Avon calls on Oracle Enterprise Performance Management to deliver strategic global insight.
by Alison Weiss, November 2011
Beauty may be in the eye of the beholder, as the old saying goes, but no matter where a woman lives in the world, Avon Products makes it easy for her to add some beauty to her life. With more than US$10 billion in annual revenue, Avon—with headquarters in New York, New York—is the leading global beauty company and the world’s largest direct seller marketing beauty, fashion, and home products. From one of the first companies to empower women to work for themselves, the “Avon Lady” has been an important cultural icon for decades.
“Strategically, we see our Avon Representatives as one of our most important competitive advantages that we have,” says Louis Dubrosa, IT director of supply chain, finance, and business supporting functions at Avon. “And making sure she gets everything she needs for her customers is a critical priority for our company.”
Avon sells in more than 100 markets around the world, reaching 300 million consumers through approximately 6.5 million independent Avon sales representatives. It has a vast portfolio of global products with international appeal, such as a newly launched fragrance by singing celebrity Fergie of the Black Eyed Peas. At the same time, individual markets do sell products that are localized to the needs of their populations. For example, customers in Asia buy face-whitening cosmetics, while U.S.-based consumers clamor for skin tanning and bronzing products.
While Avon’s winning formula has led to global dominance in the beauty arena, international expansion has also led to challenges. With approximately 40,000 employees and 100 different business units transacting business in 60 currencies, the IT division found it nearly impossible to deliver a clear overall budget and reporting picture to senior management. With no standardized systems in place, neither could they easily present any type of comparative analysis across the entire organization. Managers in each market managed their own budgets and forecasts, and gathering timely and consistent data for corporate reporting and forecasting was very cumbersome.
But over the two-year period between 2007 and 2009, Avon’s IT leadership designed, implemented, and introduced an Oracle Hyperion-based enterprise performance management (EPM) system to provide standardized and comprehensive financial planning, reporting, and analysis across the entire enterprise. The new system gives managers at every level of the organization the accurate information and the critical insight needed to continue to grow and thrive.
Avon first began bringing beauty into the lives of its customers 125 years ago via door-to-door sales, and later moved into workplace sales. Now, Avon sales representatives increasingly operate in the online world. The company has also morphed from selling beauty products in North America to selling around the globe, with China and India currently offering long-term growth opportunities. The company is also well known for a focus on innovation and social responsibility, being one of the first to market with alpha hydroxy anti-aging products and last year introducing a collection of body care products that abide by international fair trade standards. Avon’s jewelry and home products are also popular.
“Obviously our core beauty business, based on color, skincare, and fragrance, is still where we want to grow. That’s our sweet spot, but we’re also a major seller of costume jewelry,” Dubrosa says.
Avon’s expansion into international markets over the last decade has led to some growing pains. For one, products were sometimes unnecessarily specialized for different regions, causing supply chain issues. For example, the same mascara might have had a different bottle shape and brush in Mexico than the version sold in the U.S. Or, managers in Brazil would choose to use only domestic sources for products in their market. If there were product shortages in one region, it was very difficult to shift supplies from one country to another.
This regional focus also presented obstacles regarding financial budgeting and reporting, as well as analysis and forecasting. Each region operated individually in its own silo, using Microsoft Excel spreadsheets to manage budgets and forecasts. Not only was it difficult to share information, but when data was submitted for corporate reports, the data was often weeks—if not months—old. Even at the corporate level, financial functions were not connected. Tax reporting was done using one tool, while treasury staff used their own processes and tools for balance sheet forecasts and planning.
Dubrosa describes a scenario that was far too common at Avon. At times, marketing would report that sales of beauty products had increased, but finance would counter that sales in beauty were in fact flat. This caused a debate across the organization about which number was correct, but each group was using a different definition of sale.
It was clear that something had to change to get the entire organization on the same page.
Singing from the Same Sheet
Change movements require strong leadership—and Avon was no exception. When Charles Cramb, now vice chairman, Developed Market Group and interim CFO at Avon, came aboard in 2006 as CFO, he had successfully spearheaded a similar change effort at his former company.
He knew it was critical to establish a common process and system that every country could use to accurately forecast, plan, and report actual results. Fundamentally, Avon is the same business regardless of market or market nuances. “Chuck saw EPM as the tool that would begin to merge siloed financial functions under a single umbrella,” says Dubrosa, “so that everybody would be singing from the same spreadsheet.”
