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Do you already know the potential of modern planning?

Over time, many practitioners, scientists, and businesses have risen to the growing challenge of finding or developing more efficient, modern, and flexible planning approaches. These approaches may have emerged from both purely theoretical foundations and practical experiences. In practice, these modern approaches are collectively referred to as ‘Advanced Planning.’ They are intended to primarily enhance planning in terms of time efficiency, quality, and focus.

Advanced Planning

Due to changes within or outside the business environment and the constant evolution of technical factors, planning must always be adjusted or revised. If adjustments are made too late, it can potentially lead to a situation where a company cannot derive goals and measures that promote success. To prevent this, the company must engage with modern planning approaches and find and apply the most suitable approach. Among the most established planning approaches are top-down and bottom-up planning. However, the counterflow planning, which has emerged from the advantages of these approaches, has also been established in various industries and companies. Among the latest approaches, driver-based planning, which has been considered particularly promising in recent years, stands out.

What is top-down planning?

The top-down approach, also known as the retrograde approach, describes a method that starts from the top level (strategic level).


The strategic level of a company (e.g., management) defines the holistic direction and the goals to be pursued across the organization. This directive serves as a framework and is, for example, specified using a key performance indicator (KPI).

Possible directives include:

  • Increase in operating profit by X percent
  • Specific result (400,000 euros in revenue next year)

The lower levels (coordinating and operational levels) must now consider or pursue the company’s directives in their sub-plans. Ultimately, the plans are adjusted to achieve the overall planning as effectively as possible.


  1. Company-wide consistent mindset
  2. Alignment of sub-plans with the overall concept
  3. No competition among planning authorities → Common goal of individual areas
  4. Faster coordination of sub-plans with the overall concept


  1. Lack of involvement of lower levels in the creation of the overall plan → Missing knowledge from the operational level
  2. Possibility of not meeting directives
  3. Realistic planning may not be possible as plan values are adjusted to meet the goals

What is bottom-up planning?

The bottom-up approach, also known as the progressive approach, is a modern planning method that, in contrast to the top-down approach, begins at the operational level.


Operational-level planning participants (e.g., department or division managers) independently plan the respective target values for their areas of responsibility at a detailed level. From these sub-plans, individual partial results and objectives can be derived, which are then discussed, coordinated, and consolidated at higher levels.

At the strategic level, the sub-plans are ultimately merged into an overall concept. From this, company-wide goals and the pursued direction can now be discerned.


  1. Better traceability of target values → where are costs incurred?
  2. Higher realism as planning participants have a better understanding of their own business areas.
  3. High motivation since the operational level is involved in planning, and the strategic level does not provide strict planning directives.


  1. The overall goal of the company may be lost sight of.
  2. Not all sub-plans necessarily align with the final overall goal.
  3. Limited perspective focusing only on individual costs and revenues.
  4. Difficulty in creating the overall plan, as each sub-plan needs to be integrated.
  5. High time and coordination effort.

What is reverse flow planning?

As mentioned earlier, during the practical application of various planning models, opportunities for improvement have been discovered, which have been incorporated into new approaches.

A good example of such a modern planning approach is the so-called reverse flow planning. This planning approach combines the key advantages of top-down and bottom-up planning.

With this method, the goal is to ensure that company objectives are pursued while also incorporating the knowledge and experience gained from the operational level into the planning process.


In this approach, the strategic level sets the pursued goals and strategies in the form of an overall company plan (‘Top’). The operational level then creates sub-plans for individual departments/areas (‘Down’).

During this process, it is also decided whether the specified goals are realistic and achievable. After discussing whether and to what extent the directives from the strategic level are achievable, necessary corrections and improvement suggestions are made to the planning and then returned to the leadership level.

They can then analyse the proposed changes and adjust the existing overall plan accordingly. In the event that the strategic level does not agree with the changes, new directives are passed on to the operational level, and the process starts over. This continues until the overall plan is approved by both levels.


Combines the advantages of top-down and bottom-up planning.


  1. High coordination and alignment effort between levels.
  2. Adjustments made by subordinate positions must always be accepted by superordinate positions. This can lead to constant confrontations and changes.

What is driver-based planning?

Driver-based planning is one of the newer approaches in contrast to the methods described above. This planning approach was long considered too complex and difficult to implement. BARC cites a lack of conceptual and substantive expertise as the main reason why only a few companies are adopting or partially using this modern planning approach.

