We live in a dynamic economy dominated by change. For that reason, organisations need to invest in strategy that can cope with this change.
CFOs are in the perfect position to assist with the formation and delivery of this strategy.
New technologies have allowed CFOs to put down the calculator and to stop producing endless budgets which only report on the past. Technology has enabled CFOs to forecast more accurately through the availability of real-time reporting and, to focus their attention on what matters to an organisation. These advances, coupled with a change in the organisation’s expectations have resulted in the role of the CFO transitioning from being a scorekeeper focused mainly on financial data, to being a strategist, focused on defining and delivering strategy and insight.
Furthermore, the last decade has been witness to a dramatically changed economic landscape. The GFC highlighted just how fragile the economy can be, this, along with technological, political and social trajectories, all emphasised the importance of a strategic plan that can cope with external forces.
As a CFO, you are no longer expected to just report on the past. CFOs are now expected to manage the present, and help shape the future of their organisations, by engaging on a strategic level and translating data into decisions.
It is a CFO’s analytical skills and ability to draw insight from data, which allows them to provide greatest value to an organisation. Businesses need to discuss and monitor their plans, they need a CFO to gather insight into what the numbers mean for the business now, and how they will impact the future.
To provide strategic guidance in a volatile environment, the organisation needs to first understand that strategy is a process, not an event. Strategy must be dynamic, continuously worked on and monitored, adapting to new data, new ideas and new disruptions.
Goals are not achieved by having an annual strategy session; to be tucked away and brought out a year later. Strategy must be living and breathing within an organisation- it needs to be something that everyone understands and is working towards.
Strategy is about identifying and understanding where the business positions itself, not just from an external view, but right down to the organisational culture.
Therefore, the planning process commences by creating a vision which steers your organisation in the right direction. This vision must be clear, concise, achievable and visible from all directions. Setting the vision for the business is like placing a ‘flag on the hill,’ it identifies a common goal.
Once the vision is set, focus should be on understanding the business and the environment in which it operates, and a plan developed which copes with external forces. A strategic tool I like to use with my clients is the ‘Blue Ocean Strategy.’
Blue Ocean Strategy works by asking the business, which ocean it swims in: the red or the blue?
‘Red Ocean’ thinking forces an organisation to compete for existing market space, to try to beat the competition, to try and exploit existing demand. These businesses are effectively in a race to the bottom.
In today’s dynamic and competitive environment, a company’s ultimate and only sustainable competitive advantage is its ability to differentiate itself from its competitors.
Businesses operating in the ‘Blue Ocean’ take on a strategy of differentiation. They are not focused on beating the competition but are focused on making the competition irrelevant. They create and capture new demand and create uncontested market space.
To successfully implement ‘Blue Ocean Strategy’, the organisation needs to be willing to change. It requires the organisation to focus its attention and resources to this strategy. Most significantly, it requires the organisation to give something up, to create something different – by eliminating certain factors that hinder and develop new ones, which set it apart.
An organisation must make a choice. They must choose what they are going to do and who they are going to do it for – not try and do everything for everybody.
Thanks to technology, we now live in a world of big data, where data is everywhere and where data can be obtained on everything. In a data-driven world, it is the role as the CFO to collect the right data, to then interpret this data and provide insights to the organisation. However, it’s important to note that for a CFO, data is no longer just limited to financial.
For a CFO, to be able to deliver benefits to their organisation, they need to have access to several sources of data. Data around their people, process, products and innovation and their customers. This data and the measure derived from it, drive the financial outcome and the organisation’s success.
One way to enhance the collection of data is for CFOs to appreciate the importance of collaboration and the need to collaborate with other departments and stakeholders in their organisations.
Collaboration enhances the CFOs ability to gain suggestions and gather strategic insight from members of the organisation that are at the coalface. Being able to gather these observations can help to identify opportunities and also highlight areas of concern.
By facilitating better collaboration and communication between departments, the CFO will be able to easily obtain more data and drive the financial outcomes thus, the organisation’s success.
It is only through understanding these aspects that you can start predicting and shaping the future.
The future of the CFO will continue to be dominated by technological innovation. Technology like artificial intelligence and machine learning will change the finance function. These technologies will likely eliminate many tasks we currently undertake, but from elimination comes the ability to focus our attention on creation.
Technology will allow for the creation of tools which simplifying the complexity of big data, allowing it to be understood and interpreted. With these new tools, CFOs will be able to better understand their organisations, their customers and their people and use this understanding to develop and implement better strategy to drive their organisations forward.