DECEMBER 2017 THE BUSINESS MODEL ISSUE

Nick Read, Vodafone Group CFO, on the

power of a dynamic business model

MAKING A MODEL FOR THE FUTURE

01_COVER_Dec_v4.indd 1 06/11/2017 13:07

Integrated business solutions

Leading transformational change through innovative software solutionsTo find out how our solutions can transform your organisation, contact us at ibs.marketing@capita.co.uk or visit www.capita-ibs.co.uk

Public Sector Housing SectorCommercial Sector

DECEMBER 2017

3

www.cimaglobal.com

CIMA is the Chartered Institute of Management AccountantsThe Helicon, 1 South Place, London EC2M 2RB www.cimaglobal.com 020 8849 2251

President David Stanford, FCMA, CGMADeputy president Steve Swientozielskyj, FCMA, CGMAVice-presidentAmal Ratnayake, FCMA, CGMAChief executive Andrew Harding, FCMA, CGMAExecutive vice-president – Communications, PR & BrandJanice Maiman, CAEVice-president – Professional Media, Academic & Student EngagementJoanne E. FiorePublisher Kim NilsenManaging editor Rocky S. RosenAssociate publisher Karin DeMarco

The contents of this publication are subject to worldwide copyright protection and reproduction in whole or in part, whether mechanical or electronic, is expressly forbidden without the prior written consent of CIMA/Seven. © Seven. All rights reserved. Origination by F1 Colour. Printed in the UK.

Subscriptionsfm@c-cms.com 01580 883844£45 (UK), £54 (Europe), £72 (rest of world). Back issues: £7.50 (UK), £10 (rest of world) including postage, subject to availability.All payments should be in sterling drawn on a UK bank.

External affairs content manager Oliver Rowe

Financial Management is published for CIMA by Seven, 3-7 Herbal Hill, London EC1R 5EJwww.seven.co.uk 020 7775 7775

Editor-in-chief, finance Jon Watkins Editor Chris HooperCommissioning editor Lawrie Holmes Art director Andrew WellsHead of pictures Eithne Staunton Production manager Elizabeth KnipeDeputy production manager Chris GardnerGroup account director Stefanie Hinten-ReedHead of commercial deliveryMarie-Claire FrederickAdvertising Kelly Baynes,

Samantha Goodmankelly.baynes@seven.co.uk 020 7775 5578Commercial director Rupert LaneBusiness director Emma MartinChief executive Sean King Chairman Tim Trotter

36 HEALTH CHECKS How population-based models are transforming healthcare funding

40 WORLD VIEW The business models with sustainability at their heart

44 VALUE MACHINES How artificial intelligence and machine learning are driving new ways of business thinking

46 OPINION IIRC CEO Richard Howitt on the value of integrated reporting

48 SHOP FRONT Examining award-winning business model reform in the retail industry

DEEP DIVE

24 FEATURE INTERVIEW Vodafone Group CFO Nick Read on agility in the telecoms sector

30 NEW THINKING Developing a dynamic business model in the digital age

THE INFORMATION

4 PRESIDENT’S MESSAGE CIMA president David Stanford on lessons about change from Canada

10 I WORKED ON... A social enterprise project in Vietnam

12 LED BY FINANCE The challenge of funding the UK’s water supply network

16 OPINION Rethinking accountability in modern organisations

18 INSIDER VIEW: POLAND Doing business in Central Europe’s largest economy

20 Q&A: HELEN GIBSON Life at the UK government’s Cabinet Office

IN PRACTICE

54 Q&A Bob Beedham, the chair of CIMA’s Professional Standards Committee, on professionalism and ethics

57 BETTER TOGETHER The benefits that strategic alliances have in the automotive industry

61 TECH NOTES How to foster an environment of creative ideas

64 INSTITUTE NEWS The latest news and views from the Association

66 THE VIEW FROM THE CEO With the CEO – management accounting, Andrew Harding

20

6124

48

CONTENTS

THE BUSINESS MODEL ISSUE

CO

VE

R:

NIC

K W

ILS

ON

NEW 03_Contents v1.indd 3 06/11/2017 12:44

Integrated business solutions

Leading transformational change through innovative software solutionsTo find out how our solutions can transform your organisation, contact us at ibs.marketing@capita.co.uk or visit www.capita-ibs.co.uk

Public Sector Housing SectorCommercial Sector

DECEMBER 2017

3

www.cimaglobal.com

CIMA is the Chartered Institute of Management AccountantsThe Helicon, 1 South Place, London EC2M 2RB www.cimaglobal.com 020 8849 2251

President David Stanford, FCMA, CGMADeputy president Steve Swientozielskyj, FCMA, CGMAVice-presidentAmal Ratnayake, FCMA, CGMAChief executive Andrew Harding, FCMA, CGMAExecutive vice-president – Communications, PR & BrandJanice Maiman, CAEVice-president – Professional Media, Academic & Student EngagementJoanne E. FiorePublisher Kim NilsenManaging editor Rocky S. RosenAssociate publisher Karin DeMarco

The contents of this publication are subject to worldwide copyright protection and reproduction in whole or in part, whether mechanical or electronic, is expressly forbidden without the prior written consent of CIMA/Seven. © Seven. All rights reserved. Origination by F1 Colour. Printed in the UK.

Subscriptionsfm@c-cms.com 01580 883844£45 (UK), £54 (Europe), £72 (rest of world). Back issues: £7.50 (UK), £10 (rest of world) including postage, subject to availability.All payments should be in sterling drawn on a UK bank.

External affairs content manager Oliver Rowe

Financial Management is published for CIMA by Seven, 3-7 Herbal Hill, London EC1R 5EJwww.seven.co.uk 020 7775 7775

Editor-in-chief, finance Jon Watkins Editor Chris HooperCommissioning editor Lawrie Holmes Art director Andrew WellsHead of pictures Eithne Staunton Production manager Elizabeth KnipeDeputy production manager Chris GardnerGroup account director Stefanie Hinten-ReedHead of commercial deliveryMarie-Claire FrederickAdvertising Kelly Baynes,

Samantha Goodmankelly.baynes@seven.co.uk 020 7775 5578Commercial director Rupert LaneBusiness director Emma MartinChief executive Sean King Chairman Tim Trotter

36 HEALTH CHECKS How population-based models are transforming healthcare funding

40 WORLD VIEW The business models with sustainability at their heart

44 VALUE MACHINES How artificial intelligence and machine learning are driving new ways of business thinking

46 OPINION IIRC CEO Richard Howitt on the value of integrated reporting

48 SHOP FRONT Examining award-winning business model reform in the retail industry

DEEP DIVE

24 FEATURE INTERVIEW Vodafone Group CFO Nick Read on agility in the telecoms sector

30 NEW THINKING Developing a dynamic business model in the digital age

THE INFORMATION

4 PRESIDENT’S MESSAGE CIMA president David Stanford on lessons about change from Canada

10 I WORKED ON... A social enterprise project in Vietnam

12 LED BY FINANCE The challenge of funding the UK’s water supply network

16 OPINION Rethinking accountability in modern organisations

18 INSIDER VIEW: POLAND Doing business in Central Europe’s largest economy

20 Q&A: HELEN GIBSON Life at the UK government’s Cabinet Office

IN PRACTICE

54 Q&A Bob Beedham, the chair of CIMA’s Professional Standards Committee, on professionalism and ethics

57 BETTER TOGETHER The benefits that strategic alliances have in the automotive industry

61 TECH NOTES How to foster an environment of creative ideas

64 INSTITUTE NEWS The latest news and views from the Association

66 THE VIEW FROM THE CEO With the CEO – management accounting, Andrew Harding

20

6124

48

CONTENTS

THE BUSINESS MODEL ISSUEC

OV

ER

: N

ICK

WIL

SO

N

NEW 03_Contents v1.indd 3 06/11/2017 12:44

DECEMBER 2017

4

In October I returned to Canada for three confer-ences, all based on themes

very relevant to our members working in businesses today.

In Ottawa, I spoke at a conference on integrated thinking and eff ective deci-sion-making, and was able to point out the signifi cant opportunity for those com-panies that work eff ectively with big data to steal a com-petitive edge on their rivals.

This group of companies are well described as “inte-grated thinkers”. Examples from Canada include Cana-dian Tire and Shopify, which has constantly adapted by using data to adjust its online e-commerce platform to meet customer demands, thereby demonstrating agile decision-making.

Across the globe, conglomerate GE and consumer goods giant Unilever are further good examples. Unile-ver’s approach to reporting was recognised recently in the UK in the PWC Building Public Trust Awards for Cor-porate Reporting, where its commitment to sustainabil-ity was seen as moving beyond its customers’ expectations in some areas.

In the unpredictable and disrupted world in which we now live, one factor that remains constant within business is rapid change itself. This phenomenon drove the theme of the event I spoke at in Calgary: “Adapting to Unwanted Change”. I spoke about how CIMA and our new Association are putting management accountants into the driving seat to take advantage of the opportuni-ties that change brings.

The ability to challenge, to ask the right questions, and to communicate to drive better decision-making are key parts of our skillset. The skills that robots can’t perform – leadership, communication, and strategic thinking – are all part of the CGMA competency frame-work.

The Association’s 2017 salary survey confi rms that

these are the skills our mem-bers are seeking to build. Of those members who are plan-ning to learn new skills over the next 12 months to enhance their career progres-sion, 38% want to increase their strategy skills, 31% want to increase skills around driving performance, and 27% want to improve their negotiating, decision-mak-ing, and infl uencing skills.

As technological innova-tion continues to accelerate, these skills will be even more

important than in the past.By contrast, of the 88% of students looking to learn

career skills over the next 12 months, their top learning need is accounting information systems skills (47%), while strategy skills (42%) and business planning skills (41%) also feature in the top three.

The fi nal Canadian event I spoke at – in Toronto – was a conference on disruption and how to storm-proof your future. A recent survey of Fortune 500 executives identifi ed a number of skillsets that are needed for indi-viduals to provide strategic leadership in the face of new business threats. They included the ability when neces-sary to “fail fast and shift gears quickly” and also the abil-ity to develop a culture committed to mitigating risk. This is essential in a world where the volume and com-plexity of risks are increasing and only around 30% of organisations have complete enterprise risk manage-ment processes in place.

CIMA itself has storm-proofed its own future by form-ing the Association with the AICPA. As we approach the fi rst full year of the Association, it is clear that our global infl uence is growing – people and organisations increas-ingly want to talk to and listen to us.

It continues to be a privilege to advocate on behalf of you – our members and students – and I wish you all a very happy Christmas and end of year moving forward into a prosperous 2018. ■

THE VIEW FROM THE PRESIDENT

Lessons in change from Canada

DAVID STANFORD, FCMA, CGMA

NIC

K W

ILS

ONKEEP IN TOUCH

Follow me on Twitter:

@CIMA_President

NEW_04-David_Stanford_v1.indd 4 02/11/2017 09:34

Adapt to Today’sGrowing FP&A Challenges

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Excel is great, but you need more to meet today’s

fast paced and competitive environment. Adaptive

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automating your planning, reporting, consolidation

and analytics with powerful and easy to use

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• 90% Faster Planning• 50% Quicker Consolidation• 75% Lower Cost

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Financial_Management_Ad_070815.pdf 1 7/8/15 10:17 AM

DECEMBER 2017

4

In October I returned to Canada for three confer-ences, all based on themes

very relevant to our members working in businesses today.

In Ottawa, I spoke at a conference on integrated thinking and eff ective deci-sion-making, and was able to point out the signifi cant opportunity for those com-panies that work eff ectively with big data to steal a com-petitive edge on their rivals.

This group of companies are well described as “inte-grated thinkers”. Examples from Canada include Cana-dian Tire and Shopify, which has constantly adapted by using data to adjust its online e-commerce platform to meet customer demands, thereby demonstrating agile decision-making.

Across the globe, conglomerate GE and consumer goods giant Unilever are further good examples. Unile-ver’s approach to reporting was recognised recently in the UK in the PWC Building Public Trust Awards for Cor-porate Reporting, where its commitment to sustainabil-ity was seen as moving beyond its customers’ expectations in some areas.

In the unpredictable and disrupted world in which we now live, one factor that remains constant within business is rapid change itself. This phenomenon drove the theme of the event I spoke at in Calgary: “Adapting to Unwanted Change”. I spoke about how CIMA and our new Association are putting management accountants into the driving seat to take advantage of the opportuni-ties that change brings.

The ability to challenge, to ask the right questions, and to communicate to drive better decision-making are key parts of our skillset. The skills that robots can’t perform – leadership, communication, and strategic thinking – are all part of the CGMA competency frame-work.

The Association’s 2017 salary survey confi rms that

these are the skills our mem-bers are seeking to build. Of those members who are plan-ning to learn new skills over the next 12 months to enhance their career progres-sion, 38% want to increase their strategy skills, 31% want to increase skills around driving performance, and 27% want to improve their negotiating, decision-mak-ing, and infl uencing skills.

As technological innova-tion continues to accelerate, these skills will be even more

important than in the past.By contrast, of the 88% of students looking to learn

career skills over the next 12 months, their top learning need is accounting information systems skills (47%), while strategy skills (42%) and business planning skills (41%) also feature in the top three.

The fi nal Canadian event I spoke at – in Toronto – was a conference on disruption and how to storm-proof your future. A recent survey of Fortune 500 executives identifi ed a number of skillsets that are needed for indi-viduals to provide strategic leadership in the face of new business threats. They included the ability when neces-sary to “fail fast and shift gears quickly” and also the abil-ity to develop a culture committed to mitigating risk. This is essential in a world where the volume and com-plexity of risks are increasing and only around 30% of organisations have complete enterprise risk manage-ment processes in place.

CIMA itself has storm-proofed its own future by form-ing the Association with the AICPA. As we approach the fi rst full year of the Association, it is clear that our global infl uence is growing – people and organisations increas-ingly want to talk to and listen to us.

It continues to be a privilege to advocate on behalf of you – our members and students – and I wish you all a very happy Christmas and end of year moving forward into a prosperous 2018. ■

THE VIEW FROM THE PRESIDENT

Lessons in change from Canada

DAVID STANFORD, FCMA, CGMA

NIC

K W

ILS

ONKEEP IN TOUCH

Follow me on Twitter:

@CIMA_President

NEW_04-David_Stanford_v1.indd 4 02/11/2017 09:34

Adapt to Today’sGrowing FP&A Challenges

with a Modern Tool Set

www.adaptiveinsights.co.uk

Excel is great, but you need more to meet today’s

fast paced and competitive environment. Adaptive

Insights allows you to be more strategic, while

automating your planning, reporting, consolidation

and analytics with powerful and easy to use

applications that operate like Excel, but on steroids.

• 90% Faster Planning• 50% Quicker Consolidation• 75% Lower Cost

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IN CUSTOMERSATISFACTION

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Financial_Management_Ad_070815.pdf 1 7/8/15 10:17 AM

Concur.indd 1 11/01/2017 11:00

THE INFORMATION

1I WORKED ON... A SOCIAL ENTERPRISE PROJECT IN VIETNAM; INSIDE A UK WATER INFRASTRUCTURE

NETWORK’S FINANCE DEPARTMENT; OPINION – RETHINKING ACCOUNTABILITY;

INSIDER VIEW – POLAND; Q&A WITH HELEN GIBSON, DEPUTY FINANCE DIRECTOR AT THE UK

GOVERNMENT’S CABINET OFFICE

07_Section_1.indd 7 31/10/2017 17:29

Concur.indd 1 11/01/2017 11:00

THE INFORMATION

1I WORKED ON... A SOCIAL ENTERPRISE PROJECT IN VIETNAM; INSIDE A UK WATER INFRASTRUCTURE

NETWORK’S FINANCE DEPARTMENT; OPINION – RETHINKING ACCOUNTABILITY;

INSIDER VIEW – POLAND; Q&A WITH HELEN GIBSON, DEPUTY FINANCE DIRECTOR AT THE UK

GOVERNMENT’S CABINET OFFICE

07_Section_1.indd 7 31/10/2017 17:29

I N F OR O U N D U P

GE

TT

Y IM

AG

ES

A global survey of business leaders has revealed they value their organisation’s reputation above all else, including even fi nancial performance, when considering elements of resilience.

The Organizational Resilience Index, which was conducted by the British Standards Institute (BSI), surveyed more than 1,200 business leaders from across the globe and found that protecting their fi rm’s reputation topped the list of important components of resilient businesses.

Howard Kerr, BSI’s chief executive, explained: “In today’s volatile and uncertain world… it is encouraging that business leaders understand that success is measured by more than market share, with trust and reputation clearly seen as critical to long-term success.”

Unequal pay, one of the most persistent barriers to women’s success at work and to economic growth, will be actively challenged by a newly formed global partnership.

Created by the International Labour Organization (ILO), UN Women, and the Organisation for Economic Co-operation and Development (OECD), the Equal Pay International Coalition (EPIC) aims to support governments, employers, and workers to make equal pay between women and men for work of equal value a reality.

Starting with peer-to-peer policy exchanges, knowledge sharing, peer-reviewed research, and robust data and statistics, EPIC will also contribute to

strengthening advocacy on equal pay.Guy Ryder, the ILO director-general,

said: “One of the most visible, tangible, and pervasive manifestations of discrimination is that women across the globe are still being paid less than men for work of equal value.”

OECD Secretary-General Angel Gurría said: “Gender inequality has many roots, including fl awed policies, discriminatory laws and regulations, misplaced economic incentives, workplace practices, and social norms and institutions.

“It is in our power to make an immediate improvement in the quality of life of hundreds of millions of women and their families if we succeed in delivering equal pay for men and women.”

REPUTATION SEEN AS KEY TO RESILIENCE

New coalition to champion equal pay for women

WHICH RESILIENCE FACTORS ARE MOST IMPORTANT TO BUSINESS LEADERS?1 Reputational risk

2 Financial aspects

3 Leadership

4 Vision and purpose

5 Information and knowledge management

Source: BSI Organizational Resilience Index 2017.

DECEMBER 2017

8

THE INFORMATION / ROUNDUP

08-09_Info_news_round_up_v1.indd 8 31/10/2017 17:33

GE

TT

Y IM

AG

ES

The International Integrated Reporting Council (IIRC) and ICAS (the professional accountancy body) have jointly published a new report aimed at supporting businesses looking to help achieve the United Nations’ Sustainable Development Goals (SDGs).