In 2007, Avon management launched the deep-dive analysis of what they wanted to accomplish with EPM. The project would require building out new business processes, creating a new set of reporting requirements, and fundamentally changing how often and at what level of detail Avon managers performed business forecasts. In addition, leadership needed to take the time to educate managers about the upcoming changes and engage personnel in the process.
According to Dubrosa, the biggest change to the management of financial results internally was implementing responsibility reporting. Historically, a general manager in a country would be responsible for an entire set of financials. So if Avon management suggested making a strategic IT investment in Brazil, it was up to the general manager in Brazil to agree to the investment.
With responsibility reporting, Avon general managers in the different countries would now have ownership of product line profit and loss, which are aspects of performance over which they have control. And, moving forward, decisions about IT project funding, new-product marketing, financial planning, and supply chain management would be managed with a global perspective rather than a regional view.
“Taking away the planning process from the local markets can feel intensely personal,” says Dubrosa. “But what it does is allow general managers to focus on the field sales foundation, making sure we’re flowing the right products and that we’re energizing the sales force.”
While Avon leadership remained committed to regional products and supporting the most-popular regional offerings, they also wanted to be more strategic with the resources used to support products that could be managed globally—such as fragrances, talcum powder, and deodorant. “Before EPM, this was a huge black hole,” says Dubrosa. “The idea of managing product categories globally was a near impossibility.”
Another important step was establishing new forecasting frequencies—one in the spring and one in the fall—as well as including interim “flash forecasting” to be done on an as-needed basis. With Oracle EPM solutions, summarized reporting and planning around a few key financial indicators and business performance indicators could be done very quickly and separately from the formal budgeting and forecasting process.
In fact, Avon was not unique in the need to create a solid foundation before actually implementing the EPM system, because many companies are struggling to gather the right financial data to make effective business decisions.
According to John O’Rourke, vice president of EPM product marketing at Oracle, the volatile economy in 2011 makes planning and forecasting difficult. In a recent survey of 1,500 IT managers and business executives across the U.S. and EMEA conducted by Dynamic Markets and published by Oracle, 82 percent of big organizations surveyed indicate that they do not have complete visibility into profits and are working with outdated information.
The EPM market is growing, and much of the expansion is coming from business leaders requiring better information transparency. “Companies face increasing pressure to improve planning and forecasting processes in volatile economic conditions,” says O’Rourke. “Then you have internal management teams asking for better, faster information about the business so they can keep track of what’s happening and respond quickly to changes.”
This need for transparency certainly influenced Avon’s decision to seek out an EPM system, but once management finished the difficult tasks of establishing requirements for processes, reporting, and forecasting, actually selecting the system was easy.
Translating Strategy into Reality
“We’re a long-time Hyperion shop. So, the natural progression for us from [Oracle] Hyperion Enterprise to Oracle Hyperion EPM applications was part of the attraction,” says Dubrosa. “The differentiating factor was that the Hyperion EPM solution was an entire suite of integrated products with the strategic direction to unify our discrete, previously siloed financial functions across the board.”
Avon’s IT team was eager to take advantage of the depth and flexibility of the Oracle Hyperion applications in the way users would be able to access and view data. The Oracle Hyperion EPM applications would make it possible for marketing and supply chain managers to look at sales by product category, while the sales organization could look at the data at the representative level. In addition, sales and marketing could see sales on a campaign basis, while finance could look at sales on a fiscal basis. To Avon’s IT leadership, few other EPM packages offered this flexibility. In addition, the company wanted to benefit from Oracle Hyperion’s scalability and performance.
Avon was definitely on the right IT track, but the team would need assistance to actually implement the EPM system and provide the necessary training to all its business units around the world. Enter Edgewater Ranzal, an Oracle partner and systems integrator that specializes in Oracle Hyperion implementations. The company, which has its headquarters in White Plains, New York, had worked with Avon in the past.
More importantly, the partner brought the right experience and resources to manage a globally scaled project. “They saw us as a huge strategic partner, and culturally they were the right fit. They challenged us, and it resulted in a better product for us,” Dubrosa says.
