Since it was founded in the United Kingdom close to two decades ago, enterprise software company Anaplan has been built around the core concept of what it has dubbed “connected planning.” For customers who had long dealt with a messy patchwork of different systems and manual processes, this has meant having a single platform to enable integrated planning and forecasting for everything from finance and sales to supply chain and operations.
Over the years, as the pace of business and the amount of information have grown exponentially, connected planning has evolved to include extensive, dynamic scenario planning, enabling what CEO Charlie Gottdiener calls the “connected enterprise”—an organization in which employees spend most of the time “making decisions and iterating scenarios to make the best decisions.”
In a recent interview with McKinsey, Gottdiener, a veteran technology and private equity executive who took Anaplan’s helm in 2022, discusses how, and by how much, faster decision making and enterprise connectedness fuel business performance; what the Miami-based company is doing to make both itself and its customers more connected (and disciplined) enterprises; and the ways in which generative AI (gen AI) could increase the value and insights Anaplan’s platform can offer in the near future. An edited transcript of the conversation follows.
Quantifying the value of good decision making
McKinsey: Anaplan recently published research on the value of decision excellence. Based on your experience and research, how clear is the connection between better decision making and company performance?
Charlie Gottdiener: In our research, we found a very strong connection between making great decisions, or what we call decision excellence, and performance.1 We define decision excellence as the velocity, quality, and efficiency of decision making. We surveyed 500 executives across the top 1,000 companies in the UK, US, and Canada, and those that were in the top quartile of decision excellence outperformed those in the bottom quartile by 14 percentage points of total shareholder returns. That is equal to $10 billion of market capitalization across that group of companies. So decision excellence is worth $10 billion; that’s how we think of it.
McKinsey: The pace of business these days means that leaders and executives need to make good decisions faster and more frequently. What do you hear from customers about the pressure and challenges of decision making?
Charlie Gottdiener: Customers tell us that they are overwhelmed by the amount of information that they’re taking in. This can be from dealing with changes inside the four walls of their company or from external information, like shocks in the economy or supply chain issues that we experienced during the pandemic, shifting interest rates, or competitors that may be launching new products or changing prices. The amount of information coming at them, the amount of change coming at them, is unprecedented, and this puts a huge amount of pressure on decision making. Every CEO that I talk to feels this way. And they all want to know, “Am I making the best decisions in the context of this ever-changing environment?”
How enterprise connectedness leads to better decision making
McKinsey: Can you explain the concept of enterprise connectedness and how it helps companies deal with this decision-making challenge?
Charlie Gottdiener: Enterprise connectedness was part of the focus of the same research we did on decision excellence. We assessed it across three dimensions. The first is vertical connectedness—are the decisions made at the highest levels of the company, translating and trickling down to all levels, including the factory floor? The second dimension of connectedness is horizontal connectedness, so how well is the enterprise connected across functions, across business units. And the third is external connectedness, a gauge of how well companies are connected with their suppliers and their customers.
What we found was that those companies that score well on this metric make better decisions. In fact, the research showed that companies that have a percentage-point improvement in connectedness have a seven-tenths of a point improvement in decision excellence.
McKinsey: You have spoken previously about what you call the connected enterprise. What is your vision for that type of organization?
Charlie Gottdiener: From our perspective, a connected enterprise is a company that can move through decision cycles more rapidly and hence be more agile than its competition. In today’s highly competitive markets, that is a significant advantage.
It means you can observe things faster. You can orient yourself or assess the situation as new data and inputs are coming in, assess what they mean, make a decision, and then act on it. You’re better equipped to deal with things as they change, whether they’re external shocks or internal issues.
McKinsey: What does this look like on the ground for an organization?
Charlie Gottdiener: First, think about a more traditional, unconnected enterprise. In this older scenario, too much time is typically spent on bringing in data and connecting systems—which can be an intensive undertaking—and not enough time on making decisions.
In the connected enterprise, all of the time is spent on making decisions and iterating scenarios to make the best decisions. It’s a very different operating environment, one where executives can really spend their time creating value, as opposed to making sure that the technology and the data is right and that there aren’t any anomalies in their enterprises’ models.
There are numerous behavioral benefits to this model. We have found that people in a connected enterprise spend close to 50 percent less time in meetings than their peers. They also spend 25 percent more time making decisions, and 41 percent more of the decisions are made at the right level of the organization.
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McKinsey: How did this concept of the connected enterprise evolve from connected planning, which Anaplan is known for?
Charlie Gottdiener: When Anaplan started, the planning process was long and static, not dynamic at all; companies would do their financial plans every year by bringing the data into an Excel model they probably changed and manipulated for that year. Every company would run to the end to get that plan done, and it was highly manual. There were not really a lot of scenarios being run.
Anaplan solved a lot of those issues by putting the data from source systems into the platform. That data was always accurate, always clean, and it was set up to match the models on the platform. That allowed companies to do scenario planning, not just one annual financial plan. They could iterate on the plan rapidly.