Authored by Professor Carol Adams, of Durham University Business School in the UK, and published by the IIRC and ICAS, in partnership with the Green Economy Coalition, the report demonstrates how a commitment to integrated reporting can inform and support a business’s commitment to the SDGs.

Integrated reporting enables organisations to consider how they create value through the perspective of their strategy and business model. It also encourages them to consider their stewardship of the relationships and resources they use and affect, and understand the trade-offs they make.

Russell Picot, chair of the HSBC UK Pension Scheme Trustee Board and of the advisory group for the report, said: “In using this report, businesses have a tool to communicate – in a language investors will understand – how their commitment to the SDGs is creating value for society and the business alike. I urge businesses that are serious about sustainable development to use this step-by-step process, thereby embedding the SDGs into the heart of their strategy and business model.”

Despite uncertainty over the post-Brexit economic and political landscape, London is still ranked as the world’s top financial centre.

The Z/Yen Global Financial Centres Index, which is published every six months, scores cities out of a total 1,000 points and lists the UK capital as number one with 780 points.

New York is second with 756 points, and Hong Kong (744) has usurped Singapore to take third place in the latest ranking.

Paris and Dublin, the two cities that have positioned themselves to host financial services firms looking to relocate from post-Brexit Britain, are positioned 26th and 30th, respectively.

HELP FOR BUSINESSES TO ACHIEVE

SUSTAINABILITY AGENDA

LONDON STILL WORLD’S NUMBER ONE FINANCIAL CENTRE

CENTRELondon, United Kingdom

New York, United States

Hong Kong, China

Singapore

Tokyo, Japan

Shanghai, China

Toronto, Canada

Sydney, Australia

Zurich, Switzerland

Beijing, China

Source: Z/Yen Global Financial Centres Index.

CURRENT RANK1

2

3

4

5

6

7

8

9

10

RATING780

756

744

742

725

711

710

707

704

703

CHANGE IN RANK-

-

+1

-1

-

+7

+3

-

+2

+6

DECEMBER 2017

9

THE INFORMATION / ROUNDUP

€23 BILLION

The amount spent by Vodafone acquiring large

cable companies or building next-generation

fixed networks.Full interview: Pages 24-29

54The number of countries

in which the Accounting for International Development charity has projects. One of which, in Vietnam, is

featured here. Full story: Page 10

INTEGRATED REPORTING

“It helps to ensure that the report tells the story of a business that is more than the sum of its parts, and that

has a clear strategy and the right operating model to grow profits in a sustainable way.” Anthony Clarke, deputy

company secretary at retailer Marks & SpencerFull story: Page 48

08-09_Info_news_round_up_v1.indd 9 31/10/2017 17:33

I N F OR O U N D U P

GE

TT

Y IM

AG

ES

A global survey of business leaders has revealed they value their organisation’s reputation above all else, including even fi nancial performance, when considering elements of resilience.

The Organizational Resilience Index, which was conducted by the British Standards Institute (BSI), surveyed more than 1,200 business leaders from across the globe and found that protecting their fi rm’s reputation topped the list of important components of resilient businesses.

Howard Kerr, BSI’s chief executive, explained: “In today’s volatile and uncertain world… it is encouraging that business leaders understand that success is measured by more than market share, with trust and reputation clearly seen as critical to long-term success.”

Unequal pay, one of the most persistent barriers to women’s success at work and to economic growth, will be actively challenged by a newly formed global partnership.

Created by the International Labour Organization (ILO), UN Women, and the Organisation for Economic Co-operation and Development (OECD), the Equal Pay International Coalition (EPIC) aims to support governments, employers, and workers to make equal pay between women and men for work of equal value a reality.

Starting with peer-to-peer policy exchanges, knowledge sharing, peer-reviewed research, and robust data and statistics, EPIC will also contribute to

strengthening advocacy on equal pay.Guy Ryder, the ILO director-general,

said: “One of the most visible, tangible, and pervasive manifestations of discrimination is that women across the globe are still being paid less than men for work of equal value.”

OECD Secretary-General Angel Gurría said: “Gender inequality has many roots, including fl awed policies, discriminatory laws and regulations, misplaced economic incentives, workplace practices, and social norms and institutions.

“It is in our power to make an immediate improvement in the quality of life of hundreds of millions of women and their families if we succeed in delivering equal pay for men and women.”

REPUTATION SEEN AS KEY TO RESILIENCE

New coalition to champion equal pay for women

WHICH RESILIENCE FACTORS ARE MOST IMPORTANT TO BUSINESS LEADERS?1 Reputational risk

2 Financial aspects

3 Leadership

4 Vision and purpose

5 Information and knowledge management

Source: BSI Organizational Resilience Index 2017.

DECEMBER 2017

8

THE INFORMATION / ROUNDUP

08-09_Info_news_round_up_v1.indd 8 31/10/2017 17:33

GE

TT

Y IM

AG

ES

The International Integrated Reporting Council (IIRC) and ICAS (the professional accountancy body) have jointly published a new report aimed at supporting businesses looking to help achieve the United Nations’ Sustainable Development Goals (SDGs).

Authored by Professor Carol Adams, of Durham University Business School in the UK, and published by the IIRC and ICAS, in partnership with the Green Economy Coalition, the report demonstrates how a commitment to integrated reporting can inform and support a business’s commitment to the SDGs.

Integrated reporting enables organisations to consider how they create value through the perspective of their strategy and business model. It also encourages them to consider their stewardship of the relationships and resources they use and affect, and understand the trade-offs they make.

Russell Picot, chair of the HSBC UK Pension Scheme Trustee Board and of the advisory group for the report, said: “In using this report, businesses have a tool to communicate – in a language investors will understand – how their commitment to the SDGs is creating value for society and the business alike. I urge businesses that are serious about sustainable development to use this step-by-step process, thereby embedding the SDGs into the heart of their strategy and business model.”

Despite uncertainty over the post-Brexit economic and political landscape, London is still ranked as the world’s top financial centre.

The Z/Yen Global Financial Centres Index, which is published every six months, scores cities out of a total 1,000 points and lists the UK capital as number one with 780 points.

New York is second with 756 points, and Hong Kong (744) has usurped Singapore to take third place in the latest ranking.

Paris and Dublin, the two cities that have positioned themselves to host financial services firms looking to relocate from post-Brexit Britain, are positioned 26th and 30th, respectively.

HELP FOR BUSINESSES TO ACHIEVE

SUSTAINABILITY AGENDA

LONDON STILL WORLD’S NUMBER ONE FINANCIAL CENTRE

CENTRELondon, United Kingdom

New York, United States

Hong Kong, China

Singapore

Tokyo, Japan

Shanghai, China

Toronto, Canada

Sydney, Australia

Zurich, Switzerland

Beijing, China

Source: Z/Yen Global Financial Centres Index.

CURRENT RANK1

2

3

4

5

6

7

8

9

10

RATING780

756

744

742

725

711

710

707

704

703

CHANGE IN RANK-

-

+1

-1

-

+7

+3

-

+2

+6

DECEMBER 2017

9

THE INFORMATION / ROUNDUP

€23 BILLION

The amount spent by Vodafone acquiring large

cable companies or building next-generation

fixed networks.Full interview: Pages 24-29

54The number of countries

in which the Accounting for International Development charity has projects. One of which, in Vietnam, is

featured here. Full story: Page 10

INTEGRATED REPORTING

“It helps to ensure that the report tells the story of a business that is more than the sum of its parts, and that

has a clear strategy and the right operating model to grow profits in a sustainable way.” Anthony Clarke, deputy

company secretary at retailer Marks & SpencerFull story: Page 48

08-09_Info_news_round_up_v1.indd 9 31/10/2017 17:33

GE

TT

Y IM

AG

ES

DECEMBER 2017

10

THE INFORMATION / I WORKED ON

I WORKED

ON...A SOCIAL ENTERPRISE FOR

DISADVANTAGED YOUTHS IN HANOI

Name: Sultana Begum, ACMA, CGMA

Organisation: VIP Bikes Location: Hanoi, VietnamJob: Accounting support

Start date: December 2016End date: January 2017

CIMA qualifi ed: 2014Home role: Interconnector

customer and regulatory manager at National Grid

“IT IS ALSO OF GREAT VALUE TO SPEND TIME IN A DIFFERENT PART OF THE WORLD AND EXPERIENCE A DIFFERENT WORK CULTURE.”

10-11_I_work_on_Vietnam bikes_V2.indd 10 03/11/2017 14:41

GE

TT

Y IM

AG

ES

DECEMBER 2017

11

THE INFORMATION / I WORKED ON

I have worked in finance since graduating from university in 2008, and for

a long time I had been looking at undertaking a project where I could give something back. I think this partly came from my recognising how much I had benefited from living, studying, and working in the UK after I arrived here from my native Bangladesh.

I currently work for the National Grid, the UK’s electrical power transmission network, and I enquired about volunteering with Accounting for International Development (AfID) a couple of years ago after I became CIMA qualified in 2014, but various things cropped up – as they always do – and it was only more recently that I got back in contact with AfID.

I decided on Vietnam’s VIP Bikes, which is based in

the country’s capital, Hanoi. The project is a social enterprise started by a children’s foundation called Blue Dragon nearly a decade ago, and involves a motorcycle shop, a motorcycle rental service, and a mechanics shop that specialises in motorcycle repairs and servicing.

The shop provides support and training to disadvantaged Vietnamese children, teaching them mechanical skills to help get them off the streets and give them a skill to build a future for themselves.

But there is also a business side to VIP Bikes, which capitalises on motorcycles being the preferred mode of transportation in Hanoi. The shop offers servicing, repairs, and rentals to paying customers, with all the proceeds going to Blue

Dragon, which then uses that money to fund its various charitable projects, including helping victims of human trafficking and numerous wildlife causes.

My starting task with VIP Bikes was to bring the accounts up to date, as they had not been managed for quite a while. I also revised and costed up the services that VIP Bikes provided in its shop, over and above the rental service, to reflect the changes in costs incurred from parts and the staff employed, etc. I then recommended a price point that reflected the changes, to ensure a profit could be made without losing the customer base VIP already had. I also put together a payment plan so VIP could pay back some of the debts it had built up in its foundation years.

Working with VIP Bikes

was a wonderful experience, and I realise I’ve been quite fortunate to have had that opportunity and in the support I have had to date. I am acutely aware that not everyone gets that support or opportunity.

Helping someone from a disadvantaged background to prepare for their future was the most rewarding part of it all, and also seeing the work that Blue Dragon and VIP Bikes do and the impact it’s had on many lives since its inception.

I learnt a lot from having to research the project and being confronted by very different conditions. It is also of great value to spend time in a different part of the world and experience a different work culture – it has made me a better management accountant and will aid my own career development. n

A city on the rise: Hanoi, the capital of Vietnam, is home to more than 7 million people.

ACCOUNTING FOR INTERNATIONAL DEVELOPMENT BY THE NUMBERS: VOLUNTEER ACCOUNTANTS:

1,315PRO BONO HOURS IN 2016:

47,790NONPROFIT PARTNERS SUPPORTED TO DATE:

423COUNTRIES VISITED:

54

10-11_I_work_on_Vietnam bikes_V2.indd 11 01/11/2017 14:59

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THE INFORMATION / I WORKED ON

I WORKED

ON...A SOCIAL ENTERPRISE FOR

DISADVANTAGED YOUTHS IN HANOI

Name: Sultana Begum, ACMA, CGMA

Organisation: VIP Bikes Location: Hanoi, VietnamJob: Accounting support

Start date: December 2016End date: January 2017

CIMA qualifi ed: 2014Home role: Interconnector

customer and regulatory manager at National Grid

“IT IS ALSO OF GREAT VALUE TO SPEND TIME IN A DIFFERENT PART OF THE WORLD AND EXPERIENCE A DIFFERENT WORK CULTURE.”

10-11_I_work_on_Vietnam bikes_V2.indd 10 03/11/2017 14:41

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THE INFORMATION / I WORKED ON

I have worked in finance since graduating from university in 2008, and for

a long time I had been looking at undertaking a project where I could give something back. I think this partly came from my recognising how much I had benefited from living, studying, and working in the UK after I arrived here from my native Bangladesh.

I currently work for the National Grid, the UK’s electrical power transmission network, and I enquired about volunteering with Accounting for International Development (AfID) a couple of years ago after I became CIMA qualified in 2014, but various things cropped up – as they always do – and it was only more recently that I got back in contact with AfID.

I decided on Vietnam’s VIP Bikes, which is based in

the country’s capital, Hanoi. The project is a social enterprise started by a children’s foundation called Blue Dragon nearly a decade ago, and involves a motorcycle shop, a motorcycle rental service, and a mechanics shop that specialises in motorcycle repairs and servicing.

The shop provides support and training to disadvantaged Vietnamese children, teaching them mechanical skills to help get them off the streets and give them a skill to build a future for themselves.

But there is also a business side to VIP Bikes, which capitalises on motorcycles being the preferred mode of transportation in Hanoi. The shop offers servicing, repairs, and rentals to paying customers, with all the proceeds going to Blue

Dragon, which then uses that money to fund its various charitable projects, including helping victims of human trafficking and numerous wildlife causes.

My starting task with VIP Bikes was to bring the accounts up to date, as they had not been managed for quite a while. I also revised and costed up the services that VIP Bikes provided in its shop, over and above the rental service, to reflect the changes in costs incurred from parts and the staff employed, etc. I then recommended a price point that reflected the changes, to ensure a profit could be made without losing the customer base VIP already had. I also put together a payment plan so VIP could pay back some of the debts it had built up in its foundation years.

Working with VIP Bikes

was a wonderful experience, and I realise I’ve been quite fortunate to have had that opportunity and in the support I have had to date. I am acutely aware that not everyone gets that support or opportunity.

Helping someone from a disadvantaged background to prepare for their future was the most rewarding part of it all, and also seeing the work that Blue Dragon and VIP Bikes do and the impact it’s had on many lives since its inception.

I learnt a lot from having to research the project and being confronted by very different conditions. It is also of great value to spend time in a different part of the world and experience a different work culture – it has made me a better management accountant and will aid my own career development. n

A city on the rise: Hanoi, the capital of Vietnam, is home to more than 7 million people.

ACCOUNTING FOR INTERNATIONAL DEVELOPMENT BY THE NUMBERS: VOLUNTEER ACCOUNTANTS:

1,315PRO BONO HOURS IN 2016:

47,790NONPROFIT PARTNERS SUPPORTED TO DATE:

423COUNTRIES VISITED:

54

10-11_I_work_on_Vietnam bikes_V2.indd 11 01/11/2017 14:59

THE WATER

CYCLE

DECEMBER 2017

12

THE INFORMATION / LED BY FINANCE

L E D BY

F I N A N C E

NEW12-14_Led_by_finance_thames water_v2.indd 12 03/11/2017 14:44

Richard Hoult, FCMA, CGMA, the CFO of Thames Water Infrastructure Alliance, on how setting KPIs has helped the organisation enhance its vast water supply

network for 9 million customers.

QWhat is the Thames Water Infrastructure Alliance

(TWIA), and how does the finance function bind it together?

A The TWIA includes construction firms Kier,

Clancy Docwra, Morrison Utility Services, J Murphy & Sons, and Thames Water, and is the largest alliance to deliver water-related infrastructure in the UK’s water industry.

A key responsibility of the finance function is building and maintaining relationships at executive level across these five organisations.

This is because the TWIA agreement includes a significant pain/gain mechanism which could result in profits or losses for the joint venture organisations.

As the TWIA and its partners operate an “open book” and operate to an “actual cost” contract, the TWIA finance and joint venture finance teams’ responsibilities cover the validation, control, and review of up to 50,000 transactions per month from all of the businesses, how they are recorded in the joint ventures and, ultimately, Thames Water’s books.

QWhy was a decision taken to implement key perfor-

mance indicators (KPIs)? What areas does this relate to?

AI joined the TWIA in December 2015 – an

organisation that had a number of major challenges. At that time, it wasn’t hitting targets, there was a lack of governance and control, and a lack of clear accountabilities.

These performance challenges, coupled with a lack of accurate and insightful reporting, led to the newly appointed TWIA CEO (appointed in October 2016), giving a clear message to me: “I need to know how my business is performing. I need KPIs I can trust and I want everything summarised onto a monthly ‘performance on a page’.” The key areas that both the TWIA CEO and the TWIA board were interested in were leakage management, customer service performance, and financial performance. And reporting of all of these activities at a regional level.

QHow does that reflect wider developments

across the group?

AA number of management/executive

changes took place at Thames Water in 2017. These, in a number of cases, have been made to provide more focus on operational delivery within the wholesale businesses – leakage performance and customer service performance being the key focus areas.

Thames Water missed

its leakage target in 2016-2017 for the first time in ten years, which has also led to a hunger for data and a need to understand why and how having a set of (the right) KPIs can support getting leakage back on track.

QWhat process are you undertaking to implement

KPIs? What teams are you working with?

A The process was managed by an

experienced programme manager who has worked with me on transformation projects in the past, and had four parts:● Targets and outcomes

agreed (this included input from the wholesale water strategy, planning, and assurance team to ensure agreement of the leakage targets).

● Primary drivers identified (eg, the manpower required to plan and deliver leakage repair jobs).

● Primary KPIs agreed by the TWIA leadership team. A total of 12 KPIs were agreed covering the following areas: service delivery, commercial success, people, and removing harm.

● Service delivery KPIs by region – to drive ownership and accountability at the right level (general managers for each region were required to achieve their targets).

RO

BE

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DECEMBER 2017

13

THE INFORMATION / LED BY FINANCE

NEW12-14_Led_by_finance_thames water_v2.indd 13 03/11/2017 14:44

THE WATER

CYCLE

DECEMBER 2017

12

THE INFORMATION / LED BY FINANCE

L E D BY

F I N A N C E

NEW12-14_Led_by_finance_thames water_v2.indd 12 03/11/2017 14:44

Richard Hoult, FCMA, CGMA, the CFO of Thames Water Infrastructure Alliance, on how setting KPIs has helped the organisation enhance its vast water supply

network for 9 million customers.

QWhat is the Thames Water Infrastructure Alliance

(TWIA), and how does the finance function bind it together?

