Seeing Around Corners: The Coupa Business Spend Index (BSI)

Back in 2002 while working at Siebel Systems, I found myself deeply intrigued with this article: ‘The Man Who Sees Around Corners.’ Who wouldn’t be? After all, being able to predict any element of the future is one of those superpowers that anyone in business would love to have. 

The article depicts how the use of Tom Siebel’s own sales automation products helped him see that a recession was looming. â€œThe figures laid out before him in crystalline pixels of blue, red, and black showed that hundreds of potential deals, ranging in value from a few thousand dollars to several million each, had suddenly stalled.”

That initial intrigue got me thinking: What if one could build on this ‘seeing around corners’ approach and get even earlier leading indicators of what is about to happen? Then, what if one could also improve the accuracy of that predictability and share it broadly? In other words: go deeper and wider.

Going Deeper

There is no question that having instant real-time visibility to sales forecasts across an organization is of great value to any CEO. But often the majority of the sales forecasting data is collected by sales people and entered into a given CRM system. The sales person’s interpretation of what she’s observing with her potential buyers is collected. This presents some issues. First, there is an aspect of human interpretation (or misinterpretation) that can potentially impact the quality of the data rendered. Second, there is a time lag between when a buyer may be reconsidering a purchase, when they make that known to the sales person (assuming they do), and when that sales person ultimately enters her interpretation of the facts into the CRM system. These observations left me thinking: What if we were able to go deeper into the buying process and avoid both the issues of data quality and time lag? 

Virtually any company’s purchasing business processes involve a set of approvals. So, what if it was easily observable that a given buyer was taking longer to approve a wide array of their potential purchases? If we had access to that information, we’d not only be able to remove the potential data misinterpretation issue, but we’d have access to information far earlier in the buying process. In essence, we’d have earlier and higher quality leading indicators that would help us see around corners.

Going Wider

When Tom was looking around corners, he was looking at data concerning Siebel’s prospective customers. He only had visibility into buyer intent for his segment of the enterprise software space (i.e. CRM software).  Additionally, one could logically assume that he had no incentive to share his insights with industry peers or the public in a timely manner. After all, he might have been competing with industry peers. Also, would the broader public really care that much about the outlook for a specific category like CRM? What if we could go much wider in terms of our data visibility and what if we could share that data broadly?

Virtually every company purchases anywhere from dozens to millions of types of items/services on an annual basis. What if we could see their anonymized purchasing intent across virtually every segment of business spending for hundreds of companies at once and in real time? Not only would we understand the intent around all categories of purchasing, but we would understand it across industries, company sizes, geographies, and in aggregate. Clearly, that would significantly improve the accuracy of our predictability in trying to see around corners.

Also, what if we were willing to share this data in a fully sanitized, anonymized, and aggregated way with the public? Wouldn’t that help investors and economists with powerful leading indicators of economic health?

Serving One Customer at a Time

Incredibly, at Coupa, we do have access to aggregate spend data that are leading indicators allowing us to go both deeper and wider in the pursuit of seeing around corners and helping business leaders thrive. 

Back in 2009, we began our early efforts to aggregate anonymized data in ways that could be of value for each company in our developing Customer Community. We started to provide prescriptions based on this data, and continue to develop this initiative across our entire suite of offerings at Coupa. Today, our customers benefit from the insights drawn from more than $1 trillion dollars in spend data and are able to identify supplier risk, catch spend fraud, benchmark themselves, and continually optimize their spend processes in partnership with us. We call this Community Intelligence, and we believe that we are just starting to scratch the surface of what is possible here.

A Little Something for the Masses

In 2014, we decided to start sharing some of our anonymized community data with the public. We released our first Coupa Benchmark Report. It was extremely well received, built greater awareness for Coupa, and served the greater good. In fact, we still publish this report annually, and its value continues to grow, given the growing dataset upon which it is based.

Meaningful Value for Everyone

Last week, we took this one step further with the launch of the Coupa Business Spend Index (BSI), a set of leading indicators of economic growth based on business spending decisions of hundreds of companies, across virtually every category of spending. The Coupa BSI has been back tested quarterly for the past 2.5 years against actual economic data, and shows a strong correlation.

Based on three key spend factors at a business (average spend per person, average time to approve spend decisions, average rate of spend approval/rejection), the Coupa BSI analyzes hundreds of global companies and their real spend behavior, showcasing implications on the growth prospects in our economy.

In this inaugural Q1 2019 report, the Coupa BSI reveals that despite uncertainty in the markets, businesses appear to be growing increasingly optimistic about the growth of the economy over the next three-to-six months.

Let me give you some real industry examples from the Coupa BSI:

●     Business spend sentiment among retailers continues to be strong with the Coupa BSI for Retail increasing from Q4 2018 to Q1 2019, driven mainly by a nearly 44% increase in average spend per person. The Coupa BSI for Retail increased more significantly from Q3 2018 (+18.4%), demonstrating that retailers are optimistic about the prospects in their industry over the next three-to-six months.

●     In the manufacturing industry, however, business spend sentiment continues to be significantly weaker in Q1 2019, as it had been in the second half of 2018. The Coupa BSI for Manufacturing indicates that business spend sentiment may have bottomed out in Q4 2018 (84.7) with a slight improvement of 5.1% in Q1 2019 (89.0).

●     Financial services companies show more confidence about potential growth in the next three-to-six months vs. the prior quarter based on data in the Coupa BSI for Financial Services. This was mainly driven by a nearly 63% acceleration in time to approve spend decisions.

Seeing Around Corners 2.0

Twenty four hours after the release of the Coupa BSI, the US GDP numbers were announced and they topped expectations. The Coupa BSI proved to be on-point! It is important to note that we had our data for three weeks before going public with it. Additionally, and more importantly, it provides insight into the future, based on current sentiment.

The implications for business leaders are obvious. From a spending perspective, certain business leaders might choose to invest more aggressively given the bullish sentiment in their industries, in an effort to keep up. Others might choose to re-examine their strategic options. 

From a sales perspective, certain business leaders might choose to focus their energies on pursuing buyers in industries with strong sentiment. Others might focus on distinct value propositions for those that are more selective and cautious at the moment.

Either way, the Coupa BSI should help companies (and investors) make more informed business decision. It might also help build public awareness for Coupa and our offerings in Business Spend Management and the power of Community Intelligence. We’re planning to release the Coupa BSI quarterly and fine tune it as we go. 

It’s been nearly two decades since ‘The Man Who Sees Around Corners’ published. But the burning desire to see around corners from far away, and with the greatest accuracy is still very much alive. At Coupa, we’re doing our part to stoke the fire and share the view from far and wide.