Read this blog to learn why and how Predictive intelligence is important for today's office of financeWhen asked, 69% of adults in the UK said that they feel like change happens faster now than 20 years ago. And that was in 2019. A lot of change has happened since then. I wonder what they would say now.
It’s understandable that we feel this way. Technology has taken the friction out of innovation and the distribution of new ideas. We are flooded with new information each day through digital channels. The same effect has shifted business into a new gear.
Slow to change?Some commentators (mostly outside the sector) say that construction has been slow to change, but that underestimates the shifts that have happened in the last two decades: rapid information exchange through BIM, new construction techniques, and a very different labour market.
In this age of high frequency change, it is no longer enough to be responsive. As any driver learns, the faster you are travelling, the further you need to look ahead. That way, you have longer to respond to what’s coming.
For this reason, companies across every sector are starting to pay more attention to the future, investing in time and tools to examine possibilities across the near and far term. And this investment in foresight often starts in the office of finance.
Foresight toolkitTwo tools are at the disposal of the finance leader wanting to get a clearer view of the future: predictive intelligence and scenario planning.
Scenario Planning, the original futurist’s tool, was developed back in the early days of the Cold War by people trying to imagine different outcomes. Scenario Planning is structured storytelling, and in finance that structure comes from data. Taking today’s data, casting forward, and then bending the data to create different scenarios. By doing this we can create plausible stories of the future and prepare ourselves and our organizations for those possibilities.
Today, Scenario Planning for the office of finance is simplified with the application of technology. Tools that can take today’s data and semi-automate the production of future scenarios. Still though, most companies who use such scenarios only produce a limited range – perhaps ‘best case’, ‘worst case’ and a median forecast. Why not take this a step further? Why not use the power of machine learning to create infinite scenarios? Why not pull in the myriad external data sets that can enrich and enhance foresight, taking planning far beyond anything conceivable before this technology came to the fore.
Automating insightPredictive intelligence leverages machine learning to create a model of your business based on real data. You can then tweak variables in this model to imagine any number of future scenarios. In many ways this is the ultimate tool for answering business questions: you can ask any number of ‘What if…?’ questions and return a plausible answer. Importantly this model will correlate perhaps unexpected variables. The more data it can feed on from across the business – not just finance – the more complete your answer will be. Organizational data is rapidly being democratised – departmental data silos are slowly being eradicated, but is information truly shared across divisions or regions, pooled for collective wisdom? The technology and raw computing power is there to build models that process volumes of data that have grown exponentially. And that data isn’t just internal, embedding third party, published data – or even that of partners up and down the supply chain builds deeper foundations and greater accuracy.
The application of such predictive tools in the enterprise is still in its early days. But given the challenges of a volatile environment so dramatically highlighted in recent years, more and more finance leaders are now looking for a better lens on the future.
This blog is part 3 of a three-part series. For my blog on Supply Chain Planning in construction click here. To read my blog on ESG in the Construction Industry click here.