A The TWIA includes construction firms Kier,

Clancy Docwra, Morrison Utility Services, J Murphy & Sons, and Thames Water, and is the largest alliance to deliver water-related infrastructure in the UK’s water industry.

A key responsibility of the finance function is building and maintaining relationships at executive level across these five organisations.

This is because the TWIA agreement includes a significant pain/gain mechanism which could result in profits or losses for the joint venture organisations.

As the TWIA and its partners operate an “open book” and operate to an “actual cost” contract, the TWIA finance and joint venture finance teams’ responsibilities cover the validation, control, and review of up to 50,000 transactions per month from all of the businesses, how they are recorded in the joint ventures and, ultimately, Thames Water’s books.

QWhy was a decision taken to implement key perfor-

mance indicators (KPIs)? What areas does this relate to?

AI joined the TWIA in December 2015 – an

organisation that had a number of major challenges. At that time, it wasn’t hitting targets, there was a lack of governance and control, and a lack of clear accountabilities.

These performance challenges, coupled with a lack of accurate and insightful reporting, led to the newly appointed TWIA CEO (appointed in October 2016), giving a clear message to me: “I need to know how my business is performing. I need KPIs I can trust and I want everything summarised onto a monthly ‘performance on a page’.” The key areas that both the TWIA CEO and the TWIA board were interested in were leakage management, customer service performance, and financial performance. And reporting of all of these activities at a regional level.

QHow does that reflect wider developments

across the group?

AA number of management/executive

changes took place at Thames Water in 2017. These, in a number of cases, have been made to provide more focus on operational delivery within the wholesale businesses – leakage performance and customer service performance being the key focus areas.

Thames Water missed

its leakage target in 2016-2017 for the first time in ten years, which has also led to a hunger for data and a need to understand why and how having a set of (the right) KPIs can support getting leakage back on track.

QWhat process are you undertaking to implement

KPIs? What teams are you working with?

A The process was managed by an

experienced programme manager who has worked with me on transformation projects in the past, and had four parts:● Targets and outcomes

agreed (this included input from the wholesale water strategy, planning, and assurance team to ensure agreement of the leakage targets).

● Primary drivers identified (eg, the manpower required to plan and deliver leakage repair jobs).

● Primary KPIs agreed by the TWIA leadership team. A total of 12 KPIs were agreed covering the following areas: service delivery, commercial success, people, and removing harm.

● Service delivery KPIs by region – to drive ownership and accountability at the right level (general managers for each region were required to achieve their targets).

RO

BE

RT

WIL

SO

N

DECEMBER 2017

13

THE INFORMATION / LED BY FINANCE

NEW12-14_Led_by_finance_thames water_v2.indd 13 03/11/2017 14:44

QWhat are the ultimate objectives? What should

success look like?

AThe ultimate objectives for the business are to:

● Achieve the leakage reduction target.

● Deliver consistently good customer service that results in scores of five out of five for both office and field-related activities managed by the TWIA.

● Deliver the budget, which includes implementation of a number of critical enablers that drive down cost of delivery.

These objectives significantly underpin delivery of Thames Water’s targets and the commitments of the government regulator, Ofwat. They can result in significant penalties for Thames Water if they are not met.

QWhat progress have you made so far?

AThe TWIA KPIs and dashboards were

launched in April 2017 to support the reporting for this new financial year.

We use a set of Excel-based dashboards to understand how well the business is performing – the primary KPIs are a core part of the leadership team dashboard and are reviewed/challenged at

monthly TWIA leadership team meetings.

Operational performance, covering key areas such as addressing leakage, job cycle times, job volume/type of jobs, cost per job, and team productivity are KPIs included in the service delivery dashboard, which is reviewed/challenged at the monthly performance review, with each general manager presenting their performance update.

The dashboards are also provided to the TWIA board as an easy reference point on how well the TWIA is performing.

QHave any early benefits been delivered so far?

AThe KPIs have allowed us to understand that a

large number of the leaks detected by our contractors weren’t as large as expected, impacting the leakage target (leading to an improved performance framework being agreed with the leak-detection partners).

Also, the dashboard made it easy to see a correlation between the region with the highest number of major leakage/no-water events and adverse leakage performance (leading to increased headcount to be able to manage the

reactive/event work).

QWhat have you learnt from this experience?

AA good team of talented people (internally and

externally), who I’ve worked with before, really helped me accelerate progress and deliver this.

Defining and agreeing on single sources of data and improving the quality of data significantly improved confidence over the outputs, which was also

important.Buy-in from the

leadership and operational teams was key – once management teams understood the data and the targets, it helped establish ownership and accountability at all levels. Other businesses in the utilities sector are willing to share what they do for mutual benefit – thanks go to UK Power Networks for sharing some of their operational KPIs. n

THE INFORMATION / LED BY FINANCE

DECEMBER 2017

14

“DEFINING AND AGREEING ON SINGLE SOURCES OF DATA AND IMPROVING THE QUALITY OF DATA SIGNIFICANTLY IMPROVED CONFIDENCE OVER THE OUTPUTS.”

NEW12-14_Led_by_finance_thames water_v2.indd 14 03/11/2017 14:44

QWhat are the ultimate objectives? What should

success look like?

AThe ultimate objectives for the business are to:

● Achieve the leakage reduction target.

● Deliver consistently good customer service that results in scores of five out of five for both office and field-related activities managed by the TWIA.

● Deliver the budget, which includes implementation of a number of critical enablers that drive down cost of delivery.

These objectives significantly underpin delivery of Thames Water’s targets and the commitments of the government regulator, Ofwat. They can result in significant penalties for Thames Water if they are not met.

QWhat progress have you made so far?

AThe TWIA KPIs and dashboards were

launched in April 2017 to support the reporting for this new financial year.

We use a set of Excel-based dashboards to understand how well the business is performing – the primary KPIs are a core part of the leadership team dashboard and are reviewed/challenged at

monthly TWIA leadership team meetings.

Operational performance, covering key areas such as addressing leakage, job cycle times, job volume/type of jobs, cost per job, and team productivity are KPIs included in the service delivery dashboard, which is reviewed/challenged at the monthly performance review, with each general manager presenting their performance update.

The dashboards are also provided to the TWIA board as an easy reference point on how well the TWIA is performing.

QHave any early benefits been delivered so far?

AThe KPIs have allowed us to understand that a

large number of the leaks detected by our contractors weren’t as large as expected, impacting the leakage target (leading to an improved performance framework being agreed with the leak-detection partners).

Also, the dashboard made it easy to see a correlation between the region with the highest number of major leakage/no-water events and adverse leakage performance (leading to increased headcount to be able to manage the

reactive/event work).

QWhat have you learnt from this experience?

AA good team of talented people (internally and

externally), who I’ve worked with before, really helped me accelerate progress and deliver this.

Defining and agreeing on single sources of data and improving the quality of data significantly improved confidence over the outputs, which was also

important.Buy-in from the

leadership and operational teams was key – once management teams understood the data and the targets, it helped establish ownership and accountability at all levels. Other businesses in the utilities sector are willing to share what they do for mutual benefit – thanks go to UK Power Networks for sharing some of their operational KPIs. n

THE INFORMATION / LED BY FINANCE

DECEMBER 2017

14

“DEFINING AND AGREEING ON SINGLE SOURCES OF DATA AND IMPROVING THE QUALITY OF DATA SIGNIFICANTLY IMPROVED CONFIDENCE OVER THE OUTPUTS.”

NEW12-14_Led_by_finance_thames water_v2.indd 14 03/11/2017 14:44

THE INFORMATION / OPINION

DECEMBER 2017

16

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impeachment of Brazilian President Dilma Rousseff amid accusations of public accounting manipulation to hide the mag-nitude of the country’s defi cit is unprece-dented. In the UK, a requirement has recently been announced for the multiple of the CEO’s remuneration to that of the average employee to be published. This will require remuner-ation committees to communicate both the rationale and the link to performance.

Revealing as these events may be about the public interest in how organisations behave, they reveal some level of frustration about the current state of corporate and pub-lic governance practices and the diffi culties of eff ectively reforming them. Several pieces of new legislation have been passed and codes of conduct established, yet governance and accountability still seem to need further improvement. The recent demand by the Investor Forum, which makes the case for a long-term approach to investment, on the disclosure of non-fi nancial information by banks highlights the current state of aff airs.

To understand this frustration it is nec-essary to dig a little deeper on the mecha-nisms being used to make managers more accountable and to align incentives with per-formance. For executives and public offi cers to be made accountable it is necessary fi rst to agree on a common set of metrics that have to be measurable and established ex ante of the actual performance. The rules of the game must be known and be clear to all parties involved and be contracted before the performance is actually observed. What is seen today in many organisations is that most of the metrics managers are engaged and remunerated for are fi nancial in nature. The general public and many stakeholders, however, expect executives to be accounta-ble to a much broader set of dimensions including customer satisfaction, environ-mental impact, and regulatory compliance, just to name a few. To fi ll this expectations gap it is necessary to evaluate institutions and personal performances through a com-mon and integrated set of metrics that can be clearly stated and communicated to a broader audience of stakeholders not lim-ited to investors.

This integrated scorecard should be clear and distinct, providing the fi nancial report-ing picture as well as details of the internal mechanisms used to evaluate performance including compensation. In this direction the International Integrated Reporting Coun-cil’s (IIRC’s) Integrated Reporting Framework provides a concise and robust structure to evaluate an organisation’s performance

Rethinking accountability

in modern organisationsEvaluating performance based on an integrated

scorecard can help build accountability and close the expectations gap.

In many countries the role of business in society appears to be in a state of fl ux. Spe-cifi cally, according to the Edelman Trust

Barometer, trust in business is falling. The reasons are not defi nitive, but they include the failure by many organisations to eff ec-tively deliver what their customers expect, the increasing wealth gap, and, for some, poor behaviours.

This has led to an increase in demand for accountability in both the public and pri-vate sectors. Today’s boards need to be the guardian of the reputation of their organi-sations. The collapse in just one week of the public relations fi rm Bell Pottinger demon-strates the fragility of reputation; specifi cally the need to address their trust P&L, and accountability to key stakeholders.

Although not a new concept, accounta-bility has been refuelled by new technolo-gies that allow for an unprecedented access to information about organisations’ prac-tices and performance. Examples of this renewed interest in making people in charge of organisations more accountable is easily seen by the scrutiny that management com-pensation is subject to by activist investors in the corporate arena.

In the public sector, the August 2016

Charles TilleyOBE, FCMA, CGMA

Alexsandro Broedel Lopes

FCMA, CGMA, Ph.D.

NEW 16-17_Opinion_charles tilley_v4 R2.indd 16 06/11/2017 14:37

THE INFORMATION / OPINION

not only because they have good financial results but also because they can answer the claims of a broader and more demanding stakeholder group. Active and well-con-nected boards and other groups responsible for establishing corporate governance mech-anisms should seize the initiative and not sit waiting for the new wave of regulatory demands that will eventually surface.

The task is not insignificant as many of these dimensions are not easily measured. The key challenge for boards is in ensuring that the agreed purpose and values of the business are clearly integrated into the strat-egy, and are embraced by all those in the

business and its delivery partners, with the critical linkage made to the achievement of the strategy within employee job descrip-tions and incentives.

Because it is difficult should not work as an excuse to avoid embracing a broader set of more sustainable metrics. We have focused on financial measurements while the majority of value, over 80%, is not rec-ognised on the balance sheet.

So we urgently need to address the value drivers relevant to today, developing non-fi-nancial KPIs to enable the board and man-agement to deliver long-term success focused upon meeting the needs of all key stakehold-ers – customers, staff, the supply chain, the environment, and, of course, investors.

Charles Tilley is executive chairman of the CGMA Research Foundation and the former CEO of CIMA. He is a member of the International Integrated Reporting Council and is chairman of the International Federation of Accountants’ Professional Accountants in Business Committee.

Alexsandro Broedel Lopes is group finance director of Itaú Unibanco, where he developed one of the world’s first integrated reports for a financial institution. He serves on the board of the IIRC. n

DECEMBER 2017

17

around a broader set of dimensions. Formed around a six capitals-based model, this includes but is not limited to financial issues as it considers the social, intellectual, tech-nological, human, and environmental ele-ments of an institution’s behaviour. The IR Framework and metrics it embeds are much closer to the general public’s expectation about the performance of modern organi-sations than traditional GAAP measures.

Although it is well-recognised that much progress has been made by corporations around the globe to produce integrated reports and to engage in integrated think-ing, little has advanced in the use of this framework in internal performance evalu-ation and compensation mechanisms. This dichotomy needs to be solved in order to align the interests of executives, investors, and the global community that expects noth-ing but the most ethical and competent behaviour from modern institutions.

Managers should have the new demands for a more sustainable performance explic-itly included in their job descriptions. This should be well-aligned and harmonised with their compensation to avoid a separation between preaching and practice. The lead-ing organisations of tomorrow will succeed

“THE RULES OF THE

GAME MUST BE KNOWN

AND BE CLEAR TO ALL

PARTIES.”

NEW16-17_Opinion_charles tilley_v4 R1.indd 17 03/11/2017 14:47

THE INFORMATION / OPINION

DECEMBER 2017

16

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impeachment of Brazilian President Dilma Rousseff amid accusations of public accounting manipulation to hide the mag-nitude of the country’s defi cit is unprece-dented. In the UK, a requirement has recently been announced for the multiple of the CEO’s remuneration to that of the average employee to be published. This will require remuner-ation committees to communicate both the rationale and the link to performance.

Revealing as these events may be about the public interest in how organisations behave, they reveal some level of frustration about the current state of corporate and pub-lic governance practices and the diffi culties of eff ectively reforming them. Several pieces of new legislation have been passed and codes of conduct established, yet governance and accountability still seem to need further improvement. The recent demand by the Investor Forum, which makes the case for a long-term approach to investment, on the disclosure of non-fi nancial information by banks highlights the current state of aff airs.

To understand this frustration it is nec-essary to dig a little deeper on the mecha-nisms being used to make managers more accountable and to align incentives with per-formance. For executives and public offi cers to be made accountable it is necessary fi rst to agree on a common set of metrics that have to be measurable and established ex ante of the actual performance. The rules of the game must be known and be clear to all parties involved and be contracted before the performance is actually observed. What is seen today in many organisations is that most of the metrics managers are engaged and remunerated for are fi nancial in nature. The general public and many stakeholders, however, expect executives to be accounta-ble to a much broader set of dimensions including customer satisfaction, environ-mental impact, and regulatory compliance, just to name a few. To fi ll this expectations gap it is necessary to evaluate institutions and personal performances through a com-mon and integrated set of metrics that can be clearly stated and communicated to a broader audience of stakeholders not lim-ited to investors.

This integrated scorecard should be clear and distinct, providing the fi nancial report-ing picture as well as details of the internal mechanisms used to evaluate performance including compensation. In this direction the International Integrated Reporting Coun-cil’s (IIRC’s) Integrated Reporting Framework provides a concise and robust structure to evaluate an organisation’s performance

Rethinking accountability

in modern organisationsEvaluating performance based on an integrated

scorecard can help build accountability and close the expectations gap.

In many countries the role of business in society appears to be in a state of fl ux. Spe-cifi cally, according to the Edelman Trust

Barometer, trust in business is falling. The reasons are not defi nitive, but they include the failure by many organisations to eff ec-tively deliver what their customers expect, the increasing wealth gap, and, for some, poor behaviours.

This has led to an increase in demand for accountability in both the public and pri-vate sectors. Today’s boards need to be the guardian of the reputation of their organi-sations. The collapse in just one week of the public relations fi rm Bell Pottinger demon-strates the fragility of reputation; specifi cally the need to address their trust P&L, and accountability to key stakeholders.

Although not a new concept, accounta-bility has been refuelled by new technolo-gies that allow for an unprecedented access to information about organisations’ prac-tices and performance. Examples of this renewed interest in making people in charge of organisations more accountable is easily seen by the scrutiny that management com-pensation is subject to by activist investors in the corporate arena.

In the public sector, the August 2016

Charles TilleyOBE, FCMA, CGMA

Alexsandro Broedel Lopes

FCMA, CGMA, Ph.D.

NEW 16-17_Opinion_charles tilley_v4 R2.indd 16 06/11/2017 14:37

THE INFORMATION / OPINION

not only because they have good financial results but also because they can answer the claims of a broader and more demanding stakeholder group. Active and well-con-nected boards and other groups responsible for establishing corporate governance mech-anisms should seize the initiative and not sit waiting for the new wave of regulatory demands that will eventually surface.

The task is not insignificant as many of these dimensions are not easily measured. The key challenge for boards is in ensuring that the agreed purpose and values of the business are clearly integrated into the strat-egy, and are embraced by all those in the

business and its delivery partners, with the critical linkage made to the achievement of the strategy within employee job descrip-tions and incentives.

Because it is difficult should not work as an excuse to avoid embracing a broader set of more sustainable metrics. We have focused on financial measurements while the majority of value, over 80%, is not rec-ognised on the balance sheet.

So we urgently need to address the value drivers relevant to today, developing non-fi-nancial KPIs to enable the board and man-agement to deliver long-term success focused upon meeting the needs of all key stakehold-ers – customers, staff, the supply chain, the environment, and, of course, investors.

Charles Tilley is executive chairman of the CGMA Research Foundation and the former CEO of CIMA. He is a member of the International Integrated Reporting Council and is chairman of the International Federation of Accountants’ Professional Accountants in Business Committee.

Alexsandro Broedel Lopes is group finance director of Itaú Unibanco, where he developed one of the world’s first integrated reports for a financial institution. He serves on the board of the IIRC. n

DECEMBER 2017

17

around a broader set of dimensions. Formed around a six capitals-based model, this includes but is not limited to financial issues as it considers the social, intellectual, tech-nological, human, and environmental ele-ments of an institution’s behaviour. The IR Framework and metrics it embeds are much closer to the general public’s expectation about the performance of modern organi-sations than traditional GAAP measures.

Although it is well-recognised that much progress has been made by corporations around the globe to produce integrated reports and to engage in integrated think-ing, little has advanced in the use of this framework in internal performance evalu-ation and compensation mechanisms. This dichotomy needs to be solved in order to align the interests of executives, investors, and the global community that expects noth-ing but the most ethical and competent behaviour from modern institutions.

