Companies must innovate because eventually customers dry up and the engine of growth stalls. The proper response to competition from start-ups is to incubate one’s own start-ups within the organization. This requires an adaptive organization, one that can adjust its processes and performance to meet the challenges arising from changing market conditions.
The annual budget cycle is a waterfall/big bang process that has been described as being like a bank that opens its doors for only week per year. Moreover, the amount of time wasted to satisfy performance metrics (linked to the budget promises) that become quickly out of step with reality make the budget cycle a drag on the adaptive organization.
Beyond Budgeting does away with the annual budget cycle and introduces a continuous financing model that also places the customer-sales relationship at the heart of what drives the business. This approach perfectly matches the agile and lean transformation of IT and the innovation model at the root of Lean Startup. Combined, these concepts represent a new breed of organization, one that has reduced risk by relying on evidence to drive business strategy, and one where IT and the business follow similar feedback loops that guide their activities to deliver what the customer wants.
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