What-if simplified with new Value Driver Tree capabilities
In one of my prior blogs I’ve contemplated the question “What-if” using a simplistic example of my past houseplant business. It served as an introduction to the great things a Value Driver Tree (VDT) can do to visualize and formulate driver based analysis with What-if questions.
What-if is however a question that never really lets you go, and now with added functionality to the VDT in wave 20 I’d love to revisit the topic.
Designing the VDT to mirror your key business priorities was rather simple in my original example. It can however become a lot more complex when you have to sail an enterprise through these times of constant change. Luckily our Product teams is on it, and in today’s blog I’ll use my houseplant business example from the first blog again and deal with these challenges for asking What-if with added complexity and change.
Below you find last year’s iteration of the VDT representing the houseplant business at the time, these were however simpler times as we had only 1 type of houseplant and 1 single supplier so we could work with a single scenario.
Given it’s my blog , I can make up my own story, so with that my houseplant business has thrived last year!
We have thus decided to diversify our offering with 600%, myself moving into the position of CEO, and have our Procurement, Demand and Price planners deal with the now 6 different houseplants to reach our Gross Profit targets.
Let’s start with the scenarios that I want to see. In 2021 we already foresaw some signals for high inflation so now we’d like to see the potential impact compared to an as is scenario. We’ll use the below 2 as an example and with a simple right click 2 new versions can be created (blog on version management in SAC).
Lets start filling these versions for our procurement department. Copy pasting over the VDT to a new page, I’ll first remove all the nodes I don’t need and filter on my constant inflation version.
To adequately reflect the business I however want to maintain the cost price for all my products, so I use the new drill into feature by right clicking the Cost Price node and selecting Houseplants. Here we select all new plants alongside our original plant, the Spider plant.
With a single action we get the below view where we now add our assumed current prices and an additional inflation of 2%.
As high inflation is a realistic danger for our procurement prices, the procurement agents have checked for suppliers willing to go for a fixed price for the year. This would however mean a further increase of 5% on top of the 2% we’ve already added. We will expand our VDT with another drill into the Version dimension to make the comparison. This results in below VDT post entry.
Procurement costs can only be updated as our demand planners enter their expected volumes
Therefore we create a new VDT to generate Volumes for both scenarios. Now let’s see the priorly mentioned drill into functionality in action by creating a VDT from scratch.
With the VDT in place we assume a base volume of 10 for all the new plants with a decline in volume of 20% in case of high inflation, leading to a reduced volume in the high inflation scenario.
To facilitate our subsequent business pricing meeting where everything will come together, we will put both scenarios on the table in a single VDT holding all variables discussed so far.
Here we see the much lower gross profit for the high inflation scenario with equal pricing, let’s now answer our what if question: what prices would we need to equal the gross profit of 140 we see in the constant scenario. The VDT provides a direct answer: Increasing the average price with a whopping 15% would put gross profit at the same level.
With the expected market we don’t deem this to be very realistic, hence we readjust it to 10%.matching expected inflation rates. Adjusting the volume of our trusted Spider plant to 30 is another option, which seems more reasonable given our recently launched campaign for the Spider plant. This puts us in a favorable position for gross profit again.
With a potential scenario and plan to enact we will conclude our houseplant scenario.
Potentially this thought out plan will come to fruition, more importantly however we’ve shown the capabilities where we can easily work together with our planners to readjust the scenarios and add different dimensions whenever it would be required. As in times of change, the ability to quickly adapt is more important than any plan in itself.
The drill into functionality used in this blog is paired with duplicate node functionality for VDT nodes in the latest release, so one can setup and (re)adjust the VDT with different parameters with added ease in SAP Analytics Cloud from wave 20 onwards (QRC4).
Personally I don’t think I’ll ever stop asking the question of What-if, nor do I think any business will. In my role as solution manager I want to facilitate “What-if” best we can in our product as well. I’d be most welcoming to receive any feedback on our capabilities on the Influencer portal by submitting your ideas and requests or voting on the ones already there. We actively monitor this portal and use it to prioritize product enhancements.