One of Edgewater Ranzal’s first directives when the project began in October 2007 was to help Avon translate an EPM system design into reality. Avon relied on Edgewater Ranzal’s deep experience with Oracle Hyperion when real-world functionality veered away from conceptual ideals. For example, Avon management originally envisioned starting just with Oracle Hyperion Planning, Oracle Hyperion Financial Management, and Oracle Hyperion Strategic Finance. However, with Edgewater Ranzal’s guidance, it quickly became clear to Avon’s management that it would also be necessary to deploy Oracle Hyperion Financial Data Quality Management and Oracle Hyperion Data Relationship Management.
Rather than phase in modules one at a time, Avon and Edgewater Ranzal agreed that a “wholistic” approach would be necessary to meet all of the Avon objectives. “There was a lot of business process re-engineering happening prior and throughout the project that impacted design, so Avon decided on a global rollout with all modules at once rather than a phased approach,” says Veda Gagliardi, senior vice president at Edgewater Ranzal.
This meant that Edgewater Ranzal did parallel implementations for Avon’s budgeting and planning process, as well as the actual reporting process. At the same time, Edgewater Ranzal consultants also assisted with the steps needed for Avon to re-engineer how the company performed management reporting.
Along with global implementation of the solution, Edgewater Ranzal assisted with the Herculean task of training approximately 700 users in 26 countries. “Training teams consisting of an Avon Finance representative and a Ranzal consultant executed the training. We conducted a training road show, visiting countries and providing hands-on training and Web-based training,” Gagliardi says.
The complex project required Edgewater Ranzal and Avon to collaborate closely. Gagliardi credits the experience and open communication between the two companies as a reason for the project’s success. “We worked side by side with Avon for the whole two years,” says Gagliardi.
Go Live or Go Home
The first part of the EPM system, the actuals consolidation process, was rolled out in January 2009. The second part of the project, planning and forecasting, was rolled out in July 2009. Avon management decided to start with actuals reporting because it is a much more structured and discrete process. Management also hoped it would give users a chance to become familiar with the system and navigating screens before using planning and forecasting functions.
“Not many organizations have rolled out all of the Oracle EPM products at one time,” says Gagliardi. “But the best part is that we actually went live with it as scheduled and Avon is successfully using the system.”
Indeed, now that Avon has been using the EPM system for more than a year, it is achieving results beyond even what management imagined when they first decided to implement an EPM system. And although the planning process took longer than management originally expected, it has paid off now that the system is in operation.
From Day One, everyone was instructed to view the EPM system as the one source of information, and this has provided critical data consistency. “If people come with a spreadsheet or PowerPoint deck, and the information is not sourced from EPM, it’s not going to be looked at,” says Dubrosa. “That was a tough decision for the executive council to make.”
But because all the modules in the EPM system are linked, users have a fundamental understanding of the traceability of numbers and that the results generated from the system are accurate.
Management is also pleased that the company has largely overcome what it sees as the biggest challenge to the project—getting all its business units to adopt the processes enabled by the software. Something as simple as getting local markets to trust that the security in the EPM system doesn’t allow a global or regional office to see forecasts until a local market finalizes and submits them was very difficult. However, now users understand the flexibility the system affords them during the forecasting process, not only to store the data in-process but also to do multiple scenarios.
Avon management always expected to achieve a complete and global view of financial planning and forecasting with its Oracle Hyperion EPM system, but the system has provided the mechanism for finance to become much more tightly aligned with other data warehousing and reporting projects across the entire organization at the local, regional, and global levels. “At the end of the day, this was rolled out to finance only because they saw themselves in a silo,” says Dubrosa. “ But in fact, it’s used much more broadly than that, both as sources of information around individual markets and in areas of performance.”
Originally, management predicted that the EPM system would be used by 300 users, and they had serious concerns about system performance. Now, the system is actually supporting 700 users with no impact on performance whatsoever. Further, the initial vision was to store only two years’ worth of data in the system because of concerns that with too much information, performance would slow down. The system now includes data from 2007 on, and the IT staff is considering an import of 2006 as well. “From a performance perspective, the system has exceeded even our highest expectations,” says Dubrosa.
Moving forward, Avon IT staff is already in the process of upgrading to Release 11 of Oracle Hyperion enterprise performance management applications and is looking at lessons learned to ensure the continued success of the latest iteration of its EPM system. Dubrosa points to the importance of support from senior executives: “The constant in all of this has been management’s commitment to the vision of EPM,” he says. “I’m not saying we didn’t shift courses a couple of times during the course of the two years, but the end goal didn’t change: to move the business to a different place.”