Pros and Cons of Integrated Business Planning (IBP)

Pros and Cons of Integrated Business Planning (IBP)

Following the creation of ROUNDMAP™, an Integrated Business Framework (IBF), we found that an integrated business, specifically during times of change, can be far more effective and sustainable than a siloed business. To transition from a (vertical, slow, and product-focused) siloed business into a (horizontal, agile, and customer-focused) integrated business, we’re proposing to appoint a Grandmaster of Business™ ─ to make the transition as smooth as possible. But the question we would like to answer today is: What technology will benefit the integrated business most?

Besides a Customer Data Platform, companies may benefit from selecting an Integrated Business Planning (IBP) system. The goal of IBP is to synchronize the supply-side (operations; upstream) of the business with the demand-side (sales; downstream), to disclose hidden gaps, risks, and constraints, as well as under- and overperformances on both ends.

Scheme IBP

IBP-basicsFurthermore, IBP systems make it easy to find discrepancies between the projected and the actual performance, allowing swift corrections, for instance, by relocating resources.

PROs

Integrated Business Management (IBM) could surely prosper from using a real-time digital dashboard, based on aggregated data taken from various systems, to track the projected performance versus the actual performance. Digital IBP systems, also referred to as S&OP systems, offer a technological solution to steer the business from the entry and exit nodes, the up-and downstream of the supply chain ─ by applying one data model, one user interface, and one codebase. Or, as one supplier stated: ‘IBP provides the company with a reliable rolling forecast and strategy status.’

CONs

However, to successfully transition from a siloed business into an integrated business, we believe a company needs to attain all three levels of competence:

  1. Integrated TheoryApplying an Integrated Business Framework (IBF), such as ROUNDMAP™.
  2. Integrated MethodologyAdhering to Integrated Business Management (IBM), preferably with the support of a Grandmaster of Business™.
  3. Integrated TechnologyAdministering Integrated Business Planning (IBP); your choice of an IBP/S&OP system.

IBP/S&OP systems cross organizational boundaries – that is, its strength but also its vulnerability. Classic best practice suggests that the Chief Executive Officer must own S&OP. If that is not possible, some practitioners suggest forming a strong coalition of department heads to lead the process, provided they set clear ground rules and boundaries for working together. However, as McKinsey & IBM found, between 80-85% of digital transformation initiatives fail, a loss of 900 billion dollars (just in 2017) ─ mostly due to silo effects.

Technology by itself won’t be a cure for the silo syndrome or an instant recipe to transform into an integrated business. However, some of the obtained insights may point implicitly to the destructive effects of silo dynamics, thereby becoming an instigator of organizational change. Obviously, abstractions from data by itself won’t change a mature business culture or harmonize its mode of operation.

Therefore, before commencing with a technological solution, please consider an integrated theory and methodology first. Transitioning from a vertical to a horizontal organization has profound implications; leadership is bound to face strong opposition to radical change.

Scheme IBP+

The following image is how we perceive the IBP/S&OP landscape.

First of all, we prefer to use the term ‘demand chain’ instead of ‘downstream’ because the supply-and-demand chain requires different orchestrations to benefit most from the firm’s backstage competitive advantages (on the supply-side) and onstage competitive advantages (on the demand-side).

ROUNDMAP Framework Deltas Copyright ProtectedSecondly, we believe the ‘business’ should be seen as three distinct dynamics, with Customer Dynamics in the center. This way, we can add four additional delta’s, allowing for a more distinct insight into the gaps and constraints throughout the entire value chain.

Systems

There are quite a few IBP-systems on the market, making it challenging to select the most suitable for your situation. We’ve drawn up a short-list of suppliers, in random order, for your convenience:

Additionally, Gartner has drawn up a Magic Quadrant, examining the leading vendors that provide S&OP (Sales & Operations) Systems of Differentiation.

Gartner Magic Quadrant

Author

  • Edwin Korver

    Edwin Korver is a polymath celebrated for his mastery of systems thinking and integral philosophy, particularly in intricate business transformations. His company, CROSS-SILO, embodies his unwavering belief in the interdependence of stakeholders and the pivotal role of value creation in fostering growth, complemented by the power of storytelling to convey that value. Edwin pioneered the RoundMap®, an all-encompassing business framework. He envisions a future where business harmonizes profit with compassion, common sense, and EQuitability, a vision he explores further in his forthcoming book, "Leading from the Whole."

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