Managers should have the new demands for a more sustainable performance explic-itly included in their job descriptions. This should be well-aligned and harmonised with their compensation to avoid a separation between preaching and practice. The lead-ing organisations of tomorrow will succeed

“THE RULES OF THE

GAME MUST BE KNOWN

AND BE CLEAR TO ALL

PARTIES.”

NEW16-17_Opinion_charles tilley_v4 R1.indd 17 03/11/2017 14:47

INSIDER VIEWP O L A N D

When it comes to economics, Poland is developing fast.

With GDP growth of 4% expected in 2017, following average annual growth of 3.2% between 2014 and 2016, this nation of 38 million people is finally starting to move beyond its turbulent history to realise its vast potential.

Magdalena Wereda-Kolasi ska, FCMA, CGMA, fi nance director at insurer PZU Health (PZU Group), says the unemployment rate has fallen to around 7% (from a high of 20% in 2003), a fi gure that takes into account the infl ux of a million Ukrainians into Poland since 2016. “In my opinion, prospects for Poland’s economy are improving all the time,” she says.

This is echoed by Kamil Gabry , a fi nancial analyst at UBS Business Solutions, who says Central Europe’s biggest country is developing at a swift pace.

“The infrastructure is obviously still behind Western European countries, but due to massive investment in the last couple of years things are changing,” he says.

“Our biggest cities are starting to look really similar to those in the West. An example is that there are

expansion spending in Poland rose by 75% year-on-year in 2016 to almost $10 billion, and added that recent announcements from investment banks JP Morgan, UBS, and Goldman Sachs that they are beefi ng up their presence in the country shows this trend is continuing in 2017.

UBS’s Gabry agrees. “Poland has become a good place to do business,” he says. “There is a big talent pool as a lot of people managed to earn some experience by working in large multinational companies and also abroad.

“There is also a signifi cantly lower cost for companies coming here. That means you get a good mix of experienced, motivated, and reasonably inexpensive talent.”

And the prospects for the future look bright as well. Poland has more than 1.5 million students, almost half of whom speak English, says PZU’s Wereda-Kolasi ska.

“This presents an attractive market for multinationals’ functions,” she says. “And when you combine it with tax relief for research and development that was changed in 2016 to become friendly to companies, it makes for an attractive investment environment.” ■

countless new playgrounds, football and volleyball pitches, schools, and other infrastructure in small communities.

“Due to fast development, people are starting to become a bit more ‘cosmopolitan’,” he adds. However, he does inject an element of caution. “There is some political uncertainty right now,” he says. “In my view, our current government does not try to facilitate doing business, and even makes it harder sometimes with frequent

Without a single year of negative growth since transitioning from

communism in 1989, Poland is one of the economic success

stories of the last quarter century. Here, FM discovers what it is like to do business in Central

Europe’s largest economy.

changes in law and tax regulations.”

But this has not stopped Poland from making a rapid rise in the World Bank’s Doing Business rankings in recent years, climbing from 55th position in 2013 to a record high of 25th in 2016.

Jakub Bejnarowicz, CIMA’s associate director of Central and Eastern Europe, says this is down to “great improvement in infrastructure, transport, and communications”.

Bejnarowicz says that foreign companies’

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“THE INFRASTRUCTURE IS OBVIOUSLY STILL BEHIND WESTERN EUROPEAN COUNTRIES, BUT DUE TO MASSIVE INVESTMENT IN THE LAST COUPLE OF YEARS THINGS ARE CHANGING.”Kamil Gabry , UBS Business Solutions

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NEW18-19_insider_view_poland_v1.indd 19 03/11/2017 14:50

INSIDER VIEWP O L A N D

When it comes to economics, Poland is developing fast.

With GDP growth of 4% expected in 2017, following average annual growth of 3.2% between 2014 and 2016, this nation of 38 million people is finally starting to move beyond its turbulent history to realise its vast potential.

Magdalena Wereda-Kolasi ska, FCMA, CGMA, fi nance director at insurer PZU Health (PZU Group), says the unemployment rate has fallen to around 7% (from a high of 20% in 2003), a fi gure that takes into account the infl ux of a million Ukrainians into Poland since 2016. “In my opinion, prospects for Poland’s economy are improving all the time,” she says.

This is echoed by Kamil Gabry , a fi nancial analyst at UBS Business Solutions, who says Central Europe’s biggest country is developing at a swift pace.

“The infrastructure is obviously still behind Western European countries, but due to massive investment in the last couple of years things are changing,” he says.

“Our biggest cities are starting to look really similar to those in the West. An example is that there are

expansion spending in Poland rose by 75% year-on-year in 2016 to almost $10 billion, and added that recent announcements from investment banks JP Morgan, UBS, and Goldman Sachs that they are beefi ng up their presence in the country shows this trend is continuing in 2017.

UBS’s Gabry agrees. “Poland has become a good place to do business,” he says. “There is a big talent pool as a lot of people managed to earn some experience by working in large multinational companies and also abroad.

“There is also a signifi cantly lower cost for companies coming here. That means you get a good mix of experienced, motivated, and reasonably inexpensive talent.”

And the prospects for the future look bright as well. Poland has more than 1.5 million students, almost half of whom speak English, says PZU’s Wereda-Kolasi ska.

“This presents an attractive market for multinationals’ functions,” she says. “And when you combine it with tax relief for research and development that was changed in 2016 to become friendly to companies, it makes for an attractive investment environment.” ■

countless new playgrounds, football and volleyball pitches, schools, and other infrastructure in small communities.

“Due to fast development, people are starting to become a bit more ‘cosmopolitan’,” he adds. However, he does inject an element of caution. “There is some political uncertainty right now,” he says. “In my view, our current government does not try to facilitate doing business, and even makes it harder sometimes with frequent

Without a single year of negative growth since transitioning from

communism in 1989, Poland is one of the economic success

stories of the last quarter century. Here, FM discovers what it is like to do business in Central

Europe’s largest economy.

changes in law and tax regulations.”

But this has not stopped Poland from making a rapid rise in the World Bank’s Doing Business rankings in recent years, climbing from 55th position in 2013 to a record high of 25th in 2016.

Jakub Bejnarowicz, CIMA’s associate director of Central and Eastern Europe, says this is down to “great improvement in infrastructure, transport, and communications”.

Bejnarowicz says that foreign companies’

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ET

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THE INFORMATION / INSIDER VIEW

NEW 18-19_insider_view_poland_v1 R1.indd 18 06/11/2017 14:37

“THE INFRASTRUCTURE IS OBVIOUSLY STILL BEHIND WESTERN EUROPEAN COUNTRIES, BUT DUE TO MASSIVE INVESTMENT IN THE LAST COUPLE OF YEARS THINGS ARE CHANGING.”Kamil Gabry , UBS Business Solutions

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NEW18-19_insider_view_poland_v1.indd 19 03/11/2017 14:50

DECEMBER 2017

20

THE INFORMATION / Q&A

Q What does your current role of deputy director of finance entail?

A In my current role I’m responsible for the Cabinet Office

accounts and estimates produc-tion, and in-year financial report-ing. At £0.5 billion, the budget is small compared to other depart-ments. But the make-up is com-plex because of the different areas of spend. We’re the place where the PM and other cabinet minis-ters come to set up new teams, so there is always change.

The central financial manage-ment team oversees all aspects of accounts payable, accounts receiv-able, and business information

with close links into our shared services. We do annual reports and accounts as well as transparency reporting, and provide briefings for ministers and Parliament’s select committees such as the Pub-lic Accounts Committee (PAC).

As head of the finance profes-sion for the department, I am responsible for finance training and development, and for over-seeing finance transformation.

I like the learning and devel-opment part of my role, working with our CIMA account manager looking at how we provide train-ing support for our students – 20-plus in the department and others in the shared services. For me, CIMA is part of everything I

do every day with my financial and non-financial responsibili-ties.

As the senior responsible officer, I was responsible for the operational transition to Single Operating Platform (SOP) for the department, which took place at the end of May 2017. It is an Ora-cle platform, one of the largest in Europe, with 300,000 civil servants on it. It is a huge achievement, and from here we can continue to drive improve-ments and developments.

I am also the department’s counter-fraud champion, and the Cabinet Office unveiled coun-ter-fraud standards and compe-tencies in February 2017.

Now we’re working closely with the Department for Exiting the European Union. Whether that is constitutional work or the digital agenda, it touches most of our work linking out with other departments.

Q What makes a good shared service?

A The principle of shared services is to have a standard offering with

set procedures, and that can be tricky as government depart-ments all have slightly different ways of working. We are work-ing towards standard processes.

Q W h y h a v e y o u remained in the Cabinet Office?

A The reason I’ve stayed so long is that the department changes so

frequently. The old-school cul-ture has changed; we’ve got good technology and flexible working, which helps if you have – like I have – caring responsibilities. While the financial side is struc-tured, other work is so varied.

Changes in government finance have been positive, with much more of a focus and appre-ciation for financial profession-als. Their important role supporting departments in the changing landscape and climate

&Q

Helen Gibson, FCMA, CGMA, deputy finance director at the UK

government’s Cabinet Office, on being at the heart of the financial and IT

transformation of central government.

RIC

HA

RD

SA

KE

R

NEW 20-21_QandA_HelenGibson_v1.indd 20 06/11/2017 14:36

DECEMBER 2017

21

THE INFORMATION / Q&A

is recognised. The role of finance professionals is more important than ever and at the heart of everything that is done. With a drive to move more transactions work to shared services, the focus of people at the centre is to per-form value-added work.

q What was your experi-ence when you were head of the business

management team (BMT)? What was the remit and biggest chal-lenges?

A I enjoyed my role as head of BMT, which was a team set up following

the transition in 2009 to a shared-services provider for finance and HR. Involved in the design and set-up of the team, I enjoyed the shared-services tran-sition despite teething issues.

Before, HR, payroll, and finance transactions were in-house. It was a huge move which impacted roles and was a different way of working. The Cab-inet Office was driving the shared-services agenda, and we were the pilot for the whole of gov-ernment.

The team covered finance, procurement, and estates support across the department, and this was a challenge as we were cen-tralising the support which had previously been embedded in the business. It was a different way of working, with a new system, and with a third-party provider.

For me it was a big piece of co-ordinating work. The team was around 30-40 people, so staff man-agement was a big part of the role. Leadership for me is about lead-ing by example and being clear about what you are trying to achieve and communicating well. You need to take time to look after people.

Another challenge was learn-ing how to work with the shared-services provider.

As I’d been part of the team that implemented shared services, a lot of the key relationships were already formed, and many have continued since. n

20-21_QandA_HelenGibson_v1.indd 21 03/11/2017 14:54

DECEMBER 2017

20

THE INFORMATION / Q&A

Q What does your current role of deputy director of finance entail?

A In my current role I’m responsible for the Cabinet Office

accounts and estimates produc-tion, and in-year financial report-ing. At £0.5 billion, the budget is small compared to other depart-ments. But the make-up is com-plex because of the different areas of spend. We’re the place where the PM and other cabinet minis-ters come to set up new teams, so there is always change.

The central financial manage-ment team oversees all aspects of accounts payable, accounts receiv-able, and business information

with close links into our shared services. We do annual reports and accounts as well as transparency reporting, and provide briefings for ministers and Parliament’s select committees such as the Pub-lic Accounts Committee (PAC).

As head of the finance profes-sion for the department, I am responsible for finance training and development, and for over-seeing finance transformation.

I like the learning and devel-opment part of my role, working with our CIMA account manager looking at how we provide train-ing support for our students – 20-plus in the department and others in the shared services. For me, CIMA is part of everything I

do every day with my financial and non-financial responsibili-ties.

As the senior responsible officer, I was responsible for the operational transition to Single Operating Platform (SOP) for the department, which took place at the end of May 2017. It is an Ora-cle platform, one of the largest in Europe, with 300,000 civil servants on it. It is a huge achievement, and from here we can continue to drive improve-ments and developments.

I am also the department’s counter-fraud champion, and the Cabinet Office unveiled coun-ter-fraud standards and compe-tencies in February 2017.

Now we’re working closely with the Department for Exiting the European Union. Whether that is constitutional work or the digital agenda, it touches most of our work linking out with other departments.

Q What makes a good shared service?

A The principle of shared services is to have a standard offering with

set procedures, and that can be tricky as government depart-ments all have slightly different ways of working. We are work-ing towards standard processes.

Q W h y h a v e y o u remained in the Cabinet Office?

A The reason I’ve stayed so long is that the department changes so

frequently. The old-school cul-ture has changed; we’ve got good technology and flexible working, which helps if you have – like I have – caring responsibilities. While the financial side is struc-tured, other work is so varied.

Changes in government finance have been positive, with much more of a focus and appre-ciation for financial profession-als. Their important role supporting departments in the changing landscape and climate

&Q

Helen Gibson, FCMA, CGMA, deputy finance director at the UK

government’s Cabinet Office, on being at the heart of the financial and IT

transformation of central government.

RIC

HA

RD

SA

KE

R

NEW 20-21_QandA_HelenGibson_v1.indd 20 06/11/2017 14:36

DECEMBER 2017

21

THE INFORMATION / Q&A

is recognised. The role of finance professionals is more important than ever and at the heart of everything that is done. With a drive to move more transactions work to shared services, the focus of people at the centre is to per-form value-added work.

q What was your experi-ence when you were head of the business

management team (BMT)? What was the remit and biggest chal-lenges?

A I enjoyed my role as head of BMT, which was a team set up following

the transition in 2009 to a shared-services provider for finance and HR. Involved in the design and set-up of the team, I enjoyed the shared-services tran-sition despite teething issues.

Before, HR, payroll, and finance transactions were in-house. It was a huge move which impacted roles and was a different way of working. The Cab-inet Office was driving the shared-services agenda, and we were the pilot for the whole of gov-ernment.

The team covered finance, procurement, and estates support across the department, and this was a challenge as we were cen-tralising the support which had previously been embedded in the business. It was a different way of working, with a new system, and with a third-party provider.

For me it was a big piece of co-ordinating work. The team was around 30-40 people, so staff man-agement was a big part of the role. Leadership for me is about lead-ing by example and being clear about what you are trying to achieve and communicating well. You need to take time to look after people.

Another challenge was learn-ing how to work with the shared-services provider.

As I’d been part of the team that implemented shared services, a lot of the key relationships were already formed, and many have continued since. n

20-21_QandA_HelenGibson_v1.indd 21 03/11/2017 14:54

Cloud reporting software built to facilitate good data governance and an efficient reporting process in:

• Disclosure management

• Finance and accounting

• Regulatory requirements

Wdesk connects people, data and processes. Learn more by visiting workiva.co.uk/cima

Workiva (NYSE:WK) is a leading provider of enterprise cloud solutions for improving productivity, accountability, and insight into business data. Thousands of organisations, including over 70% of the 500 largest U.S. corporations by total revenue, use Wdesk. For more information, visit workiva.co/uk.

Wdesk helps you work smart.

DEEP DIVE2

FEATURE INTERVIEW: NICK READ, CFO OF VODAFONE GROUP, ON ADAPTING BUSINESS MODELS IN THE

TELECOMS SECTOR; THE NEED FOR A DYNAMIC BUSINESS MODEL; CASE STUDY – AGILE THINKING IN HEALTHCARE; SUSTAINABILITY, THE ENVIRONMENT, AND LONG-TERM VALUE; DEVELOPING A BUSINESS MODEL WITH TECH AT

ITS HEART; OPINION – INTEGRATED REPORTING AND INTEGRATED THINKING; AWARD-WINNING REPORTING

IN THE RETAIL SECTOR

23_Section_2.indd 23 31/10/2017 17:42

Cloud reporting software built to facilitate good data governance and an efficient reporting process in:

• Disclosure management

• Finance and accounting

• Regulatory requirements

Wdesk connects people, data and processes. Learn more by visiting workiva.co.uk/cima

Workiva (NYSE:WK) is a leading provider of enterprise cloud solutions for improving productivity, accountability, and insight into business data. Thousands of organisations, including over 70% of the 500 largest U.S. corporations by total revenue, use Wdesk. For more information, visit workiva.co/uk.

Wdesk helps you work smart.

DEEP DIVE2

FEATURE INTERVIEW: NICK READ, CFO OF VODAFONE GROUP, ON ADAPTING BUSINESS MODELS IN THE

TELECOMS SECTOR; THE NEED FOR A DYNAMIC BUSINESS MODEL; CASE STUDY – AGILE THINKING IN HEALTHCARE; SUSTAINABILITY, THE ENVIRONMENT, AND LONG-TERM VALUE; DEVELOPING A BUSINESS MODEL WITH TECH AT

ITS HEART; OPINION – INTEGRATED REPORTING AND INTEGRATED THINKING; AWARD-WINNING REPORTING

IN THE RETAIL SECTOR

23_Section_2.indd 23 31/10/2017 17:42

DEEP DIVE

DECEMBER 2017

24

THE

LANG

UAGEVodafone Group

CFO Nick Read, FCMA, CGMA,

reveals how the telecoms giant

is constantly adapting its

business model to meet the

challenges of an unpredictable and disruptive environment.

NEW24-29_Nick Read_vodafone_v3.indd 24 03/11/2017 14:55

DEEP DIVE

OF C

HOIC

E

DECEMBER 2017

25

NEW24-29_Nick Read_vodafone_v3.indd 25 03/11/2017 14:55

DEEP DIVE

DECEMBER 2017

24

THE

LANG

UAGEVodafone Group

CFO Nick Read, FCMA, CGMA,

reveals how the telecoms giant

is constantly adapting its

business model to meet the

challenges of an unpredictable and disruptive environment.

NEW24-29_Nick Read_vodafone_v3.indd 24 03/11/2017 14:55

DEEP DIVE

OF C

HOIC

EDECEMBER 2017

25

NEW24-29_Nick Read_vodafone_v3.indd 25 03/11/2017 14:55

international payments eXpertly done

Competitive pricing.

The ability to fix exchange rates for up to three years.

Corporate hedging expertise.

Direct access to your own industry expert.

Our investment grade balance sheet, giving you the confidence that your money is in the safest hands.

