Page 86 - Performance Leadership

Chapter 5 Operational and Analytical Alignment • 75

forecast, but external events may trigger a new rolling forecast as well.
External events can be new regulations or laws, sudden economic turns
such as increases in the price of oil, changes in the social environment
such as public opinion, the availability of new technology, or strategic
moves or failures of the competition that require an immediate
response. Including a continuous external analysis in a rolling forecast
encourages the organization to benchmark itself, creating a relative
view on performance.
Rolling forecasts bring alignment between the first and second loop
of management, connecting operational resources with financial out-
comes. At any moment, the first loop of management can invoke a
second loop, to create a new forecast and implement measures to work
against that updated forecast. In other words, rolling forecasts provide
an upward trigger. By using a rolling forecast, there is a continuous
check to see whether business reality changes and how that affects the
bottom line. Where budgets only trigger discussion on having “made
the numbers” or not, rolling forecasts invite a different discussion:
assessing internal and external changes and what to do about it.
Rolling forecasts, because of their higher frequency, also lead to a
mindset of continuous improvement, instead of hitting that single
number.

Real-Time Information

The pretzel model, where the first and second loops of management
are aligned and invoke each other when necessary, can only be effec-
tive if the periodicity of information as a feedback mechanism matches
the speed of the decision-making processes. The needed periodicity
of information is changing, and this highly affects the pretzel model
of aligning the operational and analytical dimensions of performance
leadership. It is clear that the pace of business is increasing. The time-
to-market for many products has dramatically decreased, as well as
overall product life cycles. Where traditionally the fashion industry
had a collection per season, today Spanish fashion retail chain Zara
has 26 collections per year. Because of the increasing pace of business
and the huge variety of demand, businesses need to be continuously
monitoring their performance. Last, but not least, continuous focus on