Is Compas an EPM tool?
In a previous post, we explored the concept of Enterprise Performance Management (EPM) – sometimes referred to as Corporate Performance Management (CPM) or Business Performance Management (BPM). It is often equated with Financial Planning & Analysis (FP&A), but generally has a broader scope. I am not too concerned about specific labels or definitions, but I am interested in the role that all of these types of software fulfil in the modern corporation. Viewed from a distance, all of these terms seem to describe broadly the same thing, although they may have slightly different emphases and characteristics.
The key purpose of software described by all of these terms seems to be to provide strategic planning and analysis in a way that integrates the various departments and functions of the business. The key requirements are embodied in that sentence:
- Strategic: they operate at a higher level than an ERP tool and are aimed at senior management, as well as line managers
- Planning and Analysis: they are both forward-looking and backward-looking and incorporate both plan and actual data
- Integrated: as with an ERP system, they operate on a common shared database, so that when data is changed, that change ultimately ripples through the system, affecting all departments that depend on it.
In the post, I identified 6 characteristics that need to be present in order to deliver this functionality effectively. These flow directly from the three key requirements outlined above. Let us now explore the extent to which Compas meets these criteria, and therefore the extent to which it can be described as EPM software.
- It covers multiple areas of the business in an integrated way. This is one of the ways in which EPM draws on the concepts of ERP. Everything in Compas is based on an Enterprise-class Oracle database, that provides both data storage and analytical capabilities. This allows sophisticated modelling and powerful ‘slice and dice’ capabilities, making it easy to see a top-level strategic overview, and then to drill right down to the detail if necessary.
- It has a strong focus on Finance. The primary role of Compas has always to been to support the entire business. Some EPM tools are really just an extension of FP&A, whereas for Compas Finance is just one department among many whose needs depend on data from other parts of the business. Within Compas, building a detailed profit and loss account – whether for an individual business activity, or for the entire organisation – is native to the system, but it has no higher or lower priority than anything else. Having said that, there are powerful tools available for the Finance department, in addition to the standard forecasting and analysis tools. These include the ability to construct and freeze budgets and budget restatements, and to customise the specific line items in the P&L.
- It goes beyond Finance into other functions. In Compas, everything typically starts from a marketing plan or sales forecast, but other business drivers can be used instead. What Compas does is to convert top-level plans by business driver into detailed time-based forecasts for other departments. It ensures that product demand feeds into the supply chain, and that, if necessary, that demand is broken down using the relevant Bill of Materials (BOM) to calculate a demand forecast by individual component. These are then aggregated automatically to provide financial and operational forecasts that are directly built from the sales/marketing plan and can be instantly recalculated if that plan changes.
- It combines planning and analysis. This refers to the fact that EPM software typically combines both plan and actual data in the same platform (unlike the home-grown spreadsheet approach to planning that typically requires actuals to be copied or typed in). The Oracle database on which Compas sits can take an overnight feed of company data, and use it to refresh reports and rebuild forecasts dynamically, so that users see the latest picture as soon as they start work.
- It is strategic and analytical in outlook. This is a fundamental difference from ERP, which is primarily operational in its focus. The underlying database on which Compas sits typically contains the detailed data supplied by the company – individual sales, orders, customer interactions etc. – which means that they can be reprocessed or reanalysed at any time, if necessary. However, the main application sits on the multi-dimensional OLAP engine embedded within the Oracle database. This typically does not contain raw data, but contains aggregate data by dimensions such as day, product, customer (or customer group) and perhaps other dimensions like marketing activity and order channel. This greatly reduces the complexity of the data, and is key to the ‘speed of thought’ analysis capabilities of the system.