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Contact HiFX on:Tel. +44 (0)1753 752626www.hifx.co.uk/businessHiFX Europe Limited is authorised by the Financial Conduct Authority under the Payment Services Regulations 2009, registration 462444, for the provision of payment services. Registered office at Maxis 1, Western Road, Bracknell, Berkshire RG12 1RT, United Kingdom.

If your business sends or receives international payments, currency movement can potentially have a detrimental impact on your bottom line. But there are ways you can look to protect your business from adverse moves.

With HiFX, you can benefit from:

DEEP DIVE

DECEMBER 2017

27

s chief financial officer of Vodafone Group, one of the world’s largest telecommunications

companies, Nick Read plays a key role in ensuring that its finance department is run effectively. He also has a big say in the stra-tegic direction of the group, which is one of the world’s most valuable brands.

Owning and operating networks in 26 countries, as well as having partner networks in almost twice that number, gives the group expansive market power – especially when you factor in telecoms and IT corporate cli-ents in 150 countries. But that reach, valu-ing Vodafone at more than €60 billion, also creates significant potential for disruption of its business.

Vodafone has, therefore, developed a dynamic business model that addresses the challenges brought by disruptors as well as other changing factors within its sector, ensuring it can continue to create value across its global business.

“Over the past five years, Vodafone has faced many challenges to its business model – regulation, competition, macro-economic conditions, and tech disruptors,” Read says.

“Focusing on the tech disruptors, the

largest impact has been felt in text messag-ing from players such as WhatsApp, Face-book, Apple, and Google. At its peak a few years ago, text messaging was a standalone revenue stream of €6 billion, so clearly this was critical to the company.

“When facing a disruptor, it’s important to get real-time operational/customer data, as a lot of these disruptors work on a social network effect – so their impacts are fast and exponential. You need to identify the trends quickly and respond decisively,” says Read.

“The worst thing you can do is remain in denial and wait to see if it takes off. In Vodafone’s case, we moved from charging customers a metered cost per text message, to supplying large bundles of messages for a set cost, to unlimited text messages as part of a wider package in a relatively short win-dow.

“We had to disrupt our own business model, cannibalising our own revenue, to protect our long-term relevance with the cus-tomer. We then did the same with voice calls, given Skype and other free voice services.

“Today, our core price plans are unlim-ited voice, unlimited text, and a range of data allowances,” he adds. As revenues came under pressure, Vodafone had to revise its

operating model and cost structure to ensure protection of the group’s margins and its abil-ity to continue to reinvest in future services.

“Ultimately, it was a redesign of our busi-ness model,” explains Read. “With the relent-less nature of technology and disruptors, you have to be constantly scanning externally, questioning and challenging everything both internal and external to ensure you remain agile and make the appropriate course cor-rections on your business model in a dynamic manner.”

One of the key ways of implementing a dynamic business model is the development of a culture of innovation that is enabled by rapid technological advancement, says Read. “Technology can offer large companies like Vodafone opportunities to move into new spaces or optimise its cost base for compet-itive advantage,” he says.

“Over the past four years, we have spent approximately €23 billion acquiring large cable companies or building next-genera-tion fixed networks to offer superior high-speed broadband to homes versus the copper-based experience they get from their incumbent telecoms provider.

“We have also invested organically, spending nearly €50 billion in high-speed

“WE HAD TO DISRUPT OUR OWN BUSINESS MODEL... TO PROTECT OUR LONG-TERM RELEVANCE.”

NEW24-29_Nick Read_vodafone_v3.indd 27 03/11/2017 14:56

international payments eXpertly done

Competitive pricing.

The ability to fix exchange rates for up to three years.

Corporate hedging expertise.

Direct access to your own industry expert.

Our investment grade balance sheet, giving you the confidence that your money is in the safest hands.

Protect your business from theimpact of currency volatility

Contact HiFX on:Tel. +44 (0)1753 752626www.hifx.co.uk/businessHiFX Europe Limited is authorised by the Financial Conduct Authority under the Payment Services Regulations 2009, registration 462444, for the provision of payment services. Registered office at Maxis 1, Western Road, Bracknell, Berkshire RG12 1RT, United Kingdom.

If your business sends or receives international payments, currency movement can potentially have a detrimental impact on your bottom line. But there are ways you can look to protect your business from adverse moves.

With HiFX, you can benefit from:

DEEP DIVE

DECEMBER 2017

27

s chief financial officer of Vodafone Group, one of the world’s largest telecommunications

companies, Nick Read plays a key role in ensuring that its finance department is run effectively. He also has a big say in the stra-tegic direction of the group, which is one of the world’s most valuable brands.

Owning and operating networks in 26 countries, as well as having partner networks in almost twice that number, gives the group expansive market power – especially when you factor in telecoms and IT corporate cli-ents in 150 countries. But that reach, valu-ing Vodafone at more than €60 billion, also creates significant potential for disruption of its business.

Vodafone has, therefore, developed a dynamic business model that addresses the challenges brought by disruptors as well as other changing factors within its sector, ensuring it can continue to create value across its global business.

“Over the past five years, Vodafone has faced many challenges to its business model – regulation, competition, macro-economic conditions, and tech disruptors,” Read says.

“Focusing on the tech disruptors, the

largest impact has been felt in text messag-ing from players such as WhatsApp, Face-book, Apple, and Google. At its peak a few years ago, text messaging was a standalone revenue stream of €6 billion, so clearly this was critical to the company.

“When facing a disruptor, it’s important to get real-time operational/customer data, as a lot of these disruptors work on a social network effect – so their impacts are fast and exponential. You need to identify the trends quickly and respond decisively,” says Read.

“The worst thing you can do is remain in denial and wait to see if it takes off. In Vodafone’s case, we moved from charging customers a metered cost per text message, to supplying large bundles of messages for a set cost, to unlimited text messages as part of a wider package in a relatively short win-dow.

“We had to disrupt our own business model, cannibalising our own revenue, to protect our long-term relevance with the cus-tomer. We then did the same with voice calls, given Skype and other free voice services.

“Today, our core price plans are unlim-ited voice, unlimited text, and a range of data allowances,” he adds. As revenues came under pressure, Vodafone had to revise its

operating model and cost structure to ensure protection of the group’s margins and its abil-ity to continue to reinvest in future services.

“Ultimately, it was a redesign of our busi-ness model,” explains Read. “With the relent-less nature of technology and disruptors, you have to be constantly scanning externally, questioning and challenging everything both internal and external to ensure you remain agile and make the appropriate course cor-rections on your business model in a dynamic manner.”

One of the key ways of implementing a dynamic business model is the development of a culture of innovation that is enabled by rapid technological advancement, says Read. “Technology can offer large companies like Vodafone opportunities to move into new spaces or optimise its cost base for compet-itive advantage,” he says.

“Over the past four years, we have spent approximately €23 billion acquiring large cable companies or building next-genera-tion fixed networks to offer superior high-speed broadband to homes versus the copper-based experience they get from their incumbent telecoms provider.

“We have also invested organically, spending nearly €50 billion in high-speed

“WE HAD TO DISRUPT OUR OWN BUSINESS MODEL... TO PROTECT OUR LONG-TERM RELEVANCE.”

NEW24-29_Nick Read_vodafone_v3.indd 27 03/11/2017 14:56

DEEP DIVE

DECEMBER 2017

28

mobile networks, spectrum, and IT to give a superior mobile experience across our foot-print. We have also invested in a unique plat-form to become the global leader in enterprise internet of things, with particularly strong focus on the automotive, healthcare, and util-ities sectors.

“Our innovation comes from a combi-nation of platform development (unique or collaborative), big bets on step-change infra-structure, and a spirit of co-creation with leading providers. To do the latter, we have centres of excellence around the world, inno-vation hubs, and we develop strategic alli-ances with our major suppliers.”

That approach to innovation is key to fulfilling customer expectations. To this end, Read says Vodafone is working on three types of innovation. ● “Firstly, we see pain points in the customer

experience on a service or product being supplied today. We focus on innovative solutions to remove these and improve the customer journey.

● “Secondly, we work on product/service road maps over our planning cycle, enrich-ing the functionality, building on the cus-tomer’s wish list of what is possible.

● “And finally, we work with leading inno-

vators/tech companies around the world to define five- to ten-year global indus-try standards. An example of this is the future of autonomous cars and how will they interact with the infrastructure around us. We are shaping/envisioning this and many other future possibilities,” he asserts.

To give a sense of how the group has employed a rapidly changing approach to its business model, Read explains how the composition of the business has completely changed.

“Just over ten years ago, Vodafone was a metered by minute/text/MB of data, [with its] mobile business focused mainly on Europe,” he says. “Today, nearly half our rev-enues come from fixed next-generation high-speed communications and high-growth emerging markets.”

Read says this high degree of business model evolution has been achieved as a result of several factors. He says Vodafone has been maintaining a global radar on mar-ket developments and has been commer-cially dynamic.

He also says there has been a willing-ness to lead market consolidation to gain scale, becoming number one or number two “where we chose to play, so we have the right economics to compete and earn an acceptable long-term return”.

Another factor described by Read is bold investments into new areas that the group believes have the ability to scale up. “There is also a zero-based budgeting mindset in every aspect of the business, in a world of constrained resources, where we take resources from non-productive areas and redeploy into productive future opportu-nities,” he adds.

Finance and the CFO play a key role in this approach, says Read, who sits on the CGMA advisory panel that has been discuss-

“WE ARE UNIQUELY PLACED AMONG OUR COLLEAGUES TO ARTICULATE OUR BUSINESS MODEL AND HOW VALUE IS CREATED.”

NIC

K W

ILS

ON

24-29_Nick Read_vodafone_v3.indd 28 01/11/2017 15:24

DEEP DIVE

DECEMBER 2017

29

ing the Business Model Framework consul-tation paper.

“Given our complete 360 view of the business, we are uniquely placed among our colleagues to articulate our business model and how value is created,” says Read. “It is critical we communicate this to every-one in the business, aligning metrics/report-ing/remuneration to drive the optimal outcomes, and create the ability to reinvest for future growth.”

Read adds that this approach requires finance to own the data standards and defi-nitions, to embrace the digital agenda so the company can deliver the best customer experience at the lowest unit cost, and to constantly benchmark and challenge all areas of the business to obtain excellence.

“This year, I was extremely proud that Vodafone Finance, having been assessed by the Hackett Group, was awarded the world-class level – the first telecoms com-pany globally to be awarded that status,” he says. “I have a great team; one of the keys to their success is their desire to learn, to innovate and break new ground.

“As an example, we have more than 50 robots/artificial intelligence systems in pilot in our shared services today, delivering three times the productivity of one person for half the cost with a higher-quality output. We plan to expand in routine process areas, whilst working to retrain our teams to focus on the higher-value-add activities,” he says.

Read says that, historically, Vodafone’s finance and CFOs have strongly influenced the group’s business model and direction of the company. “I personally think the VUCA [volatile, uncertain, complex, and ambiguous] world we face requires CFOs to step up to an even higher level. “Our goal should be to dynamically shape the busi-ness model to ensure the company remains market relevant today, whilst articulating the investments required to have a bright future tomorrow,” he says. n

Read became Vodafone Group CFO and a board member of the Vodafone Group Plc in April 2014. Since joining Vodafone he has held a number of senior roles, including CFO, CCO, and CEO of Vodafone Ltd, the group’s UK operating company. Before being made Group CFO, he was the regional CEO for Vodafone’s Africa, Middle East, and Asia Pacific business for five years and was also a board member of several subsidiaries, including India and Egypt, and Vodafone’s joint venture in Australia.

He previously held senior finance roles at United Business Media and Federal Express Worldwide.

NICK READ

“OUR GOAL SHOULD BE TO DYNAMICALLY SHAPE THE BUSINESS MODEL.”

NIC

K W

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ON

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mobile networks, spectrum, and IT to give a superior mobile experience across our foot-print. We have also invested in a unique plat-form to become the global leader in enterprise internet of things, with particularly strong focus on the automotive, healthcare, and util-ities sectors.

“Our innovation comes from a combi-nation of platform development (unique or collaborative), big bets on step-change infra-structure, and a spirit of co-creation with leading providers. To do the latter, we have centres of excellence around the world, inno-vation hubs, and we develop strategic alli-ances with our major suppliers.”

That approach to innovation is key to fulfilling customer expectations. To this end, Read says Vodafone is working on three types of innovation. ● “Firstly, we see pain points in the customer

experience on a service or product being supplied today. We focus on innovative solutions to remove these and improve the customer journey.

● “Secondly, we work on product/service road maps over our planning cycle, enrich-ing the functionality, building on the cus-tomer’s wish list of what is possible.

● “And finally, we work with leading inno-

vators/tech companies around the world to define five- to ten-year global indus-try standards. An example of this is the future of autonomous cars and how will they interact with the infrastructure around us. We are shaping/envisioning this and many other future possibilities,” he asserts.

To give a sense of how the group has employed a rapidly changing approach to its business model, Read explains how the composition of the business has completely changed.

“Just over ten years ago, Vodafone was a metered by minute/text/MB of data, [with its] mobile business focused mainly on Europe,” he says. “Today, nearly half our rev-enues come from fixed next-generation high-speed communications and high-growth emerging markets.”

Read says this high degree of business model evolution has been achieved as a result of several factors. He says Vodafone has been maintaining a global radar on mar-ket developments and has been commer-cially dynamic.

He also says there has been a willing-ness to lead market consolidation to gain scale, becoming number one or number two “where we chose to play, so we have the right economics to compete and earn an acceptable long-term return”.

Another factor described by Read is bold investments into new areas that the group believes have the ability to scale up. “There is also a zero-based budgeting mindset in every aspect of the business, in a world of constrained resources, where we take resources from non-productive areas and redeploy into productive future opportu-nities,” he adds.

Finance and the CFO play a key role in this approach, says Read, who sits on the CGMA advisory panel that has been discuss-

“WE ARE UNIQUELY PLACED AMONG OUR COLLEAGUES TO ARTICULATE OUR BUSINESS MODEL AND HOW VALUE IS CREATED.”

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ing the Business Model Framework consul-tation paper.

“Given our complete 360 view of the business, we are uniquely placed among our colleagues to articulate our business model and how value is created,” says Read. “It is critical we communicate this to every-one in the business, aligning metrics/report-ing/remuneration to drive the optimal outcomes, and create the ability to reinvest for future growth.”

Read adds that this approach requires finance to own the data standards and defi-nitions, to embrace the digital agenda so the company can deliver the best customer experience at the lowest unit cost, and to constantly benchmark and challenge all areas of the business to obtain excellence.

“This year, I was extremely proud that Vodafone Finance, having been assessed by the Hackett Group, was awarded the world-class level – the first telecoms com-pany globally to be awarded that status,” he says. “I have a great team; one of the keys to their success is their desire to learn, to innovate and break new ground.

“As an example, we have more than 50 robots/artificial intelligence systems in pilot in our shared services today, delivering three times the productivity of one person for half the cost with a higher-quality output. We plan to expand in routine process areas, whilst working to retrain our teams to focus on the higher-value-add activities,” he says.

Read says that, historically, Vodafone’s finance and CFOs have strongly influenced the group’s business model and direction of the company. “I personally think the VUCA [volatile, uncertain, complex, and ambiguous] world we face requires CFOs to step up to an even higher level. “Our goal should be to dynamically shape the busi-ness model to ensure the company remains market relevant today, whilst articulating the investments required to have a bright future tomorrow,” he says. n

Read became Vodafone Group CFO and a board member of the Vodafone Group Plc in April 2014. Since joining Vodafone he has held a number of senior roles, including CFO, CCO, and CEO of Vodafone Ltd, the group’s UK operating company. Before being made Group CFO, he was the regional CEO for Vodafone’s Africa, Middle East, and Asia Pacific business for five years and was also a board member of several subsidiaries, including India and Egypt, and Vodafone’s joint venture in Australia.

He previously held senior finance roles at United Business Media and Federal Express Worldwide.

NICK READ

“OUR GOAL SHOULD BE TO DYNAMICALLY SHAPE THE BUSINESS MODEL.”

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“THE WORLD IS CHANGING FAST, SO THE BUSINESS MODEL SHOULD BE CHANGED TOGETHER.”Yinqun Zha, fi nance operations director at Wuxi AppTec

For most companies and organisations the goal of long-term value creation is best achieved when an eff ective business model is in place and is well understood. But the grow-ing set of challenges for businesses in the digital

age creates the demand for business mod-els that are both robust and adaptable to the rapid changes in the wider environment.

To this end, the Association of Interna-tional Certifi ed Professional Accountants is seeking to provide a framework that matches the demands businesses are seek-ing to address. Through a series of round-tables conducted around the world and subsequent research, members’ expecta-tions fed into a consultation process that will be developed into a new model next year.

In light of rapid changes taking place in the world, a business model needs to be dynamic and should be tied closely to both purpose and strategy, says the Association’s fi nancial policy specialist David Hackett, who is leading the research programme. “It needs to defi ne clearly what we mean by

long-term value creation and value destruc-tion that is at the heart of the model, for all stakeholders, not just shareholders,” he says.

An eff ective business model also needs to address the challenges created by dis-ruptive forces over the horizon. “This takes into account SWOT and PESTLE analyses that management accountants are already familiar with,” Hackett says. “But we’re also concerned with the importance of long-term sustainability of the model, and the role of corporate values in ensuring that reputational damage, for example, is kept to a minimum.”

“The other key element considered in the research programme is who should own the business model: the CFO or the man-agement accountant at the operating level of the business,” Hackett says. “That leads to the possibility of creating the relevant KPIs that many of the respondents are inter-ested in.”

Hackett argues that the more theoreti-cal understanding of the business model framework will also have practical appli-cations for businesses.

John Zheng, FCMA, CGMA, the CFO of Mitsui-Sumitomo, a Japanese and Chinese

insurance company formed through a joint venture, believes a dynamic business model is crucial in the fast-changing and complex global business environment. He says that if a market changes at a quicker pace than expected, the business model should change in accordance with it.

Zheng says new technology is the major factor in changing the competition pattern for businesses. In his fi eld, the insurance sector, innovations such as mobile inter-net are having a profound eff ect in speed-ing up the claims process. “You could fi nd that competition between auto insurers is not only concentrated on price, but also on focusing on effi ciency of service,” he says. “As a result, the company with a quicker claim[s] process and better service could charge more. So an insurance company should embrace the change and consider this element in its business model in order to guide business decisions. Therefore, the dynamic business model could help the company’s adjusted competition strategy, especially when new technology brings more opportunities to disrupt the traditional industrial structure.”