That was the first version of the new era of planning. The connected piece was that as other functions in the organization did their plans—a merchandising plan in retail, for instance, or a demand plan in a supply chain or manufacturing situation—they could link those plans to the financial plan.
And customers are smart, so they innovated. They took their annual or quarterly planning and made it daily. They really created this notion of the connected enterprise by building out hundreds of use cases that are connected through their enterprise on the Anaplan platform, whether it’s sales planning, operational planning, supply chain planning, or financial planning. And all that connected information raises their ability to make better decisions faster or, in our parlance, to achieve decision excellence.
Execution discipline and the connected enterprise
McKinsey: Since you became CEO, what changes have you been instilling at Anaplan, especially to make it more of a connected enterprise itself?
Charlie Gottdiener: I’ve been CEO of Anaplan for a little over a year, and I would say we’ve made progress in our journey to becoming a connected enterprise.
Since I joined the company, we have established three operating principles. We’re strategy led, which means our key decisions are already embedded in our strategy. And that’s what guides the company. We’re values based. Anaplan always had values—most good companies do. But we changed the values to incorporate things like innovation and accountability. Finally, we are disciplined in execution.
I would say that this last principle—really being disciplined in execution—is the new muscle for Anaplan, and that’s where we leverage being a connected enterprise. To execute really well, both flawlessly and consistently, you need the right information at the right time, so you can make decisions in real time. That’s what execution really is about—the right decision making in real time, backed up by processes and talent.
So that’s what we’re doing at Anaplan, in large part by leveraging our platform. We have a whole team called AOA, or Anaplan on Anaplan, that has developed hundreds of models that help us have access to insights and stay connected across our company—whether it’s finance and sales or operations. This information flow allows us to execute with discipline, and it makes us a really good decision maker as a company.
McKinsey: What are some examples of better, faster decision making at Anaplan that are the hallmark of a connected enterprise?
Charlie Gottdiener: One really pragmatic example I think most executives will be able to appreciate is sales planning. Our sales reps have their quotas on the first day of the new year. That’s unheard of. At every other company that I’ve run or ever been affiliated with, it can take up to a quarter or more for sales producers to get their quotas.
So what does that do? It allows us to start the year with a 12-month runway. Most companies are starting the year behind, right? They launch into the year, and salespeople don’t know what they’re really being held accountable for. They may have eight, nine, or ten months with their quotas.
As I said earlier, we dynamically plan our year. We go through many iterations of our plan, but I get the information in real time. I can do a scenario every hour if I want. So I constantly hone my plan, which allows me to get territories and quotas set for day one.
The gen AI future for Anaplan and its customers
McKinsey: Anaplan’s been on a journey from financial-planning software to supply chain to sales performance management. What’s next for the company?
Charlie Gottdiener: What’s really on our horizon is doing more, and doing it faster. We’re building industry-specific solutions. We’re building applications that allow our customers to leverage our platform faster. And so, rather than building bespoke models, they’ll have a lot more out-of-the-box functionality. We’re really focused on bringing faster value to our customers with very specific solutions and more functionality so they can become a connected enterprise more rapidly.
McKinsey: What about gen AI?
Charlie Gottdiener: It’s a hot topic for everyone, of course. It is certainly on our development road map. We see AI and gen AI adding value to our customers in three ways.
The first is access. We’ll be able to leverage gen AI to give executives access to the Anaplan insights through natural language, and it’s on our product road map for this year. An executive will be able to query the Anaplan app on their phone to get insights from the models they have on the Anaplan platform.
The second way is to help companies get more predictive insight out of the Anaplan platform. We’re working on features that will generate early warnings if there are changes or anomalies in an organization’s models or that will create rapid scenario planning. So instead of a human having to create the scenario, AI will suggest different planning scenarios.
The third and last is efficiency. People talk about efficiency a lot in the world of AI. In our case, there are over a million models that we have in production today. The metadata of those models allows us to build our own LLM [large language model], to get insights about how to build models effectively. So over time, probably by next year, we should be able to automate and create efficiency for model building with gen AI, just as people can automate code building with it today.
Making better decisions away from work
McKinsey: How good of a decision maker are you away from the office?
Charlie Gottdiener: I think I’m a pretty good decision maker. My wife would tell you that I’m really good in a crisis. And I think that is primarily because I take in information very quickly, and I’m decisive. I think in a crisis; you have to be decisive.
McKinsey: And how do you spend time away from work?
Charlie Gottdiener: I work a lot, so I spend most time away from work traveling with my family. But I also have one hobby that really relates to decision making. It’s Texas Hold’em poker. In Texas Hold’em, the winners make better decisions than their competition over the long run.
And this applies to Anaplan, right? What we’re trying to do is help companies make the best decisions possible in the short run and the long run. That’s how you win in poker, and that’s how companies win in competition. They make better decisions than their competitors.
