OIS Phase II is the “bridge” phase between Phase I’s persuasive business cases and Phase III’s implementation when the traditional budget is discontinued.  This phase is focused specifically on OIS’s very first adopters and, therefore, how Phase II can incent their purchases of OIS. After enough of their successes are broadcast, the incentives will no longer be required.

1.  OIS Phase II Actualization: The incentive is that OIS will improve profit importantly beyond what traditional budget had planned for current year.

(a): At the beginning of Year 1, OIS Phase I model is updated, appropriately, with changes from Year 1’s budget including:

1. • 1. the budget’s annual forecast and an annual future forecast for the S of SG&A
     2. changes envisioned in the budget for next year’s COGS + G&A
     3. and optimize
   • the new OIS will have a forecast and income statement that provide most profit possible.
   • creating Year 1’s most profitable budget by simply adding Year 1’s strictly fixed costs to OIS
   • then sum the activity costs of each department to create the departmental budgets for Year 1

Unfortunately, OIS and the traditional budget are the same for only a very few weeks as unpredicted economic dynamics unfold as they always do:

1. 1. making the budget’s forecast increasingly “out of step”
   2. making, in turn, the demands placed on the departments’ budgets’ just as “out of step” with the unpredicted new demands that will be placed on them
   3. also, firm’s profit is only updated-able during Year 1 at the highest levels of aggregation: Revenue – costs = profit.

(b): Fortunately, OIS Phase II provides the CFO/CEO with a forecast and income statement during Year 1 and for future years that is updated whenever the because current OIS’s forecast assumptions change importantly. For example:

• • important new product delivery  slips
  • more aggressive competitive pricing announced
  • strike
  • economic outlook improves or deteriorates
  • et al.

Another update occurs at the end of each of the current year’s quarters:

• • a comparison is made of the demand OIS had forecasted for that quarter with that quarter’s actual demand.
  • for those differences deemed significant, the associated response functions are updated.
  • OIS then computes a new income statement including a new most profitable forecast

Thus any new profit opportunities are identify as they occur!  So, if the new profit warrants pursuing during OIS Phase II, the CFO/CEO have all the information at the income statement line item detail they need to make the necessary budget changes to achieve the new profit.

2.  OIS Phase III Actualization: Implement a new form of the rolling forecast, the “rolling OIS;” a new best practice which is, in fact, the OIS that will be implemented in OIS Phase III. One that eliminates A) the traditional rolling forecast’s first 12 moths and all its problems.

The best practice includes:

• a rolling 12 months of OIS that is continually updated at the line item detail of the firm’s income statement. See (b) above
  • not at the detail of 3 to 7 key variables in the rolling forecast; see (A) above
• with a prescriptive forecast that is the most profitable one possible, a new best practice
  • not a driver-based deterministic solution: if X happens, Y is result See (A) above

Continuing with the rolling OIS process, at the end of the first quarter of the Year 1, a quarterly OIS will be developed for the first quarter of Year 2 extending OIS back to a 4 quarter model.. It will include a forecast incorporating anticipated events (as opposed to the actual events described in OIS Phase II Actualization (b). Also, the appropriate future cast. This process continues for the next three quarters

Then, at the end of Year 1, if the Admin Support, below ,hasn’t been completed, the 4 quarters of the rolling OIS are replaced by the budget for Year 2  and the processes described in OIS Phase II Actualization and OIS Phase III Actualization repeat themselves.

3.  OIS Phase II Admin Support

• Optilogic will partner with ZS to provide the necessary response functions and future casting required for Phase II’s early adopters. They should be drawn from either ZS or Optiogic’s current clients. And, the the two firm’s  should decide upon the appropriate SIC code(s) for the early adopter

Incentives should be provided these prospects like discount on base-line OIS model

• Forecasting department should work for the CFO. If not, the forecasting department will provide the CFO with a forecast upon his request.
• Enough time will be provided before implementing Phase III for CFO/CEO to familiarize themselves with OIS’s Phase III’s “rolling OIS” functionality.
• The CFO/CEO team will also be working out all the additional details involved in eliminating the traditional budget in Phase III. For example, bonuses which are frequently associated with the departments’ achieving their budgeted expenditures.