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Drucker's Advice for CEOs
Can Bring Spreadsheet Hell

Peter Drucker has made a career of telling CEOs what to do. His
recent essay in the Wall Street Journal continues this practice.
But his advice can make life difficult for Excel users.

In the Wall Street Journal's Opinion page on December 30, 2004, management guru Peter Drucker assigned several tasks to your CEO. He said these tasks are ones that only CEOs can do, and that CEOs must do.

Drucker didn't mention Excel. But the tasks he assigned are ones that only Excel users can support, and that Excel users must support.

These tasks, however, pose high risks for Excel users.

The CEO's Tasks

The CEO, Drucker said, is the link between the Inside -- your firm -- and the Outside -- society, the economy, technology, markets, customers, the media, public opinion, etc.

Your CEO's first task, he wrote, is to define the meaningful Outside.

At a bank, for example, does the meaningful Outside include the local market for commercial loans? The national market for mutual funds? Or the major industrial companies and their short-term credit needs? These all are likely markets, but one bank can't concentrate on them all.

Toy makers, he said, tend to define their Outside as their toy-maker competitors. "But the most meaningful competitors for the toy maker are not other toy makers but other claimants on potential customers' disposable dollars."

Your CEO's second task is to think through what information regarding the Outside is meaningful and needed in your organization, and then to work on getting it in a usable form.

Inside information is readily available. "But few CEOs," he wrote, "whether in business, in nonprofits, or in government agencies have yet organized [external] data into systematic information for their own work."

Defining the meaningful Outside, and the Outside information a company needs, makes it possible to answer the key questions: "What is our business? What should it be? What should it not be?"

This information enables the CEO to decide what results are meaningful for the organization.

This is a high-risk exercise. Drucker points out that in the '50s and '60s, executives decided that what was going on in Japan was largely irrelevant to their companies. This explains why the Japanese export push caught CEOs so unprepared.

The Critical Role of Excel

When the CEO chooses a meaningful Outside from among many alternatives, she likely does so with the help of analyses prepared in Excel. When the CEO evaluates the success of a decision, he likely does so using Excel reports.

These analytical reports use data from many sources, summarized and evaluated in many ways, often by several analysts. Source data must be updated regularly because the initial analyses can take months to develop. And after a decision has been made, senior managers and their staff must monitor Outside conditions, from perspectives that can change frequently.

Excel is critical to this effort because no other program has the power to adapt quickly to the unique and changing requirements defined by the CEO and other senior managers.

However, the Excel solution can mean chaos for the support staff. This is because these analyses require many external sources of unstructured data. They have frequent updates. Many spreadsheet databases. Competing versions of similar data. Constant changes in the reports. High probability of error. Few reconciliation methods. And intense Board-level attention. These conditions virtually guarantee Spreadsheet Hell.

Worse yet, from Drucker's perspective, a random collection of Excel spreadsheet databases are a far cry from satisfying his second task for your CEO. Few people would claim that spreadsheet databases sprinkled across your Excel users' hard drives represent a meaningful collection of information in a strategically useable form.

The Critical Role of Excel-Friendly OLAP

Excel-friendly OLAP databases bring order to chaotic data.

Like Excel databases, Excel users can create OLAP databases quickly, with little or no help from IT. But OLAP databases are maintained centrally, and their data can be shared with Excel users throughout the company.

Excel-friendly OLAPs have two important characteristics.

First, data can be contained in any number of cubes. For example, Inside data could include a General Ledger cube, a headcounts cube, and a budget cube. Outside data could include a cube with foreign exchange rates, a cube with the financials of publicly traded customers and competitors, and a cube with key economic trends.

Second, worksheet formulas can return data from any number of cubes into one worksheet, even into one cell of a worksheet. Because formulas return the data, you could update a monthly report by changing text from "June" to "July" in some cell and then recalculating your workbook.

Spreadsheet-friendly OLAP simplifies Excel reporting, because it turns every "one-time" analysis into a periodic report.

Less obvious, however, is the power that the technology brings to company-critical analyses. It allows all analysts to work with the same version of the data. When new data is added, all analysts with the appropriate security can link to the new data in their spreadsheets. The reporting structure makes Excel dashboards easy to create. And using one source of data simplifies the task of finding errors in both the data and the Excel reports.

These features give Excel users throughout the company tremendous power to combine Inside and Outside data in their reports and analyses. And they provide the technical means to satisfy Drucker's two tasks that he assigned to your CEO.

The Bottom Line

Management gurus, like Peter Drucker, tell managers what they should do. Typically, a guru's job isn't to tell managers how to get the job done; Drucker advises on strategy, not technology. Often, therefore, Excel users must invent ways to provide the reports and analyses that management gurus recommend.

The only practical way I've found to help your CEO satisfy Drucker's recent assignment is to store Inside and Outside data in Excel-friendly OLAP cubes, and to report and analyze that data with Excel.