Basis for any senior management decisions areanalysis with influences on short and long-term financial statements - results.It is not only profitability that needs to be taken in analysis because,short-term decisions could lead into significant enhancement of Profit (NOPAT -Net Operating Profit After Taxes) but in long-term period company might lose onits value much more because of this profit enhancing strategic decisions.Companies could even go to bankruptcy if they lose experts, innovative cycles, processand environment value. They could lose their competitive advantage. All thiscould happen if strategic management analysis is oriented on short-termfinancial results aka maximizing current profitability.
Sustainable growth and value contribution should bemain target for any strategic management analysis. One of best models with allrespect to Balance Score Card, Activity Based Costs and Six Sigma is definitelyEconomic Value Add (EVA) that gives best view into sustainable opportunities inindustry and extra profit. Catch with EVA model is to have accurate WeightedAverage Cost of Capital (WACC) but this material for another story.
Doesn't matter what business model top managementuses to build company and society value it provides strategic managementanalysis needs to take care about level of corporate knowledge integration withfinancial statements. This is the basis of everything - integration of currentand planned business performance figures (key performance indicators, businessanalysis reports, ad hoc analysis and similar) together with financialstatements. In other words, company information flow and knowledge generation,best is through customized business intelligence software solutions, must bequantified directly in financial statements.
If business data from KPIs and from financialstatements and financial ratios are not integrated strategic managementdecisions will not have quantity analysis, estimation. Strategic managementdecisions will than rely more on experience and feeling instead of poor qualityplans and analysis. Low integration means exactly that data from productionsystems, financial and non financial are not directly related. If sales figureis changed (revenues and costs) will be not transparently presented in financialstatements. This is main game, complete integration of non financial indicatorsinto financial ratios. That would allow ultimate strategic management analysis.
Strategies must rely on solid corporate knowledgefrom information systems like standard business intelligence, businessperformance management, data warehouse, data mining, business intelligence forfinance and business models. That is a must! Only then can be many analysis becompared and to fine tuned. Only then can valuable strategic decisions be madeupon strategic management analysis. There is no other way to go without highquality strategic management analysis that is based upon company informationflow and external data (marketing research).
With results in financial and non-financial worldit is easy to find, to compare strategic decisions in strategic managementanalysis. For example if EVA model is implemented in company then it is easy tobase strategic management decisions on simply just finding which analysisbrings more EVA.
Source:
Image Courtesy:
apt-initiatives.com
promentor.us
Comments