2/18/24, 11:20 AM What’s next in end-to-end decision-making?

| Kearney

What’s next in end-to-end decision-making?

January 24, 2024

It’s time for end-to-end decisions—the ones that define organizations’ core competitiveness—to move
beyond token strategy updates to become a continuous and routine way of creating effective business
outcomes.

Decisions that encompass the entire value chain—from the suppliers involved in innovation to customers who are
demanding more attractive offers—define the competitive essence of organizations. However, such decisions
have never been easy, and they aren’t getting any easier. Today’s customers are more demanding than ever,
technology is accelerating, value chains now need to be circular and sustainable, and new entrants are
proliferating, just to name a few factors in this complex environment.

True end-to-end (E2E) decision-making is tough, even without factoring in today’s uncertain and fast-changing
environment. Orchestrating value chains across process, functional, and organizational boundaries defines how
organizations compete and differentiate themselves from their competition. It delivers the foundational strategic
choices on business, operating, resourcing, and organizational models.

But the sheer number of trade-offs, interdependencies, options, and choices makes effective E2E decision-
making elusive, relegating it to high-level conceptual exercises that often come in the form of obligatory periodic
strategy updates expressed as simple financial aspirations (see figure 1). And this comes at a price. The need to
conceptualize compromises precision and the ability to act by robbing strategic decisions of the granularity and
specificity needed to be more than just token guidance for day-to-day activities.

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What’s more, most organizations have gone a long way in optimizing their individual functions, but they are
getting diminishing returns on their efforts—making it imperative to pursue cross-functional optimization and
growth opportunities. This is exacerbated by growing competition from digitally born competitors that started out
as end-to-end integrated businesses without any function-by-function legacy.

So far, however, most established organizations’ day-to-day operational decisions are still primarily single-function
affairs, whether its pricing, warehouse stock levels, distribution routing, or decisions about marketing campaign
effectiveness. Also, digitalization and the use of data, advanced analytics, and AI and machine learning (ML) for
day-to-day operational optimization is mostly on a function-by-function basis.

As a result, most cross-functional decisions fall well short of being either E2E or day-to-day routines. Instead, they
are mostly tactical at best, addressing the trade-offs between selected parts of the value chain, either as part of
annual processes or as one-off interventions when the need arises or can no longer be avoided.

For example, marketing and production might settle on the optimal number of product families that strike a
balance between customer fit and average production costs. R&D might work with marketing and production to
find the most effective way to make products more sustainable by matching customer ESG elasticities
(understanding which attributes of ESG customers value most) with manufacturability and materials sourcing
considerations. Operations might optimize its manufacturing network through make-versus-buy to resolve
structural bottle necks. The list goes on.

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All this works reasonably well when things are stable, but things are becoming a lot more dynamic and
demanding. To meet this new reality, much more end-to-end decision-making is required. Strategic decisions
about value chains such as make-versus-buy must become more frequent and routine. They must be
operationalized and moved beyond their conceptualized strategic and tactical level toward a routine with more
precision, more granularity, more stakeholders, and above all, a step change in volume and speed to deliver end-
to-end cross-functional orchestration.

The need for this is not new. For example, many organizations have become more customer-centric, providing all
functions and departments with a single overriding objective to help strengthen a common decision focus in their
value chains. Similarly, multifunctional teams that are close to customers are often called on to focus on end-to-
end optimization with a strong customer lens. Such approaches provide welcome relief but ultimately fall short in
seeing the overall picture and routinely resolving fundamental trade-offs and value chain reconfigurations.

Fortunately, ongoing functional digitalization and the automation of individual functions provide a solid foundation
to build on—spanning from sophisticated customer relationship management and customer engagement
platforms (such as those provided by Salesforce and Adobe) to the platformed procurement enablement from
SAP Ariba and Coupa and everything in between.

The result is that individual functions are becoming more rich with data and automation that—at least on paper—
can be correlated across functions as well as with external data sources and third parties. Doing so creates vital
transparency across organizational boundaries and thus support for cross-functional and even end-to-end
decision-making. This brings the pursuit of cross-functional optimization and growth opportunities within practical
reach.

