Profitability Analytics as a ‘West Side Story’
People think by comparisons. So let me give you an analogy. I am a big fan of movies – old black and white ones, new ones with special effects, and most types in between. I especially like musicals. One of my favorite musical films is West Side Story, released in 1961. And this December 2021 Stephen Spielberg has directed an update of the movie.
The movie is a retelling of Shakespeare’s tragic romance Romeo and Juliet. What does a Broadway musical and its subsequent film version have to do with profitability analytics? Plenty. Here is the background.
Please oblige me if you are so young that you are unaware of this film or have dismissed it as a silly folly about two tough 1950s New York City street gangs – the working-class white Jets and the Puerto Rican Sharks – dancing and singing. West Side Story has parallels to what it takes to complete the full vision of a successful implementation of profitability analytics methods.
Essentials: a skilled team, a talented delivery team, and a breakthrough event
is a skilled design team. Three giant talents in their respective fields collaborated on West Side Story: Jerome Robbins with dance choreography, Stephen Sondheim with its song lyrics, and Leonard Bernstein with its music. A prerequisite with successful implementations of profitability analytics methods is good model design and construction to provide cost and profit margin reporting with analytics, strategy management, performance measures, operational planning, driver-based budgeting and rolling financial forecasts, and business analytics that are applied by the data science community.
involves who will operate and maintain the profitability analytics methods as an integrated system. Who will analyze its information, gain insights and foresight, make decisions, and take actions? West Side Story’s film actors were not widely recognized marquee names, but they were incredibly talented. They included Natalie Wood as Maria, Rita Moreno as Anita, George Chakiris as the Sharks’ leader, Bernardo, and Russ Tamblyn as the Jets’ leader, Riff. They were wonderful performers including their dancing and singing. Similarly in the work world, without sufficient passion and zeal then project managers and users of profitability analytics are just going through the motions – just showing up for a day’s pay.
is a breakthrough moment or event. The opening night of a Broadway or London West End play or musical is a do-or-die situation depending on the acceptance of the audience and positive next-day reviews by the media critics. A little-known fact about West Side Story’s opening night on Broadway is that it almost flopped. During the first hour of the performance, the audience was unemotional and unresponsive – stone cold. Perhaps this was because the audience was a bit upper-crust and uncomfortable with the characters being gang members and Puerto Rican immigrants. Remember, it was 1961. Did some people walk out of the theater before the show ended? I am not sure.
But the breakthrough moment that saved the musical and sparked the audience’s interest was the rooftop scene with the Sharks and their girlfriends. The scene opens with the girls proclaiming their happiness as immigrants to the USA and singing the song “America,” starting with “I want to be in America! OK by me in America!” It was a magical moment. The audience lit up. If you have never seen this scene from the movie, click on this hypertext link below to see the film version of it. Then imagine you were at that 1961 opening performance. When the song and dance ends, how would you have felt?
Was the audience’s change in mood because of a tug of USA patriotism? Was it the Latin beat of Bernstein’s incomparable music? Was it Sondheim’s inspirational song lyrics? Was it Robbins’ energetic dance choreography? Perhaps it was the synergy and chemistry of all of them combined. What matters is the audience’s acceptance of the musical was “sparked”. As the story unfolds in the last hour, with the love story of Tony and Maria and the reduced animosity of the Jets and Sharks, the audience is rewarded with a most memorable experience.
Applying the three parallels to profitability analytics
A successful implementation of profitability analytics methods benefits from all three parallels.
The developers need to be skilled. The project team needs to be talented. Finally, some sort of spark or trigger event is needed to get buy-in – both from the users of the profitability analytics information and the executive team.
The users of profitability analytics deserve good information from their accountants. Without it they are prone to make poor decisions. Read my July 20, 2020 article in this site titled “A Bill of Rights for Users of Management Accounting Information” in this link:
Strong links in the chain
The old adage that a chain is only as strong as its weakest link can apply to an integrated profitability analytics system. West Side Story had three elements that led to its global and timeless appeal, and each one was critical to its success:
- Developers and Designers (the music, lyrics, and dance)
- Users (the actors)
- Buy-in (a trigger event)
The successful implementation of information technologies is not simple. For example, some companies have abandoned their activity-based costing (ABC) software implementation before its completion concluding that its benefits were not worth the effort. (A bad decision.) My belief is that, as with West Side Story, successful profitability analytics are not about software but rather from (1) its model designs and imbedding advanced analytics into each of the various profitability analytics methods (e.g., a strategy map and its companion balanced scorecard with KPIs, cost and profit calculations, driver-based budgeting and rolling financial forecasts), (2) its users, and (3) the spark or breakthrough event.
The spark is not serendipity. The clever profitability analytics implementation project team knows when, where and with whom to ignite the spark.
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