Yinqun Zha, FCMA, CGMA, the Shang-hai-based senior fi nance director at WuXi AppTec, a global pharmaceutical, biotech-nology, and medical device outsourcing company, is also a firm believer in the dynamic business model. He says such an approach is crucial in response to chang-ing factors such as disruption and new tech-nologies. “The world is changing fast, so the business model should be changed together,” Zha says.

Zha says that businesses operating in most markets are susceptible to the chal-lenges posed by new technologies. Refl ect-ing on the “internet plus” strategy proposed by China’s Premier Li Keqiang in 2015 for companies to drive through technological innovation, Zha says applying those

NEW AGETHINKING

The challenges facing businesses in the digital era demand a whole new way of thinking about the

business model, writes Lawrie Holmes.

David Hackett

NEW 30-35_dynamic business_V1 R1.indd 31 06/11/2017 14:31

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31

“THE WORLD IS CHANGING FAST, SO THE BUSINESS MODEL SHOULD BE CHANGED TOGETHER.”Yinqun Zha, fi nance operations director at Wuxi AppTec

For most companies and organisations the goal of long-term value creation is best achieved when an eff ective business model is in place and is well understood. But the grow-ing set of challenges for businesses in the digital

age creates the demand for business mod-els that are both robust and adaptable to the rapid changes in the wider environment.

To this end, the Association of Interna-tional Certifi ed Professional Accountants is seeking to provide a framework that matches the demands businesses are seek-ing to address. Through a series of round-tables conducted around the world and subsequent research, members’ expecta-tions fed into a consultation process that will be developed into a new model next year.

In light of rapid changes taking place in the world, a business model needs to be dynamic and should be tied closely to both purpose and strategy, says the Association’s fi nancial policy specialist David Hackett, who is leading the research programme. “It needs to defi ne clearly what we mean by

long-term value creation and value destruc-tion that is at the heart of the model, for all stakeholders, not just shareholders,” he says.

An eff ective business model also needs to address the challenges created by dis-ruptive forces over the horizon. “This takes into account SWOT and PESTLE analyses that management accountants are already familiar with,” Hackett says. “But we’re also concerned with the importance of long-term sustainability of the model, and the role of corporate values in ensuring that reputational damage, for example, is kept to a minimum.”

“The other key element considered in the research programme is who should own the business model: the CFO or the man-agement accountant at the operating level of the business,” Hackett says. “That leads to the possibility of creating the relevant KPIs that many of the respondents are inter-ested in.”

Hackett argues that the more theoreti-cal understanding of the business model framework will also have practical appli-cations for businesses.

John Zheng, FCMA, CGMA, the CFO of Mitsui-Sumitomo, a Japanese and Chinese

insurance company formed through a joint venture, believes a dynamic business model is crucial in the fast-changing and complex global business environment. He says that if a market changes at a quicker pace than expected, the business model should change in accordance with it.

Zheng says new technology is the major factor in changing the competition pattern for businesses. In his fi eld, the insurance sector, innovations such as mobile inter-net are having a profound eff ect in speed-ing up the claims process. “You could fi nd that competition between auto insurers is not only concentrated on price, but also on focusing on effi ciency of service,” he says. “As a result, the company with a quicker claim[s] process and better service could charge more. So an insurance company should embrace the change and consider this element in its business model in order to guide business decisions. Therefore, the dynamic business model could help the company’s adjusted competition strategy, especially when new technology brings more opportunities to disrupt the traditional industrial structure.”

Yinqun Zha, FCMA, CGMA, the Shang-hai-based senior fi nance director at WuXi AppTec, a global pharmaceutical, biotech-nology, and medical device outsourcing company, is also a firm believer in the dynamic business model. He says such an approach is crucial in response to chang-ing factors such as disruption and new tech-nologies. “The world is changing fast, so the business model should be changed together,” Zha says.

Zha says that businesses operating in most markets are susceptible to the chal-lenges posed by new technologies. Refl ect-ing on the “internet plus” strategy proposed by China’s Premier Li Keqiang in 2015 for companies to drive through technological innovation, Zha says applying those

NEW AGETHINKING

The challenges facing businesses in the digital era demand a whole new way of thinking about the

business model, writes Lawrie Holmes.

David Hackett

NEW 30-35_dynamic business_V1 R1.indd 31 06/11/2017 14:31

The University of LondonGlobal MBAStudy online, from anywhere in the world.With four entry points per year, we’re ready whenever you are.

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technologies can realise big successes and development, but a dynamic business model will need to be at their heart.

He says that such a model is required to address the change management taking place in organisations that are innovating rapidly, as well as problems stemming from short product life cycles that appear fre-quently. “I believe the dynamic business model is a good solution to those issues as it off ers higher fl exibility to business and enhances the ability to handle the uncer-tainty,” he adds.

“A common feature of many global organisations is complexity created by stra-tegic alliances and extended supply chains that need to be incorporated into the group’s business model. But there are many chal-lenges around how to site their activities in the wider business model,” says Zha.

“There are issues such as profi t shar-ing, protection of trade secrets, and imple-menting technological innovation across the often vast tentacles of an organisation and its affi liates, for example.

“Wider and more diverse supply chains may result in higher risk and uncertainty, so business ethics become very important to prevent those problems.”

And he cites a solution developed by Alibaba, China’s powerful e-business plat-form. “Alibaba off ers credit scores for all the traders, most of which are small and middle-sized companies, on its platform based on ‘big data’ analysis. It makes the supply chain more transparent and trust-able,” he says,

For Wuxi AppTec, a business model that incorporates strategic alliances has delivered huge benefi ts in the key area of research and development (R&D). “In the R&D area, a business model incorporating strategic alliances can realise cost saving and even break through the entry barriers to innovation,” says Zha. “We use the con-tract research organisation (CRO) approach, which is now widely used in pharmaceu-tical, biotechnology, and medical device industries.”

“CROs usually off er research infrastruc-tures and support, usually for specifi c steps in the full R&D cycle, to life science R&D. With CROs in the business model, big pharma companies can realise cost savings as they no longer need to do everything ‘in house’,” says Zha. “For small pharma com-panies, entry into drug development becomes simplifi ed as they do not need to

invest heavily in infrastructures, and can focus on innovation areas in which they have expertise,” he adds.

Zheng says Mitsui-Sumitomo has ben-efi ted in three ways from incorporating the activities of strategic alliances into the group’s business model. “The forecast of the result of the business plan can be more precise and new advice can be more read-ily accepted by shareholders when consid-ering support from a strategic alliance,” he explains. “Also, it is easier to get data and information from the experience of a stra-tegic alliance when entering into a new area.”

Nevertheless, such an arrangement poses some challenges. Zheng says that a potential difficulty of incorporating the activities of a strategic partner into a busi-ness model may arise when considering the accuracy of expectations in scenario anal-ysis. “By analysing bad, average, and good situations when incorporating or exclud-ing alliance support, the results of business plans can be judged as closer to reality,” he says.

Just how dynamic a business model can become may depend on to what degree it can be reinvented. Take the example of

THE NEXT LEVELRob McInerney, founder of startup Intelligent Layer, is focused on developing machine learning algorithms to revolutionise the way companies use their data and interact with the world. What he is developing might just be the machine at the heart of future business models.

“We believe that data science is currently too focused on fi nding

answers in existing data sets, rather than exploring the unknown. We envision systems that enable ‘learning by doing’, not just retrospective analysis,” he says.

“The technology we are developing will allow companies to experiment in real time with their customers, products, and services, promoting innovation and helping fi nd previously undiscovered trends and preferences at a highly granular scale,” he adds.

In essence, that means using

artifi cial intelligence (AI) and machine learning to create and market products and services in a way that is superior to legacy systems – wrapped with a business model that can change as fast as the machine at its heart.

This may seem like science fi ction, but McInerney’s initial product – the world’s fi rst beer brewed with the help of AI called IntelligentX – has been on the market since last year. As for the business model, he says it can change by the hour.

John ZhengFCMA, CGMA

Yinqun ZhaFCMA, CGMA

Yinqun ZhaFCMA, CGMA

NEW 30-35_dynamic business_V1 R1.indd 33 06/11/2017 14:31

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33

technologies can realise big successes and development, but a dynamic business model will need to be at their heart.

He says that such a model is required to address the change management taking place in organisations that are innovating rapidly, as well as problems stemming from short product life cycles that appear fre-quently. “I believe the dynamic business model is a good solution to those issues as it off ers higher fl exibility to business and enhances the ability to handle the uncer-tainty,” he adds.

“A common feature of many global organisations is complexity created by stra-tegic alliances and extended supply chains that need to be incorporated into the group’s business model. But there are many chal-lenges around how to site their activities in the wider business model,” says Zha.

“There are issues such as profi t shar-ing, protection of trade secrets, and imple-menting technological innovation across the often vast tentacles of an organisation and its affi liates, for example.

“Wider and more diverse supply chains may result in higher risk and uncertainty, so business ethics become very important to prevent those problems.”

And he cites a solution developed by Alibaba, China’s powerful e-business plat-form. “Alibaba off ers credit scores for all the traders, most of which are small and middle-sized companies, on its platform based on ‘big data’ analysis. It makes the supply chain more transparent and trust-able,” he says,

For Wuxi AppTec, a business model that incorporates strategic alliances has delivered huge benefi ts in the key area of research and development (R&D). “In the R&D area, a business model incorporating strategic alliances can realise cost saving and even break through the entry barriers to innovation,” says Zha. “We use the con-tract research organisation (CRO) approach, which is now widely used in pharmaceu-tical, biotechnology, and medical device industries.”

“CROs usually off er research infrastruc-tures and support, usually for specifi c steps in the full R&D cycle, to life science R&D. With CROs in the business model, big pharma companies can realise cost savings as they no longer need to do everything ‘in house’,” says Zha. “For small pharma com-panies, entry into drug development becomes simplifi ed as they do not need to

invest heavily in infrastructures, and can focus on innovation areas in which they have expertise,” he adds.

Zheng says Mitsui-Sumitomo has ben-efi ted in three ways from incorporating the activities of strategic alliances into the group’s business model. “The forecast of the result of the business plan can be more precise and new advice can be more read-ily accepted by shareholders when consid-ering support from a strategic alliance,” he explains. “Also, it is easier to get data and information from the experience of a stra-tegic alliance when entering into a new area.”

Nevertheless, such an arrangement poses some challenges. Zheng says that a potential difficulty of incorporating the activities of a strategic partner into a busi-ness model may arise when considering the accuracy of expectations in scenario anal-ysis. “By analysing bad, average, and good situations when incorporating or exclud-ing alliance support, the results of business plans can be judged as closer to reality,” he says.

Just how dynamic a business model can become may depend on to what degree it can be reinvented. Take the example of

THE NEXT LEVELRob McInerney, founder of startup Intelligent Layer, is focused on developing machine learning algorithms to revolutionise the way companies use their data and interact with the world. What he is developing might just be the machine at the heart of future business models.

“We believe that data science is currently too focused on fi nding

answers in existing data sets, rather than exploring the unknown. We envision systems that enable ‘learning by doing’, not just retrospective analysis,” he says.

“The technology we are developing will allow companies to experiment in real time with their customers, products, and services, promoting innovation and helping fi nd previously undiscovered trends and preferences at a highly granular scale,” he adds.

In essence, that means using

artifi cial intelligence (AI) and machine learning to create and market products and services in a way that is superior to legacy systems – wrapped with a business model that can change as fast as the machine at its heart.

This may seem like science fi ction, but McInerney’s initial product – the world’s fi rst beer brewed with the help of AI called IntelligentX – has been on the market since last year. As for the business model, he says it can change by the hour.

John ZhengFCMA, CGMA

Yinqun ZhaFCMA, CGMA

Yinqun ZhaFCMA, CGMA

NEW 30-35_dynamic business_V1 R1.indd 33 06/11/2017 14:31

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Apple, which has grown to become the world’s biggest, and arguably most success-ful, listed company. In a 2008 article in the Harvard Business Review, Mark W. Johnson, Clayton M. Christensen, and Henning Kag-ermann argued that Apple’s big achieve-ment when it cornered the digital music market was the development of its busi-ness model.

“Apple did something far smarter than take a good technology and wrap it in a snazzy design,” the writers said. “It took a good technology and wrapped it in a great business model. Apple’s true innovation was to make downloading music easy and convenient.”

In recent years the nexus between pow-erful technology and dynamic business models has become clear to see, with com-panies such as Facebook, Google, and Net-flix joining Apple as the world’s most innovative and dominant companies.

But companies that fi nd new ways of exploiting artifi cial intelligence and other technologies, and can develop an adaptable business model to fi t, are also capable of becoming extremely successful. In this year’s book What to Do When Machines Do Everything, Malcolm Frank, Paul Roehrig, and Ben Pring of consultancy Cognizant argue that there are plenty of great exam-ples of this. They reference US wealth

manager Betterment, South African health group Discovery through its Vitality pro-gramme, and America’s McGraw-Hill Edu-cation, which developed its ALEKS technology system. “[These companies] have built and operate these new machines, and most importantly, they have sur-rounded these new machines with busi-ness models that generate remarkable growth and profitability engines while expanding the overall market,” say the authors.

Having technology and a business model that are both nimble is key, says Anne Boden, founder and CEO of mobile bank Starling. With the right model in place, you can respond quickly to customer demands and develop new iterations to meet chang-ing expectations.

“We work on two weekly sprints. In the first week we make a couple of changes when working out what we need to change, and by the end of the second week we go live with the changes,” she says. “So in essence we are making changes to our app every couple of weeks.”

Boden, who previously worked in sen-ior roles at a number of large fi nancial insti-tutions, adds: “At the heart of our business model is the agile development methodol-ogy that allows us to be as eff ective as pos-sible because everyone in the business is

included in the process,” she says.Having the right culture to support a

dynamic business model is something that Wuxi AppTec’s Zha agrees with. “A dynamic business model changes the decision-mak-ing process, and therefore impacts the organisation in all key aspects, like people, process, and technology,” he says. “As every-one in the organisation may be impacted, having the support of the right culture is key to success.”

“Collaboration and knowledge sharing shall be recommended, and at the same time business ethics must always be empha-sised,” says Zha. But most importantly, a culture encouraging innovation must be fostered at all times. “Stay hungry and stay foolish” is the mantra behind Wuxi AppTec’s dynamic business model, he says. ■

DE

SIG

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AD

“AT THE HEART OF OUR BUSINESS MODEL IS THE AGILE DEVELOPMENT METHODOLOGY.”Anne Boden, founder and CEO, Starling Bank

To keep up to date with the latest CGMA business models research and to fi nd out when new resources become available, go to: http://bit.ly/2gYP2gP

Anne Boden

DEEP DIVE

NEW 30-35_dynamic business_V1 R1.indd 35 06/11/2017 14:32

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Apple, which has grown to become the world’s biggest, and arguably most success-ful, listed company. In a 2008 article in the Harvard Business Review, Mark W. Johnson, Clayton M. Christensen, and Henning Kag-ermann argued that Apple’s big achieve-ment when it cornered the digital music market was the development of its busi-ness model.

“Apple did something far smarter than take a good technology and wrap it in a snazzy design,” the writers said. “It took a good technology and wrapped it in a great business model. Apple’s true innovation was to make downloading music easy and convenient.”

In recent years the nexus between pow-erful technology and dynamic business models has become clear to see, with com-panies such as Facebook, Google, and Net-flix joining Apple as the world’s most innovative and dominant companies.

But companies that fi nd new ways of exploiting artifi cial intelligence and other technologies, and can develop an adaptable business model to fi t, are also capable of becoming extremely successful. In this year’s book What to Do When Machines Do Everything, Malcolm Frank, Paul Roehrig, and Ben Pring of consultancy Cognizant argue that there are plenty of great exam-ples of this. They reference US wealth

manager Betterment, South African health group Discovery through its Vitality pro-gramme, and America’s McGraw-Hill Edu-cation, which developed its ALEKS technology system. “[These companies] have built and operate these new machines, and most importantly, they have sur-rounded these new machines with busi-ness models that generate remarkable growth and profitability engines while expanding the overall market,” say the authors.

Having technology and a business model that are both nimble is key, says Anne Boden, founder and CEO of mobile bank Starling. With the right model in place, you can respond quickly to customer demands and develop new iterations to meet chang-ing expectations.

“We work on two weekly sprints. In the first week we make a couple of changes when working out what we need to change, and by the end of the second week we go live with the changes,” she says. “So in essence we are making changes to our app every couple of weeks.”

Boden, who previously worked in sen-ior roles at a number of large fi nancial insti-tutions, adds: “At the heart of our business model is the agile development methodol-ogy that allows us to be as eff ective as pos-sible because everyone in the business is

included in the process,” she says.Having the right culture to support a

dynamic business model is something that Wuxi AppTec’s Zha agrees with. “A dynamic business model changes the decision-mak-ing process, and therefore impacts the organisation in all key aspects, like people, process, and technology,” he says. “As every-one in the organisation may be impacted, having the support of the right culture is key to success.”

“Collaboration and knowledge sharing shall be recommended, and at the same time business ethics must always be empha-sised,” says Zha. But most importantly, a culture encouraging innovation must be fostered at all times. “Stay hungry and stay foolish” is the mantra behind Wuxi AppTec’s dynamic business model, he says. ■

DE

SIG

N L

AD

“AT THE HEART OF OUR BUSINESS MODEL IS THE AGILE DEVELOPMENT METHODOLOGY.”Anne Boden, founder and CEO, Starling Bank

To keep up to date with the latest CGMA business models research and to fi nd out when new resources become available, go to: http://bit.ly/2gYP2gP

Anne Boden

DEEP DIVE

NEW 30-35_dynamic business_V1 R1.indd 35 06/11/2017 14:32

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THE

PUBLIC

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There are varying struc-tures of health and social care services around the world, but the demographic pres-sures with which they are grappling are often very similar. These include lifestyle dis-

eases, which have had a signifi cant impact on service demand, funding constraints, workforce recruitment, and staff retention issues.

