In today’s economy, all companies are contending with a dynamic business environment characterized by volatile commodity prices and exchange rates, a shaky global financial system and slow growth in many countries. Many of them rely heavily on desktop spreadsheets to support the data collection and analysis related to their capital-asset planning. However, spreadsheets have inherent limitations that make them the wrong choice.

Spreadsheets are handy because most people already have them installed on their computer and have the basic skills to use them. They facilitate ad-hoc analysis and modeling. People who understand a business process and business objectives can quickly translate this knowledge into formulas and numbers. More formal software, such as dedicated planning applications, demand some degree of additional training for business users and may also require some ongoing involvement by the IT department to set up and maintain models and analyses. Thus for many departments and individuals this creates a barrier, and they conclude that it’s just faster, easier and cheaper to work with spreadsheets.

Yet spreadsheets fall apart as a modeling and analysis tool when used in repetitive collaborative enterprise-wide activities. Asset-intensive companies almost always have a high degree of centralization in making capital allocation decisions, so individual spreadsheets must be “rolled up” to gain a consolidated view of the investments. Our research shows that even people who are highly experienced in using spreadsheets find it difficult to combine more than a couple of them at a time. Since they lack referential integrity, models are brittle – meaning that when rows and columns are changed in one, it creates an error in the consolidated view. Spreadsheets have limited dimensionality and are not inherently time-aware. Yet one of the most important characteristics of capital investment analysis and management is the timing of the various activities and the cash flows associated with them. It’s therefore difficult (although not impossible) to impose global assumptions across multiple users and extremely difficult to manage the time dimension of investment modeling. more

For those of you who are my regular readers, you may know that the number of my obituaries that honor special people are very few. I believe this my fourth one in the four years that I have been blogging.

Jeremy Hope (1948 – 2011) was a special type of management consultant. He started a revolutionary movement when he co-authored with Robin Fraser the book, Beyond Budgeting: How Managers Can Break Free from the Annual Performance Trap (Boston: Harvard Business School Publishing, 2003). Their basic message was that the annual budgeting process is so broken and dysfunctional that the best solution is not to reform it but rather to abandon the process altogether. Their solution was to understand the underlying purposes of a budget and apply methods, like driver-based rolling financial forecasts, that fulfill the purposes of a budget.

I personally knew Jeremy, however, to read a much better memorial tribute and description about Jeremy and his like than I could write I encourage you to read a piece written by my friend and fellow enterprise performance management (EPM) visionary, Steve Player. more

In April, Proctor & Gamble announced that it was merging its Pringles business into Diamond Foods, the company behind Pop Secret popcorn and Kettle Brand potato chips, among other goodies. The transaction value comes in at about $2.35 billion, P&G said. Included in that number is $1.5 billion in Diamond common stock, which consists of 29.1 million shares, equal to about 57 percent of the outstanding shares of the combined company, along with the assumption of $850 million of Pringles debt. Diamond’s existing shareholders will continue to own approximately 43 percent of the combined company.

The shift in ownership makes sense; P&G’s largest markets are in health and beauty and household care. The company’s household care division, which boasts such names as Tide and Downy, rang up more than $24 billion in sales in fiscal 2011, while revenue for its health and beauty brands, such as Pantene and Olay, topped $20 billion. In contrast, snacks and pet care, including the Pringles division, accounted for just $3.2 of P&G’s $82.6 billion in sales.

What’s more, the transaction is going to be structured – legally – in such a way that the company avoids taxes. In fact, this is the latest of several deals P&G has been able to structure so that it earns a profit, yet avoids having to pay taxes, as this recent article in Fortune points out. more

When an expert tells you that the amount of data is exploding it usually leads to a pitch to buy more storage capacity or tools to better manage the storage you have. While that’s probably not bad advice, it misses the most important point.

The point usually overlooked is that the data, when used right, has great business value. “Analyzing large data sets—so-called big data—will become a key basis of competition, underpinning new waves of productivity growth, innovation, and consumer surplus,” declares McKinsey in a recent research report. Click here for a copy.

IBM, which is in the business of selling technology to generate, capture, store, analyze, and apply data, has been pushing the idea of the business value of data for years. Next week it is holding its annual Information on Demand conference in Las Vegas. There it will showcase its thought leadership and technologies for dealing with big data. more

More than 40 trade and professional associations, from the Aeronautical Repair Station Association to the Wood Machinery Manufacturers of America, recently wrote the chairs of the House Ways and Means Committee and the Senate’s Committee on Finance, asking that the legislators charged with reforming the tax code bear in mind three principles:

1) That any reform be comprehensive and include both individual and corporate tax rates. The letter notes that most U.S. workers are employed by businesses organized as pass-through entities, which pay taxes at the individual rate. A recent study by Ernst & Young which found that “in the US, pass-through entities account for some 90 percent of businesses, employ more than 50% of the private sector workforce and report more than a third of all business receipts. Moreover, individual owners of pass-throughs pay 44 percent of all business taxes on their allocable income. In 1980, 83 percent of businesses chose a pass-through form; that number had jumped to 95 percent in 2008, the study notes. more