This article was updated November 2020.
Whether you’re seeking funding, building a new product line, planning for an initial public offering (IPO), or seeking an acquisition, steady growth metrics are critical for technology companies looking to attract resources—and they often drive discussions at every stage of the business life cycle. To stay on an upward trajectory, a company’s essential business information needs to be available, accessible, and actionable. If it isn’t, uninformed decisions may limit future opportunities.
In this article, we look at some of the most common and significant challenges tech companies face when scaling as well as specific case studies of situations where corporate performance management (CPM) systems have helped overcome those hurdles by providing the following:
- A collaborative planning environment
- Visibility to actual results from financial and operational systems
- Reporting capabilities to pull relevant business information together into one easy-to-use dashboard
The quality of any organization’s planning process and its ability to turn available information into effective decisions contribute directly to steady growth. However, it’s not a lack of information that usually stands in the way.
Technology companies are awash in data, which floods in from all parts of the business. The challenge lies in keeping that data updated and aligned to the business’s top priorities through ongoing cross-departmental communication.
Aligning Growth Strategies
Competing growth strategies are a common problem. Managers often work from aging plans and individual interpretations, which often creates challenges when securing accurate variance reporting between business plans and actual results. These barriers cause delays that inhibit agility and cost precious resources.
Planning Around Operational Performance
Top-line metrics for success such as run rate revenue and year-on-year growth are important—especially for companies working toward an IPO—but it’s easy to overlook underlying drivers of these indicators of operational performance. This oversight can lead to operational performance and planning processes not working together—potentially leading to timing issues that are out of sync with the market.
If one part of a business is growing too fast, it might be adding costs and draining financial resources from the rest of the company. If another part of the business is scaling too slowly, negative impacts to the product can be noticed by the customer before management has a chance to address the issues.
How a CPM System Can Help
Steady growth requires a high level of organizational coordination and a common trusted platform of performance information.
A CPM system provides a platform for unified planning, analysis, and operational and financial communication. This gives business leaders a focal point to align growth strategies and plan around operational performance. It also allows executives to set overall strategic targets and know that management of each operational area has ready access to the net effect of those decisions. In addition, the results of operational area decisions are immediately rolled into overall organizational performance planning and communication.
On a CPM foundation, a broad range of highly communicative features are made available, including:
- What-if scenarios
- Agile business planning processes
- Comparisons between plans and actual results over time
- The ability to drill into the details behind the numbers
- Business-driven reporting
- Compelling dashboards
The overarching focus is on high availability of management information and facilitating collaboration. This alignment contributes to business agility and facilitates responsiveness to markets.
The following are examples of how technology companies have used CPM systems to drive growth.
Creating the Foundation for Funding
The management team of a software company successfully secured an additional round of funding though extensive planning in spreadsheets and manually gathering and calculating information to make their pitch.
They received the initial round of financing, but they also invested a disproportionate amount of energy and resources to the process—time and effort that could’ve been allocated to building other parts of the business.
By implementing a CPM solution to preserve the initial funding effort, the company was able to give its managers access to a solution they needed to facilitate operational coordination. This significantly reduced the effort of developing future board of director reports.
When it came time to seek new funding two years later, the ongoing use of a CPM solution paid off in the form of high credibility in the forecasted growth. Investors could immediately see the results of proactive coordination that helped drive steady growth, which helped instill the confidence to further invest.
Revenue Recognition Decision-Making
Another company’s management team struggled to plan around the complexities of their revenue recognition requirements. With a new product line under consideration, they needed to understand the effect the requirements may have on existing products, operations, and overall profitability. The launch also required a highly coordinated effort to avoid slowing growth while the new product ramped up.
The company used a CPM solution to provide the collaborative planning tool needed across the management team. With the tool in place, they were able to quickly experiment with multiple what-if scenarios and gain visibility to the net effect for each across the organization’s operations.
When the board of directors saw the resulting options from the analysis, they had a clear view of the real effect of the company’s business drivers, allowing decisions to be made based on a foundation of highly visible and accessible data.
Tech companies on the path to growth don’t always have the luxury of time when it comes to delivering. There’s too much competition, too many variables, and too many distractions threatening to slow their momentum. A CPM system enables companies to stay coordinated, on track, and confidently pursue their growth strategy.
In the examples above, the CPM solution delivered highly valuable outcomes. Management teams clearly understood that coordinated efforts could preserve steady growth. Accuracy and credibility of information increased. Reporting was streamlined, and analysis was available immediately.
Most importantly, by putting operational performance strategies and planning together, management teams gained new confidence that the decisions they made were the best for the business, helping them become more successful, agile, and growth-focused firms.
We’re Here to Help
For more information on CPM systems or help streamlining your organization’s forecasting, budgeting, and collaboration processes, contact your Moss Adams professional.