Product Spotlight:Oracle Hyperion Profitability and Cost Management

Roy Googin, OracleRJ Linehan, Innovus Partners

Today’s Management Challenges

Only 5% of the work force understands the strategy

60% of organizations don’t link budgets to strategy

Only 25% of managers have incentives linked to strategy

85% of executive teams spend less than one hour per month

discussing strategy

9 of 10 companies fail to execute

strategy

The People Barrier

The Vision Barrier

The Management Barrier

The Resource Barrier

Inability to Translate Vision into an Executable Strategy

©1998-2012 Balanced Scorecard Institute

The Four Perspectives of Translating Vision and Strategy

Vision andStrategy

Objectives Measures Targets Initiatives

FINANCIAL

“To succeed financially, how should we appear to our shareholders?”

Objectives Measures Targets Initiatives

LEARNING AND GROWTH

“To achieve our vision, how will we sustain our ability to change and improve?”

Objectives Measures Targets Initiatives

CUSTOMER

“To achieve our vision, how should we appear to our customers?”

Objectives Measures Targets Initiatives

INTERNAL BUSINESS PROCESS

“To satisfy our shareholders and customers, what business processes must we excel at?”

Today’s Management Challenges

©1998-2012 Balanced Scorecard Institute

Linking Tactics to Strategy

Customer Perspective• Strategy - Improve customer value to increase revenue

and profitability• Tactic – Define profitable customers, Identify those

customers, Acquire and/or retain those customers

Financial Perspective• Strategy - Manage financial resources more efficiently to

reduce costs and increase profitability• Tactic – Identify cost drivers, Decide what costs are

wasteful or unnecessary, Eliminate those costs

Today’s Management Challenges

Strategy and Tactics Lead to More Questions

• How do we define a profitable customer?• How much does it cost to service our

customers?• What is the profit margin for products sold

to our customers?• What organizational resources does a

customer consume?• Why has an increase in revenue not

translated into an increase in profitability?

Today’s Management Challenges

Measuring Profitability and Costs

Challenges of Measuring Profitability and Cost Drivers

• Homegrown disparate models are inflexible, inaccurate, and inconsistent

• Time lags to create and update profitability model• Insufficient customer, product, or driver data at

the correct grain• Lack of integration with financial data• Excessive cost associated with maintaining

profitability solution

Measuring Profitability and Costs

Qualities of an Effective Profitability Solution

***Connecting the Dots***

• Integrated solution that is flexible, accurate, and consistent

• Owned and maintained by business users• Offers transparent results that are reliable• Provides traceability to source data for easier

visibility• Lowers total-cost-of-ownership

• Packaged Profitability functionality • Computes Profitability for Business Segments, Customers and

Products• Pre-Built Framework for profitability modeling:

• Pre-built Measures dimension• Support for Multiple Cost Allocation methodologies• Pre-Built Validation reporting

• Graphical Interactive Traceability Maps• Genealogy Reporting shows flow from any stage to any stage

• A User-Driven application• Measures, Allocates and Assigns Cost and Revenues via User

Defined Rules• Finance User-facing Administration• Provides Scenario Modeling for Decision Making

• Tightly integrated with the full Hyperion EPM Suite• Shared Data and Metadata via EPMA• Shared Reporting Tools like Financial Reports & Web Analysis• Proven Technology Stack

Hyperion Profitability and Cost Management (HPCM)An Oracle EPM System Module

Oracle’s Enterprise Performance Management Platform

Common Integration & AnalysisData Quality and Consistent Dimensions

Common Reporting & Interaction

Strategic Planning

Financial Close

Planning & Forecasting

Profitability Management

10

EPM Architect / Financial Data Quality Management

Web Browser / Excel / Word / PowerPoint

Hyperion Profitability & Cost Management

DW / Excel / Text Files / Etc…

ITSalaries

Facilities Rent

Audit Salaries

IT Desktop Support

Checking Accts

East 57th St

Checking AcctEast 57th St

Process Deposit

Stages: Dimensions:

1: General Ledger

= Dept + Account

2: Activity = Dept + Activity

3: Product = Product

4: Branch = Branch

5: Cost Object

= Product + Branch + Activity

An Example: Using HPCM to Assign Costs to Products, Branches, and Activities

Stages & Dimensions Drivers & Assignment Paths

GL $$$

$$$$ $$$$ $$$$

$$$ $$$

$$$

$$ $$ $$$

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

% of Time Spent

# PCs in Use

Even Split

# of Trans

Square Feet

# of Trans

HCPM Demonstration

Product Spotlight:Oracle Hyperion Profitability and Cost Management

Roy Googin, OracleRJ Linehan, Innovus Partners