Technologies in the form of digital twins with data and AI from integral business planning solution providers such
as O9, Kinaxis, Aera, and Anaplan, for example, provide the end-to-end cognitive foundation for capitalizing on
exponentially growing data availability. This is boosted by intentional digitalization efforts that generate specific
data to support and automate end-to-end optimization and decision-making.

Despite major advances in AI/ML along with the promises of fully automated self-driving enterprises and “lights
out” operations, there are some important caveats. For example, efforts to capitalize on the growing ability to
capture cross-functional insights and optimization generally focus on immediate benefits from day-to-day
operations, such as improving sales and operations planning with better forecasts or reducing inventory levels by
improved supply and demand alignment. Although beneficial, the efforts of rolling out integrated business
planning can prove exorbitant for the actual day-to-day benefits delivered.

A better approach is to complement or even lead such efforts, working backward from the most important
strategic and tactical trade-offs for the organization and ensuring that the use of digital technologies, data, and
AI/ML supports making such decisions effectively (see figure 2). Such a strategic or tactical decision-back
approach can focus on the continuous optimization of the product portfolio, for example, to balance customer
relevance and the cost of goods sold or on make-versus-buy decisions to reduce the time to market for new
products and services.

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Another caveat is that technology alone won’t solve the end-to-end decision-making challenge. First, the required
data is not there yet; digitalization is still in full swing with a lot more to come. Second, AI/ML is best with stable
and routine conditions but is ill equipped by itself—if at all—to make entrepreneurial decisions for capitalizing on
new opportunities and fast-changing conditions that require entirely new value chain line-ups and configurations.

This is where people come in and why organizational constructs and ways of working must be reimagined for
end-to-end decision-making supported with appropriate solutions, platforms, and digital workflows. As this cuts
across organizational boundaries, it presents formidable transformation challenges that rely on parallel
technology roll outs and adoption of similar proportions.

Most organizations will have to step up their decision-making technology, for example, to ensure they have the
following:

One common system of record that captures everything about the decision-making: the decision, the targeted
outcome, the data and information used, the parts of the organization and individuals involved, the execution, and
the follow-up as well as all deliberations along the entire process.

Road maps and guidance providing dynamic decision-making workflows and specific decision trees to cater to
a multitude of decision-making situations—from major one-off decisions to day-to-day decisions that require
judgment and or cross-functional alignment.

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Improvement foundation providing a basis for organizational learning and AI optimization and automation. By
turning decision-making into data-generating activities, a new and highly valuable data set is built that help make
better decisions by learning from all the facets of the past. This is a key reason why decision-making enablement
is so much bigger than digital twins.

Rome wasn’t built in a day, and the same will be true for end-to-end decision-making. A pragmatic starting point is
to take on some of the most important tactical-level trade-offs in a business that have substantial potential for
end-to-end business value uplift.

Such tactical trade-offs make great candidates for piloting new ways of cross-functional decision-making to
generate more frequent, more valuable, and more focused decision outcomes (see figure 3). Doing so will reveal
where and how decision-making processes must be adapted and how organizational setups need to be adjusted.
It will also reveal the (new) data and enablement required for routinely making such tactical trade-offs and
decisions.

This simply cannot be done with today’s ways of working with emails, spreadsheets, face-to-face meetings, and
periodical management updates. New decision-making enablement is an absolute prerequisite.

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It's no surprise that decision intelligence and enablement is enjoying growing interest and is tracked as a
dedicated technology segment after Gartner declared it a top trend of 2022 and provided it with a proper
definition.

All this may come across as a lot of work but “no pain, no gain” as they say, but the gains will be substantial. As
most organizations have run the course of functional optimization, the next frontier is cross-functional and end-to-
end optimization that makes business strategy a 24/7 practical affair.

Authors

Johan C. Aurik Gillis Jonk

Chairman Emeritus Vice President

Rob Evans Eugene Roytburg

Global Alliance Lead CEO, Cloverpop

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