However, it should be mentioned that the focus on essential control variables (= drivers) and the representation of various scenarios is seen as a significant advantage compared to other planning approaches. Now, let’s address the question of what driver-based planning is and whether it offers improvement potential for companies.

Driver-based planning is about developing plans based on a logical rationale. It starts with the essential internal and external factors and progresses towards a company’s key objectives. The idea behind it is primarily to focus on the most relevant processes using a driver model (= key performance indicator system) and consider the cause-and-effect relationships between financial and

operational factors. In this context, drivers are control variables that influence key performance indicators and ensure active management in the entire company planning process.

Improving drivers directly leads to an enhancement in the company’s key performance indicators. They can represent both monetary variables (e.g., an hourly rate) and non-monetary values (e.g., number of customers, number of projects, etc.). Since these variables are aligned with the company’s own business model, it ensures a realistic planning. The development of a driver model requires substantive and conceptual knowledge.

Using a driver analysis, all historical internal and external data that directly affect the company must be analysed and evaluated. The identified key performance indicators are consolidated into a key performance indicator system, representing the process within the company.

The diagram below illustrates an example of a driver model in the form of a driver tree in SAP Analytics Cloud. The yellow-highlighted key performance indicators are the drivers that significantly influence the other nodes.

Using this driver model, so-called “simulation models” can be created. These models depict future scenarios that can encompass various aspects of a company. In this process, the drivers can be adjusted differently, and manual adjustments can be made throughout the year.

In the above example, the following scenarios could be depicted, for instance, focusing on how profit is influenced:

  • If the company can acquire 10% more customers in the future.
  • If the company can acquire 10% more customers in the future, but the average employee salary also increases.
  • If the hourly rate is increased, but the number of project days decreases (for example, due to a poor forecast of orders).

These and many other future scenarios can be represented quickly and easily.


  1. Reduction of planning iterations, complexity, and overall planning duration.
  2. Increased transparency à Due to the representation of a driver tree, it is easier to identify which factors need adjustment to achieve a positive effect and how the results are achieved.
  3. Easy model adaptation and simulation à This allows for quicker response to influencing factors, resulting in more realistic planning.


    1. Time-consuming identification of relevant drivers and their interconnections.
    2. High level of conceptual and substantive knowledge required for identification and modelling.

⇒ Leads to a high time investment in the creation process.

Which modern planning approach is suitable for my company?

When faced with the question of which planning approach is suitable for your company, it’s important to be aware of the advantages and disadvantages of the most well-known planning approaches.

Without practical application within your company and the resulting experiences, it can be difficult to determine which approach is the best and most fitting for you. Helpful in making this decision is the consideration of various criteria such as planning effort and implementation effort.

Regarding the implementation or modelling effort, it is clear that driver-based planning is significantly more complex and demanding in terms of conceptual implementation. This is primarily due to the extensive identification of the most important internal and external drivers of the company, leading to a longer implementation project. Conversely, switching to a top-down or bottom-up planning approach is easier because only the known hierarchies and their values within the company are relevant. The counterflow approach even allows for aligning the ideas of the operational level with the directives of the strategic level.

In the long run, however, driver-based planning offers several important advantages. For example, the driver model can be more easily adapted to current situations or events, ensuring a more realistic planning. Additionally, the so-called simulation models can depict various scenarios more easily and provide a clear view of which levers in the company need adjustment. Furthermore, the required planning iterations between company levels and the planning duration can be significantly shortened since all levels were involved in creating the model.

In contrast, top-down, bottom-up, and counterflow planning approaches require significant coordination and coordination efforts during the planning phase to create an overall picture of the company in the form of a comprehensive plan.

After comparing the key advantages and disadvantages, it may be easier to decide which planning approach suits your company.

The PIKON Maturity Model for Your Corporate Planning

Use the PIKON Maturity Model as guidance and orientation on your journey towards integrated, agile, and flexible corporate planning:

Maturity Model for your Integrated Business Planning

Maturity Model for your Integrated Business Planning

  • Defined target states for different areas (from the management view through to business processes and up to data storage/visualisation) with various issues as an aid for own assessment.
  • Detailed development phases on the way towards the target state – aid for self-assessment
  • Information on optimisation potentials (quick wins)
  • Orientation for your own individual roadmap


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About the author
Tina Erke-Winter
Tina Erke-Winter
I work as consultant for Business Intelligence at PIKON Deutschland AG. My main focus is on planning and reporting.

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