the internal operations themselves. “When tech companies are in a hyper-growth phase, their technology investment goes to customer-facing solutions,” said Grant Thornton Technology Industry National Managing Partner Andrea Schulz. “The back office usually gets neglected. The mindset is typically, ‘Let's just deal with it using manual processes.”
Effective operational data can help tech companies find inefficiencies that are slowing internal operations and the development for both new and existing products.
Existing product development
“For an existing service or product, an EPM typically helps you bill services and analyze where you have cross-selling opportunities,” Whatton said.
EPMs can also play an essential role in helping you re-evaluate your customer strategies. “Look at your customer profiles to say, for instance, ‘Here's where we should be selling, and here's margin opportunity,’ versus trying to add a new feature or trying to capture a new segment of the market,” Whatton said.
“Customers are being critical about where they invest in advanced technologies — they want to see ROI for them,” Schulz said. “Ask yourself if you’re looking at the right customers and really being true to your product market fit.”
“That could require some third-party data, and some other information that is going to be a different lens. The best EPM tools, and the best EPM organizations, can do all of those things under the one platform that they're using for delivery, whether it’s custom-built or purchased.”
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Long-term forecasting
When tech companies understand the metrics that measure their internal and external product development, they can improve their long-term tracking and forecasting.
“Understanding the trends over time starts with tracking,” Whatton said. “Did you perform the way you were anticipating? Do you have the right skill set? Do you need a change?”
“Then, the forecasting on the future side answers questions like ‘How can you market features or products and hit your dates? How can you forecast some of the margin and revenue activities, versus the operational efficiency and the risk management?’” Whatton said.
Even with solid data, no forecast is fully guaranteed. That’s why it’s important to consider another capability that today’s EPMs can offer — modeling and preparing for multiple scenarios.
Scenario modeling
Scenario modeling has become an important activity for a range of industries, and tech can learn from what other industries have done.
For example, Whatton said, “manufacturing — tech or otherwise — really dug into supply chain planning and forecasting during the pandemic. For instance, they got very focused on modeling specific events, like weather disruptions or commodity pricing volatility, and EPM tools were at the center. Those lessons still apply to tech today, and will continue to be critical moving forward for modeling specific events that tech leaders must anticipate.” Tech companies need to model and understand scenarios like their own hardware and software supply chain disruptions, along with mass outages and cybersecurity incidents.
Technology upgrades, cybersecurity and supply chains were the top three challenges cited by respondents to our Tech CFO survey. “Companies with multi-national supply chains face greater risks from events that could have extensive impacts, and they can analyze those more quickly with scenario modeling,” Schulz said.
“There's enough historical data out there that you can start modeling disruptive events — from weather, political developments, outages, hackers, or other issues — and start building response plans for them,” Whatton said.
“You need quality data when you use the AI capabilities on EPM platforms to model specific events,” Whatton said. “Your EPM tool is going to be very dependent on your data. What is the data actually telling you, and are you staying ahead of those trends?”
Data integration
The latest generation of business planning applies the power of AI technology, and EPM solutions can help tech companies both consolidate and analyze their data.
“Data integrity, and the quality of the data that’s retained, is a challenge for a lot of tech companies,” Schulz said. “As organizations are looking to use AI, their success depends on the volume, diversity and timeliness of their data,” Whatton said. An EPM solution can consolidate and integrate data, while also providing AI-driven analysis.
“A lot of mid-market CFOs are looking to integrate AI analysis, but they might not know how or have any experience," Schulz said. “The industry-leading EPM platforms have AI tools built in today, and are improving with every release,” Whatton said. “They’re basically configuration-ready. Assuming your data is of quality, that’s a real accelerator to ROI. We’re talking 10 to 12 weeks to production-ready AI capabilities for the office of the CFO, by leveraging your EPM platforms. That’s an incredible differentiator for these platforms moving forward.”
With faster and better understanding of products throughout their lifecycle, you can see how to accelerate your speed from innovation to value.
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This Grant Thornton Advisors LLC content provides information and comments on current issues and developments. It is not a comprehensive analysis of the subject matter covered. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this content.
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