- It permits the creation and storage of different scenarios. This is an area in which Compas has both considerable strengths and some weaknesses. The multidimensional database on which Compas sits permits the storage of many different versions of the plan. This is immensely powerful, as it allows users to revisit how the plan looked, say, a week or a month ago, and to see exactly what has changed since then. Compas takes a complete snapshot of the plan every week as part of its core functionality. It also contains a number of scenario analysis tools to permit ‘what-if’ analysis, but this is an area where the tools could be improved (as of the time of writing) and we will be working to develop these in coming months. Compas permits users to switch individual activities (e.g. marketing campaigns) on or off by putting them into simulation mode. This allows them to see the impact on the forecast with and without them. They can also change any details and save a snapshot containing those changes as a named scenario. However, it is a bit harder for them to make ‘across the board’ changes affecting an entire year – for example ‘what if my response rates are all 10% lower?’, ‘what if all my costs rise by more than I expect?’. These changes can be made manually, but Compas could probably offer more assistance. Compas also offers both a scenario analysis tool and a sensitivity analysis tool at the individual marketing campaign level, which allow users to try out different scenarios, and test the sensitivity of campaign profitability to various input parameter estimates.
So, is Compas an EPM tool?
EPM tools exist to allow strategic planning and analysis that links the operations of an organisation directly with their financial impact. The characteristics outlined above identify what is needed to do this effectively, and Compas delivers these in spades. It was not originally conceived as ‘an EPM tool’ – indeed, the term didn’t really exist when the forerunner systems of Compas were first being built – but it has always operated in an integrated fashion to help businesses to plan strategically, improve operations and analyse financial return on investment. Equally, it could be considered as a tool for Financial Planning & Analysis (FP&A), and we have users who view it as just that.
One of its earliest iterations was for the planning and evaluation of trade promotions in an FMCG environment. Users could plan the expected uplift from baseline as an absolute or percentage amount, enter a profile and associated costs, and the system would build a phased forecast of incremental sales volume, as well as a promotion-level P&L. The incremental sales volumes were aggregated and exported to the factory, and the individual promotion-level P&Ls could be aggregated and analysed at a higher level. Once actual sales started arriving, the system could adjust the future sales forecast based on what had already happened, and everything would be updated to keep them consistent. When the promotion was complete, analytical tools permitted the evaluation, both of the promotion individually, and of all past promotions at a higher level, to build learnings that fed into a process of continuous improvement. This, along with the fact that multiple scenarios for each promotion could be planned, illustrates quite well the six key characteristics above.
How is Compas different?
I am not qualified to comment in detail on the strengths and weaknesses of all of the other offerings in this particular space. However, I can comment in some detail on what Compas can do.
My main observation is that EPM tools face a difficult challenge in anyone’s book. Whereas reporting on historic data is a relatively straightforward problem, building a planning solution that covers the enormous diversity of organisations is an almost impossible task. This is true of ERP solutions too, and in that case, a compromise (happy or otherwise) is typically found between what the business would ideally like, and what the ERP tool can easily provide. This may be one of the reasons why EPM tools tend to focus on the financial side of things – despite the operational complexities of different businesses, the financials, at least, tend to bring everything back to a common basis.
The approach that we have taken with Compas is to recognise the scale of this challenge, and to keep the basic platform as lightweight as possible. Rather than trying to build a comprehensive system that can be configured to meet the diverse needs of many different organisations, we have built a powerful platform with a huge range of capabilities that we can easily tailor to the specific needs of each client. The basic ‘out of the box’ framework provides much in the way of planning and analytical capabilities, and may well meet the needs of many organisations, such as e-commerce, direct-to-consumer (DTC) and multi-channel retailers, and other organisations that deal directly with consumers (e.g. charities). However, the real strength of the platform is the ease with which it can be turned to any business need, without being burdened with a deadweight of functionality that is not needed. This means that it can be used for niche, or specialist applications that are simply not possible – or at least, not straightforward – with more generalist solutions. The result is that the client gets what is essentially a bespoke application, perfectly tailored to their needs, rather than a general planning tool, which has been configured to meet their requirements.
This difference manifests itself in several ways:
- A clean and intuitive user interface. Because each system has been built precisely for the end users, the menu structure and system flow can reflect exactly what they need, rather than the needs of a more general application. Input screens are tailored precisely, using their terminology, and not demanding any unnecessary inputs. Tooltips and help screens can be added to describe exactly how the screens should be used in the context of that business. The basic user interface can be extended with interactive dashboards and reports to provide a completely bespoke application, at the cost of an off-the-shelf tool.