Such challenges are overwhelming ser-vices as well as having a very real and dam-aging eff ect on the health of the populations they serve. However, they have led to a con-certed eff ort by public service leaders to explore ways to improve performance and boost outcomes. One of the most promis-ing initiatives is a population-based approach, which has helped deliver more cohesive and eff ective health systems in several countries.

A population-based approach can broadly be defi ned as tailoring health and social care programmes and interventions to the specifi c needs of local populations. Budgets are set, and programmes coordi-

nated, on the basis of population charac-teristics, not on the usual free-market principles that have governed the develop-ment of healthcare in many parts of the world. Such initiatives were created in response to work, such as that by the Cana-dian Institute for Advanced Research, which demonstrates that a population’s health is more acutely infl uenced by its local envi-ronment and lifestyle decisions than by the quality of services that communities receive. A population approach seems the most likely way of supporting the principle that it is more eff ective to use funding to sup-port schemes that aim to change behaviours and boost living conditions, rather than solely channelling resources into organi-sations.

There has been a significant shift towards a population-based approach within healthcare organisations in the US. The results, as outlined in a 2012 report from the UK’s leading health think tank, The King’s Fund, demonstrate the plethora of financial and social benefits that such schemes can have. One example that the report draws upon is a scheme, created by the healthcare organisation Kaiser Perma-nente, which aims to prevent heart disease

within a particular population group. By promoting exercise and healthy eating to its members who were most at risk, Kaiser Permanente reduced heart disease mortal-ity by 26% in a nine-year period. This meant that its members were nearly a third (30%) less likely to die from heart disease than the general population in California. And, of course, the secondary benefi t was a reduc-tion in hospital demand and resources.

Another example of how a popula-tion-based approach has helped health organisations in the US, is the work of the Southcentral Foundation, a not-for-profi t group supporting Alaskan Native groups. The foundation developed a system of care that empowers communities by allowing them to help design and implement the healthcare services that they receive. The patient-centred model has meant the foun-dation can gather insights from the com-munity on its public health programmes and then use the feedback to improve deliv-ery. As a result of such working, there has been a 42% reduction on the demand for emergency services since the approach was introduced by Southcentral Foundation in the late 1990s.

It is clear that a population-based

A population-based approach to health and social care has transformed public sector business models around the world, writes Rob Whiteman.

36-38_Public sector_business model_v4.indd 37 02/11/2017 17:56

XXXXXXXXXX / XXXXXXXX XXXXXXX

IN

THE

PUBLIC

EYE36-38_Public sector_business model_v4.indd 36 02/11/2017 17:55

DEEP DIVE

DECEMBER 2017

37

There are varying struc-tures of health and social care services around the world, but the demographic pres-sures with which they are grappling are often very similar. These include lifestyle dis-

eases, which have had a signifi cant impact on service demand, funding constraints, workforce recruitment, and staff retention issues.

Such challenges are overwhelming ser-vices as well as having a very real and dam-aging eff ect on the health of the populations they serve. However, they have led to a con-certed eff ort by public service leaders to explore ways to improve performance and boost outcomes. One of the most promis-ing initiatives is a population-based approach, which has helped deliver more cohesive and eff ective health systems in several countries.

A population-based approach can broadly be defi ned as tailoring health and social care programmes and interventions to the specifi c needs of local populations. Budgets are set, and programmes coordi-

nated, on the basis of population charac-teristics, not on the usual free-market principles that have governed the develop-ment of healthcare in many parts of the world. Such initiatives were created in response to work, such as that by the Cana-dian Institute for Advanced Research, which demonstrates that a population’s health is more acutely infl uenced by its local envi-ronment and lifestyle decisions than by the quality of services that communities receive. A population approach seems the most likely way of supporting the principle that it is more eff ective to use funding to sup-port schemes that aim to change behaviours and boost living conditions, rather than solely channelling resources into organi-sations.

There has been a significant shift towards a population-based approach within healthcare organisations in the US. The results, as outlined in a 2012 report from the UK’s leading health think tank, The King’s Fund, demonstrate the plethora of financial and social benefits that such schemes can have. One example that the report draws upon is a scheme, created by the healthcare organisation Kaiser Perma-nente, which aims to prevent heart disease

within a particular population group. By promoting exercise and healthy eating to its members who were most at risk, Kaiser Permanente reduced heart disease mortal-ity by 26% in a nine-year period. This meant that its members were nearly a third (30%) less likely to die from heart disease than the general population in California. And, of course, the secondary benefi t was a reduc-tion in hospital demand and resources.

Another example of how a popula-tion-based approach has helped health organisations in the US, is the work of the Southcentral Foundation, a not-for-profi t group supporting Alaskan Native groups. The foundation developed a system of care that empowers communities by allowing them to help design and implement the healthcare services that they receive. The patient-centred model has meant the foun-dation can gather insights from the com-munity on its public health programmes and then use the feedback to improve deliv-ery. As a result of such working, there has been a 42% reduction on the demand for emergency services since the approach was introduced by Southcentral Foundation in the late 1990s.

It is clear that a population-based

A population-based approach to health and social care has transformed public sector business models around the world, writes Rob Whiteman.

36-38_Public sector_business model_v4.indd 37 02/11/2017 17:56

approach has had signifi cant benefi ts to health outcomes in the US; however, it is important to note that the schemes imple-mented focus on specifi c groups of people within a population, rather than a whole area. This means that the benefi ts may not be felt across an entire region, and so socio-economic issues can remain preva-lent.

To see how a regional population-based system can have a meaningful impact across whole areas, one can look to Europe. Exam-ples include programmes in Kinzigtal,

south-west Germany, which led to savings in healthcare budgets of 16.9%, and in Alzira, south-east Spain, where costs of providing health services to the commissioner reduced by 25%.

But whether or not a population-based approach delivers benefi ts to a whole region or just a certain group of people, the approaches and methods are similar, as well as the requirements to introduce such pro-grammes. To make a shift towards the pop-ulation-based approach, the right data need to be available so organisations can under-stand the need and also track the outcomes of interventions; and budgets need to be set on the basis of population, not activity, to ensure there are fi nancial incentives to improving health.

Furthermore, the integration of rele-vant services is crucial. Many of the health inequalities prevalent across the world are exacerbated by fragmented and un-coordinated services that do not join up to address joint challenges.

In order to eff ectively tackle the issues, all the local partners that have an interest in the health of a population must come together with communities to share data, and design and coordinate services that can

truly respond to an area’s needs. By integrating services and introduc-

ing a place-based approach to budgeting and delivery – increasingly set up as “accountable care systems” – it is clear from international examples that outcomes can be improved and savings achieved. That could off er organisations the best hope of addressing the many challenges facing health and social care services by deliver-ing a more cohesive and eff ective system.

Rob Whiteman is the CEO of the Chartered Insti-tute of Public Finance and Accountancy. ■

DEEP DIVE

DECEMBER 2017

38DECEMBER 2017

38

“TO MAKE A SHIFT TOWARDS THE POPULATION-BASED APPROACH, THE RIGHT DATA NEED TO BE AVAILABLE.”

36-38_Public sector_business model_v4.indd 38 02/11/2017 17:56

NEW

Introducing anexciting new range of

2017 CIMA coursesWe’ve listened to your feedback and completely redesigned all our courses for 2017, so you can develop the knowledge

and exam confidence you need to pass first time.

It’s a better way of learning that’s built around you.

To find out more about our new CIMA courses:To find out more about our new CIMA courses:

www.kaplanfinancial.co.uk/cima2017www.kaplanfinancial.co.uk/cima201701908 540 069

6692_F17_CIMA_Advantage_FM_Print_Advert.indd 1 09/01/2017 10:33

approach has had signifi cant benefi ts to health outcomes in the US; however, it is important to note that the schemes imple-mented focus on specifi c groups of people within a population, rather than a whole area. This means that the benefi ts may not be felt across an entire region, and so socio-economic issues can remain preva-lent.

To see how a regional population-based system can have a meaningful impact across whole areas, one can look to Europe. Exam-ples include programmes in Kinzigtal,

south-west Germany, which led to savings in healthcare budgets of 16.9%, and in Alzira, south-east Spain, where costs of providing health services to the commissioner reduced by 25%.

But whether or not a population-based approach delivers benefi ts to a whole region or just a certain group of people, the approaches and methods are similar, as well as the requirements to introduce such pro-grammes. To make a shift towards the pop-ulation-based approach, the right data need to be available so organisations can under-stand the need and also track the outcomes of interventions; and budgets need to be set on the basis of population, not activity, to ensure there are fi nancial incentives to improving health.

Furthermore, the integration of rele-vant services is crucial. Many of the health inequalities prevalent across the world are exacerbated by fragmented and un-coordinated services that do not join up to address joint challenges.

In order to eff ectively tackle the issues, all the local partners that have an interest in the health of a population must come together with communities to share data, and design and coordinate services that can

truly respond to an area’s needs. By integrating services and introduc-

ing a place-based approach to budgeting and delivery – increasingly set up as “accountable care systems” – it is clear from international examples that outcomes can be improved and savings achieved. That could off er organisations the best hope of addressing the many challenges facing health and social care services by deliver-ing a more cohesive and eff ective system.

Rob Whiteman is the CEO of the Chartered Insti-tute of Public Finance and Accountancy. ■

DEEP DIVE

DECEMBER 2017

38DECEMBER 2017

38

“TO MAKE A SHIFT TOWARDS THE POPULATION-BASED APPROACH, THE RIGHT DATA NEED TO BE AVAILABLE.”

36-38_Public sector_business model_v4.indd 38 02/11/2017 17:56

NEW

Introducing anexciting new range of

2017 CIMA coursesWe’ve listened to your feedback and completely redesigned all our courses for 2017, so you can develop the knowledge

and exam confidence you need to pass first time.

It’s a better way of learning that’s built around you.

To find out more about our new CIMA courses:To find out more about our new CIMA courses:

www.kaplanfinancial.co.uk/cima2017www.kaplanfinancial.co.uk/cima201701908 540 069

6692_F17_CIMA_Advantage_FM_Print_Advert.indd 1 09/01/2017 10:33

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Business leaders from around the globe tell

FM how business models refl ect the wider

environment in which companies operate.

For companies to survive over the long term, their busi-ness models must be able to respond to challenges. These include the threat of climate change, or, in the short term, the denial of a licence to operate if envi-

ronmental, social, and governance issues are not taken into consideration.

Anders Bouvin, chief executive of Han-delsbanken, says the business model devel-oped at one of Scandinavia’s biggest banks is finely attuned to the ecosystem it sits within. He says that it has been developed in response to changing expectations from the community the bank serves, whether in its home market in Sweden or in the UK, where the bank has more than 200 branches.

For example, Bouvin says that thinking about the wider environment begins with staff empowerment. “We believe that peo-ple naturally want to take responsibility and do good work,” he says. “When given the responsibility and power to decide, they fi nd better solutions and achieve more than a top-down approach could hope to. We also know that over many decades customers’ individual needs are seen

and met best by those closest to them. This is why we decentralised our organisation, with a head offi ce in the UK to build and maintain the services our customers ask their branches for.”

Working this way helps the bank focus on real-world change in the here and now, and determine how its actions should relate to its values and competitive strengths, says Bouvin. “Then we avoid fi xed plans, budg-ets, or targets, so that we can adapt quickly and co-operatively once a direction is agreed,” he adds.

Bouvin says the benefi ts of placing com-munity engagement at the heart of the busi-ness model are many: “This way of working means we deliver what we know our cus-tomers actually want, rather than what some strategic report tells us they should want or that we should give them.”

Digitisation is a good example of how technology and community engagement combine to influence how the business model needs to continually adapt.

“The way customers access the bank con-tinues to change at pace and so do their demands for digital services. At the same time, we experience even stronger positive responses to the individual service and rela-

tionships our branches provide,” he adds. “So while other banks are retreating from local communities, we will use digital tech-nologies to build on our promise that ‘the branch is the bank’, providing more ways for a branch to serve its customers and the local community.”

Bouvin, who ran Handelsbanken’s UK business before moving to the top role last year, says the bank has always believed in playing a responsible role in society. “Sus-tainability issues matter increasingly to our customers and other stakeholders, and the local benefi ts of our principle go beyond simply having a solid, stable banking part-ner in the community,” he explains. “Given our commitment to local relationship bank-ing, branches see every reason to put their knowledge, energy, and support into initi-atives that make a diff erence in their home-towns.”

Bouvin says it pays to be diff erent if you aim to outperform your peers. “But an organ-isation needs self-confi dence and a shared sense of purpose to go its own way, as we so often do,” he adds. “Culture plays a vital role here in binding us around our core val-ues, oiling the gears of co-operation, and reminding us how successfully our approach

DEEP DIVE

TOP OF THE WORLD

TOP OF THE TOP OF THE WORLDWORLD

TOP OF THE TOP OF THE

“INVESTORS AND REGULATORS ARE ALSO EXPECTING HIGHER LEVELS OF TRANSPARENCY AND DISCLOSURES.”Mukund Rajan, chief ethics offi cer and chairman of Tata Global Sustainability Council of Tata Sons

NEW 40-43_sustainability_environmental_model R1.indd 40 06/11/2017 15:50

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has met all manner of opportunities and challenges over the years.”

“Handelsbanken’s business model is built to absorb change and shape it to our advantage, without altering our fundamen-tal values or approach,” says Bouvin. “Our business model is built around a set of fun-damental values which are timeless and shared throughout the bank. These values inform our analysis of change and how we should respond to it.”

For India’s Tata group of companies, developing a business model that refl ects its changing interaction with the ecosystem in which it operates is key to long-term, sus-tainable value creation, says Mukund Rajan, Ph.D., chief ethics offi cer and chairman of Tata Global Sustainability Council of Tata Sons, the holding company of the Tata Group.

Rajan says the fact that nine out of every ten Fortune 500 companies that existed 60 years ago are gone today demonstrates the dynamism and competitiveness of the world we live in. “Any company striving for growth, profi tability, and longevity will therefore have to constantly reinvent itself and adapt its business models if it hopes to compete for the long term,” he says.

Looking ahead, in the context of the

grave threats posed by climate change and the increasing environmental degradation of the planet, the next wave of transforma-tion is likely to be dominated by sustaina-bility considerations, suggests Rajan. He says an investor perception survey conducted by the Tata Group revealed that investors are increasingly concerned about environmen-tal, social, and governance issues.

“Investors and regulators are also expect-ing higher levels of transparency and dis-closures on the vulnerability of their businesses to sustainability challenges,” he says. “BlackRock, the world’s largest asset manager, urging oil companies like Exxon Mobil Corp to ‘enhance disclosures’ regard-ing risks related to climate change earlier this year is a case in point. The recent draft report of the task force on climate-related fi nancial disclosure (TCFD) set up by the Financial Stability Board (FSB) recommends that businesses disclose material climate-related risks in their fi nancial fi lings. Going forward, it will become incumbent on cor-porates to disclose the risks they face from climate change impacts.

“All these developments mean that com-panies will have to assess their risks and constantly adapt their business models to future-proof their businesses,” he adds. “Within the Tata group, Tata Power, our energy company, for example, has commit-ted to generate 40% of its power through renewables by 2025. Another good example of an innovative model is Jaguar Land Rov-er’s Recycled Aluminium Car project around the theme of the circular economy.”

Tata, India’s biggest conglomerate with 100 or so companies, has developed many ways in which business models are being adopted to address the wider ecosystem, says Rajan. These include the use of new technology, new communication tools including social media, and innovations in distribution.

“Tata Global Beverages’ Gaon Chalo ini-tiative is a great example of an innovation in rural distribution which addressed the wider ecosystem,” he says. “The initiative started in 2006, where villagers in rural India were motivated to sell Tata Tea products in their local communities. Not only did this help in boosting rural incomes, it also solved the company’s problem of tackling the fi nal leg of rural distribution.

“Currently, Gaon Chalo is present in 18 Indian states, with direct reach across 70,000 villages. As a result of this initiative, Tata Tea’s consolidated market share from rural areas rose from 18% to 26.6%, and an addi-tional 20,000 retailers in 10,000 villages were brought into the Tata Tea fold,” he adds.

When it comes to the benefi ts accrued from engaging with the wider community, Rajan says the brand rub-off is immense. Increasing numbers of consumers are becoming more inclined to buy products or services that align with their own life-styles and value systems, and pur-pose-driven brands consequently get very good traction in the mar-ket, he says.

“For consumers, it is increasingly not just about

becoming more inclined to buy products or services that align with their own life-styles and value systems, and pur-pose-driven brands consequently get very good traction in the mar-

“For consumers, it is increasingly not just about

Jaguar Land Rover’s Recycled Aluminium Car

project reuses aluminium from end-of-life cars in new Jag-uar Land Rover

vehicles.

NEW40-43_sustainability_environmental_model.indd 41 03/11/2017 16:42

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Business leaders from around the globe tell

FM how business models refl ect the wider

environment in which companies operate.

For companies to survive over the long term, their busi-ness models must be able to respond to challenges. These include the threat of climate change, or, in the short term, the denial of a licence to operate if envi-

ronmental, social, and governance issues are not taken into consideration.

Anders Bouvin, chief executive of Han-delsbanken, says the business model devel-oped at one of Scandinavia’s biggest banks is finely attuned to the ecosystem it sits within. He says that it has been developed in response to changing expectations from the community the bank serves, whether in its home market in Sweden or in the UK, where the bank has more than 200 branches.

For example, Bouvin says that thinking about the wider environment begins with staff empowerment. “We believe that peo-ple naturally want to take responsibility and do good work,” he says. “When given the responsibility and power to decide, they fi nd better solutions and achieve more than a top-down approach could hope to. We also know that over many decades customers’ individual needs are seen

and met best by those closest to them. This is why we decentralised our organisation, with a head offi ce in the UK to build and maintain the services our customers ask their branches for.”

Working this way helps the bank focus on real-world change in the here and now, and determine how its actions should relate to its values and competitive strengths, says Bouvin. “Then we avoid fi xed plans, budg-ets, or targets, so that we can adapt quickly and co-operatively once a direction is agreed,” he adds.

Bouvin says the benefi ts of placing com-munity engagement at the heart of the busi-ness model are many: “This way of working means we deliver what we know our cus-tomers actually want, rather than what some strategic report tells us they should want or that we should give them.”

Digitisation is a good example of how technology and community engagement combine to influence how the business model needs to continually adapt.

