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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.
by Charley Kyd
In the Wall Street Journal's Opinion page on December 30,
2004, management guru Peter Drucker assigned several tasks to your CEO. He
tasks are ones that only CEOs can do, and that CEOs must
Drucker didn't mention Excel. But the tasks he assigned are ones that
only Excel users can support, and that Excel users must
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
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'
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
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
The Critical Role of Excel
When the CEO chooses a meaningful Outside from among many alternatives, she likely
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
monitor Outside conditions, from perspectives that can change
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
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.