- Precise implementation of business rules. Many EPM tools provide a wide range of standard business rules (e.g. “fixed costs should be allocated proportionate to revenue”, or “high-level figures should be split to lower levels according the the average split last year”). However, it is impossible for a generic system to meet all the possible needs of potential users. Compas allows literally any business rules to be incorporated – either by us, or by incorporating custom models developed by third parties or in-house. A good illustration of this is provided by an implementation for a food producer. Having calculated the basic demand for individual product elements by processing the Bill of Materials for everything in the sales forecast, the system was then able to apply a ‘substitution hierarchy’ by knowing which components could potentially be substituted by others, and which could not. This allowed the system automatically to allocate forecast supply to demand, and to identify potential supply problems coming up where there was a shortage that could not even be met by substitution.
- A lightweight and highly optimised solution. Building a solution from the bottom up, rather than by taking a monolith that delivers everything and then cutting it down, means that the final solution can be designed precisely to meet the needs of the business and no more. Implementation typically includes a couple of weeks of up-front consultancy to help craft the optimum design for the business. For example, for direct-to-consumer and other e-commerce businesses, we might forecast daily sales, possibly split by order channel where relevant to allow us to calculate order processing costs more precisely. However, when we calculate the P&L, that is likely to be stored only weekly or monthly, and not split by order channel, as that is not a relevant dimension.
- Powerful and flexible reporting. A finance director who recently moved from a business that used Anaplan to one based on Compas, observed to us that he found the reporting in Compas very intuitive, and much better than Anaplan. The Oracle OLAP engine is to be thanked for much of this – it is powerful, flexible and fast – but also, the fact that the Compas implementation had been built precisely for that business meant that the reporting could be made as easy to use as possible.
Who is Compas for?
Whereas most of the solutions currently in the marketplace seem to focus on ‘enterprise-level’ implementations, the primary focus of Compas is on the mid-market. That is not to say that it cannot be used by larger businesses, and indeed has been used in the past by one of the largest companies in Europe. However, slightly smaller businesses that are still wrestling with a largely spreadsheet-based approach, or a disconnected set of legacy tools, really benefit from the end-to-end handholding and tailored approach provided by Compas. Smaller businesses can rarely spare the staff to oversee a big software implementation, and the lightweight, cloud-based solution offered by Compas can be deployed with minimal disruption. The tailored approach means that existing business practices can be followed and familiar terminology used, allowing users to get up to speed as quickly as possible. However, our experienced consultants will be able to provide an independent pair of eyes to examine current practices to see whether they can be improved – there is no point simply transferring an outdated or inefficient business practice to a new platform.
A second consequence is that Compas is ideally suited to somewhat niche or difficult problems. The care and attention applied to each implementation, and the ability to incorporate completely bespoke models and screens means that it can be much easier and more satisfactory to deploy a Compas-based solution, than to pay some consultants a huge amount to tailor one of the more ‘generalist’ EPM/planning tools to meet a somewhat unusual set of needs. A good example of this is a deployment that we made for Stonegate, a large producer and packer of free-range and organic eggs in the UK. There, the main focus was on predicting the supply of eggs – and then matching that with forecast demand. For this, we really needed to understand the market, as well as details of production and packing, and then incorporate that into the system to make what, to all intents and purposes, was a bespoke tool for them.
Finally, whilst Compas does have full Finance capabilities, and can build tailored Profit and Loss accounts, it does not have the same primary focus on Finance that some other systems do. That makes it particularly suited to use by departments such as Sales, Marketing, Supply chain, Business Planning, as well as Finance. Some of our most prolific users are in fact in Marketing, particularly in Direct-To-Consumer (DTC) businesses, who use Compas to plan, monitor, reforecast and ultimately evaluate their marketing campaigns, at the same time generating financial forecasts for Finance and demand forecasts for Merchandising, Customer Service and Operations.
In summary, Compas provides a powerful, lightweight and relatively inexpensive planning and analysis solution to organisations ranging from small to large, with a focus on the mid-market. Companies benefit from close support and a bespoke approach, and can typically be up and running in a small number of weeks. In particular, companies with slightly unusual or difficult planning needs should contact us to see how we can help.
This explainer video provides an entertaining overview of Compas and how it fits in to an organisation’s software landscape.
NB: We will shortly be making a simple demo of Compas available through the website, to allow users to explore its functionality for themselves. In the meantime, if you would like a no-obligation demo, tailored to your requirements, please contact us directly.