“The way customers access the bank con-tinues to change at pace and so do their demands for digital services. At the same time, we experience even stronger positive responses to the individual service and rela-

tionships our branches provide,” he adds. “So while other banks are retreating from local communities, we will use digital tech-nologies to build on our promise that ‘the branch is the bank’, providing more ways for a branch to serve its customers and the local community.”

Bouvin, who ran Handelsbanken’s UK business before moving to the top role last year, says the bank has always believed in playing a responsible role in society. “Sus-tainability issues matter increasingly to our customers and other stakeholders, and the local benefi ts of our principle go beyond simply having a solid, stable banking part-ner in the community,” he explains. “Given our commitment to local relationship bank-ing, branches see every reason to put their knowledge, energy, and support into initi-atives that make a diff erence in their home-towns.”

Bouvin says it pays to be diff erent if you aim to outperform your peers. “But an organ-isation needs self-confi dence and a shared sense of purpose to go its own way, as we so often do,” he adds. “Culture plays a vital role here in binding us around our core val-ues, oiling the gears of co-operation, and reminding us how successfully our approach

DEEP DIVE

TOP OF THE WORLD

TOP OF THE TOP OF THE WORLDWORLD

TOP OF THE TOP OF THE

“INVESTORS AND REGULATORS ARE ALSO EXPECTING HIGHER LEVELS OF TRANSPARENCY AND DISCLOSURES.”Mukund Rajan, chief ethics offi cer and chairman of Tata Global Sustainability Council of Tata Sons

NEW 40-43_sustainability_environmental_model R1.indd 40 06/11/2017 15:50

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DEEP DIVE

DECEMBER 2017

41

has met all manner of opportunities and challenges over the years.”

“Handelsbanken’s business model is built to absorb change and shape it to our advantage, without altering our fundamen-tal values or approach,” says Bouvin. “Our business model is built around a set of fun-damental values which are timeless and shared throughout the bank. These values inform our analysis of change and how we should respond to it.”

For India’s Tata group of companies, developing a business model that refl ects its changing interaction with the ecosystem in which it operates is key to long-term, sus-tainable value creation, says Mukund Rajan, Ph.D., chief ethics offi cer and chairman of Tata Global Sustainability Council of Tata Sons, the holding company of the Tata Group.

Rajan says the fact that nine out of every ten Fortune 500 companies that existed 60 years ago are gone today demonstrates the dynamism and competitiveness of the world we live in. “Any company striving for growth, profi tability, and longevity will therefore have to constantly reinvent itself and adapt its business models if it hopes to compete for the long term,” he says.

Looking ahead, in the context of the

grave threats posed by climate change and the increasing environmental degradation of the planet, the next wave of transforma-tion is likely to be dominated by sustaina-bility considerations, suggests Rajan. He says an investor perception survey conducted by the Tata Group revealed that investors are increasingly concerned about environmen-tal, social, and governance issues.

“Investors and regulators are also expect-ing higher levels of transparency and dis-closures on the vulnerability of their businesses to sustainability challenges,” he says. “BlackRock, the world’s largest asset manager, urging oil companies like Exxon Mobil Corp to ‘enhance disclosures’ regard-ing risks related to climate change earlier this year is a case in point. The recent draft report of the task force on climate-related fi nancial disclosure (TCFD) set up by the Financial Stability Board (FSB) recommends that businesses disclose material climate-related risks in their fi nancial fi lings. Going forward, it will become incumbent on cor-porates to disclose the risks they face from climate change impacts.

“All these developments mean that com-panies will have to assess their risks and constantly adapt their business models to future-proof their businesses,” he adds. “Within the Tata group, Tata Power, our energy company, for example, has commit-ted to generate 40% of its power through renewables by 2025. Another good example of an innovative model is Jaguar Land Rov-er’s Recycled Aluminium Car project around the theme of the circular economy.”

Tata, India’s biggest conglomerate with 100 or so companies, has developed many ways in which business models are being adopted to address the wider ecosystem, says Rajan. These include the use of new technology, new communication tools including social media, and innovations in distribution.

“Tata Global Beverages’ Gaon Chalo ini-tiative is a great example of an innovation in rural distribution which addressed the wider ecosystem,” he says. “The initiative started in 2006, where villagers in rural India were motivated to sell Tata Tea products in their local communities. Not only did this help in boosting rural incomes, it also solved the company’s problem of tackling the fi nal leg of rural distribution.

“Currently, Gaon Chalo is present in 18 Indian states, with direct reach across 70,000 villages. As a result of this initiative, Tata Tea’s consolidated market share from rural areas rose from 18% to 26.6%, and an addi-tional 20,000 retailers in 10,000 villages were brought into the Tata Tea fold,” he adds.

When it comes to the benefi ts accrued from engaging with the wider community, Rajan says the brand rub-off is immense. Increasing numbers of consumers are becoming more inclined to buy products or services that align with their own life-styles and value systems, and pur-pose-driven brands consequently get very good traction in the mar-ket, he says.

“For consumers, it is increasingly not just about

becoming more inclined to buy products or services that align with their own life-styles and value systems, and pur-pose-driven brands consequently get very good traction in the mar-

“For consumers, it is increasingly not just about

Jaguar Land Rover’s Recycled Aluminium Car

project reuses aluminium from end-of-life cars in new Jag-uar Land Rover

vehicles.

NEW40-43_sustainability_environmental_model.indd 41 03/11/2017 16:42

Copyright © 2017 Association of International Certified Professional Accountants. All rights reserved. CIMA and The Chartered Institute of Management Accountants are trademarks of The Chartered Institute of Management Accountants and are registered in the United Kingdom and other countries. The design mark is a trademark of the Association of International Certified Professional Accountants.

Visit MY JOBS to try our new salary insight tool and discover your earning potential

The tool allows you to explore average salaries by industry, job role, level of experience and country. Visit the tool today to:

· Compare and contrast your own salary against CGMAs and CIMA students across the globe

· Make use of the data available to get the most accurate view of your earning potential

Find out what you are worth – visit MY JOBS and use the new salary insight tool today.

myjobs.cimaglobal.com

CFO Rising.indd 1 11/07/2017 14:03

DEEP DIVE

DECEMBER 2017

43

what you ‘buy’, but what you ‘buy into’,” he says. “The Tata brand is India’s most valu-able brand, valued 118% higher than its clos-est competitor, according to a third-party study by Interbrand, and it is our commit-ment to strive for value creation for all our stakeholders, and not just our sharehold-ers, that has earned us the trust of the nation.”

“Second, the growing trend of concern for environmental and social issues has opened up a new channel to raise capital via green bonds. According to the Climate Bonds Initiative, about $81 billion of green bonds were issued last year to fund socially respon-sible initiatives. In May last year, Starbucks issued the largest-ever corporate sustaina-bility bond, raising half a billion dollars to fund the coff ee chain’s sustainability activ-ities.

“Third, companies that earn their social licence to operate within the communities they serve have a better chance of succeed-ing in the long term. An interesting exam-ple within the Tata group is the karigar (craftsman) parks set up by Titan Industries for its jewellery business. Recognising that gold jewellery craftsmen came from pre-dominantly marginalised communities and were unorganised, Titan set up safe, healthy, and modern working facilities. The work-

ers were also given fi nancial aid, insurance, and medical facilities at the parks. The ini-tiative not only signifi cantly enhanced the productivity levels of the workers and streamlined the assembly chain, it also improved the average standard of living of the craftsmen,” he says.

Environmental and social factors will have an increasing infl uence on the oper-ating context of global businesses, explains Rajan. He says that to create future-ready businesses, organisations need to integrate sustainability thinking into their businesses by mainstreaming sustainability into each business function. “This requires a shift in the mindset from compliance to culture, and involves collective effort across the stakeholder segments, including employ-ees and value-chain partners,” he adds.

“One of the ways in which we sensitise colleagues in the Tata group on the sustain-ability challenges we all face is through a groupwide volunteering programme. Called ‘Tata Engage’, it is India’s largest corporate volunteering program, with Tata colleagues contributing 1.2 million hours of volunteer-ing support last year to nonprofi ts around the world.

“We also celebrate a Tata sustainability month in June every year, when numerous campaigns are conducted on subjects like

climate change and sustainable develop-ment to help build a culture of sustainabil-ity in the organisation. We are also looking at the sustainability requirements of our supply chain partners and working on devel-oping a strategic approach towards sustain-able sourcing.”

In many ways the Tata business model is continuing to adapt to the changing envi-ronment – an area that all corporates will need to fi nesse.

“As the sustainability imperatives of businesses become more nuanced, compa-nies will need to develop an integrated sus-tainability approach to stay relevant in this changing business context,” Rajan says. ■

“AN ORGANISATION NEEDS SELF-CONFIDENCE AND A SHARED SENSE OF PURPOSE.”Anders Bouvin, CEO, Handelsbanken

Tata Global Beverages’ Gaon Chalo initiative helps villagers in tea-

producing areas establish their own distribution networks.

“AN ORGANISATION

climate change and sustainable develop-

NEW40-43_sustainability_environmental_model.indd 43 03/11/2017 16:43

Copyright © 2017 Association of International Certified Professional Accountants. All rights reserved. CIMA and The Chartered Institute of Management Accountants are trademarks of The Chartered Institute of Management Accountants and are registered in the United Kingdom and other countries. The design mark is a trademark of the Association of International Certified Professional Accountants.

Visit MY JOBS to try our new salary insight tool and discover your earning potential

The tool allows you to explore average salaries by industry, job role, level of experience and country. Visit the tool today to:

· Compare and contrast your own salary against CGMAs and CIMA students across the globe

· Make use of the data available to get the most accurate view of your earning potential

Find out what you are worth – visit MY JOBS and use the new salary insight tool today.

myjobs.cimaglobal.com

CFO Rising.indd 1 11/07/2017 14:03

DEEP DIVE

DECEMBER 2017

43

what you ‘buy’, but what you ‘buy into’,” he says. “The Tata brand is India’s most valu-able brand, valued 118% higher than its clos-est competitor, according to a third-party study by Interbrand, and it is our commit-ment to strive for value creation for all our stakeholders, and not just our sharehold-ers, that has earned us the trust of the nation.”

“Second, the growing trend of concern for environmental and social issues has opened up a new channel to raise capital via green bonds. According to the Climate Bonds Initiative, about $81 billion of green bonds were issued last year to fund socially respon-sible initiatives. In May last year, Starbucks issued the largest-ever corporate sustaina-bility bond, raising half a billion dollars to fund the coff ee chain’s sustainability activ-ities.

“Third, companies that earn their social licence to operate within the communities they serve have a better chance of succeed-ing in the long term. An interesting exam-ple within the Tata group is the karigar (craftsman) parks set up by Titan Industries for its jewellery business. Recognising that gold jewellery craftsmen came from pre-dominantly marginalised communities and were unorganised, Titan set up safe, healthy, and modern working facilities. The work-

ers were also given fi nancial aid, insurance, and medical facilities at the parks. The ini-tiative not only signifi cantly enhanced the productivity levels of the workers and streamlined the assembly chain, it also improved the average standard of living of the craftsmen,” he says.

Environmental and social factors will have an increasing infl uence on the oper-ating context of global businesses, explains Rajan. He says that to create future-ready businesses, organisations need to integrate sustainability thinking into their businesses by mainstreaming sustainability into each business function. “This requires a shift in the mindset from compliance to culture, and involves collective effort across the stakeholder segments, including employ-ees and value-chain partners,” he adds.

“One of the ways in which we sensitise colleagues in the Tata group on the sustain-ability challenges we all face is through a groupwide volunteering programme. Called ‘Tata Engage’, it is India’s largest corporate volunteering program, with Tata colleagues contributing 1.2 million hours of volunteer-ing support last year to nonprofi ts around the world.

“We also celebrate a Tata sustainability month in June every year, when numerous campaigns are conducted on subjects like

climate change and sustainable develop-ment to help build a culture of sustainabil-ity in the organisation. We are also looking at the sustainability requirements of our supply chain partners and working on devel-oping a strategic approach towards sustain-able sourcing.”

In many ways the Tata business model is continuing to adapt to the changing envi-ronment – an area that all corporates will need to fi nesse.

“As the sustainability imperatives of businesses become more nuanced, compa-nies will need to develop an integrated sus-tainability approach to stay relevant in this changing business context,” Rajan says. ■

“AN ORGANISATION NEEDS SELF-CONFIDENCE AND A SHARED SENSE OF PURPOSE.”Anders Bouvin, CEO, Handelsbanken

Tata Global Beverages’ Gaon Chalo initiative helps villagers in tea-

producing areas establish their own distribution networks.

“AN ORGANISATION

climate change and sustainable develop-

NEW40-43_sustainability_environmental_model.indd 43 03/11/2017 16:43

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DECEMBER 2017

45

berger. More interesting still is how the approach is being used in medical science, said Cukier. “In an experiment diagnosing advanced cancer, scientists didn’t tell the computer what were features to look for in the cell sample. They only gave the com-puter thousands of cell samples and infor-mation on what the patients’ survival rates were,” he said.

“They wanted to see how the algorithm would perform against a human patholo-gist. The result was that three of the traits the algorithm was able to identify were ones the human practitioners didn’t know to look for,” he added.

Cukier stressed that by far the most important message to come out is that there is now a new way of looking at the world. “It is thinking about the world as a plat-form for the collection and analysis of data. As a result, we recognise we are now see-ing a new form of value being created,” he urged. n

To learn more about how management accountants are embracing the big data revolution, go to the CGMA Big

Data Innovation resources webpage at: http://bit.ly/2xAyKxS

leads from a quantitative shift to a quali-tative shift. More isn’t just more, more is different,” added Cukier.

So what does all this information mean for decision-making? How does it make decision-making faster and more accurate, or at least quicker and less expensive?

“With machine learning, ie, the ability of computers to learn without being explic-itly programmed, the idea of computers translating in areas such as voice recogni-tion or self-driving cars is no longer as laughable as it might once have been,” Cuk-ier said.

“In the past, computer programming was about instructing a computer what to do, but with machine learning a computer is inferring what to do based on the data it continuously learns, so we can do new things. Salesforce.com allows a company to track a salesman’s performance, can reg-ister all activities, run analytics around it, and suddenly now can aggregate all this information, so working out how to best approach a client,” said Cukier, who co-au-thored Big Data: A Revolution That Will Trans-form How We Live, Work, and Think in 2013 and Learning With Big Data: The Future of Education in 2014 with Viktor Mayer-Schön-

44-45_lecture report_v4.indd 45 31/10/2017 17:44

The machine at the heart of business models of the future will be very different because big data will create new forms of value, argues Kenneth Cukier, sen-ior editor of digital products at The Econo-

mist and the speaker at the 2017 CIMA Anthony Howitt lecture in September. The biennial lecture is named after Anthony Howitt, FCMA, who was CIMA president between 1972 and 1973, and who established

a charitable fund “for the promotion and dissemination of knowledge in account-ancy and other related subjects”.

In the talk, which was titled “Making Decisions Amidst the Data Deluge”, Cukier described how the ways we are making deci-sions are changing as a result of the rapid advances in technical innovation.

What’s changed, said Cukier, is that technology has become so powerful, the cost of memory has gone down, and data storage ability has massively increased, so that there has been a rise of the big data mindset. There has been a big advancement

DEEP DIVE

of how to create economic value from data, he said. “You can make decisions based on that data in a way that you really couldn’t previously.”

“Classical economists saw the world based on the three factors of production – land, labour, and capital. They hadn’t put data into the equation because it was so hard to collect, store, and process. But those con-straints have largely gone away now, so we can introduce data in ways that we couldn’t before,” he said. “We can put data into the mix of our decision-making, and maybe even automate it.”

The term big data means different things to different people, argued Cukier. “For some it means how we are applying statistics that can be amassed in a way that couldn’t be previously,” he said.

“But at its origins it meant something specific – it meant the amount of data that existed had surpassed the ability of the tech-nical skills to process it. They had to find a new term to explain how they were trying to address this challenge.

“At the same time a technique of artifi-cial intelligence called machine learning, that up until then hadn’t worked very well, started to show a lot of promise. Today the use of machine learning to process big data

THE VALUE MACHINES

The Economist’s Kenneth Cukier explains how artificial intelligence

and machine learning have created a new form

of value that will drive change in organisations and society as a whole.

44-45_lecture report_v4.indd 44 31/10/2017 17:44

DEEP DIVE

DECEMBER 2017

45

berger. More interesting still is how the approach is being used in medical science, said Cukier. “In an experiment diagnosing advanced cancer, scientists didn’t tell the computer what were features to look for in the cell sample. They only gave the com-puter thousands of cell samples and infor-mation on what the patients’ survival rates were,” he said.

“They wanted to see how the algorithm would perform against a human patholo-gist. The result was that three of the traits the algorithm was able to identify were ones the human practitioners didn’t know to look for,” he added.

Cukier stressed that by far the most important message to come out is that there is now a new way of looking at the world. “It is thinking about the world as a plat-form for the collection and analysis of data. As a result, we recognise we are now see-ing a new form of value being created,” he urged. n

To learn more about how management accountants are embracing the big data revolution, go to the CGMA Big

Data Innovation resources webpage at: http://bit.ly/2xAyKxS

leads from a quantitative shift to a quali-tative shift. More isn’t just more, more is different,” added Cukier.

So what does all this information mean for decision-making? How does it make decision-making faster and more accurate, or at least quicker and less expensive?

“With machine learning, ie, the ability of computers to learn without being explic-itly programmed, the idea of computers translating in areas such as voice recogni-tion or self-driving cars is no longer as laughable as it might once have been,” Cuk-ier said.

“In the past, computer programming was about instructing a computer what to do, but with machine learning a computer is inferring what to do based on the data it continuously learns, so we can do new things. Salesforce.com allows a company to track a salesman’s performance, can reg-ister all activities, run analytics around it, and suddenly now can aggregate all this information, so working out how to best approach a client,” said Cukier, who co-au-thored Big Data: A Revolution That Will Trans-form How We Live, Work, and Think in 2013 and Learning With Big Data: The Future of Education in 2014 with Viktor Mayer-Schön-

44-45_lecture report_v4.indd 45 31/10/2017 17:44

The machine at the heart of business models of the future will be very different because big data will create new forms of value, argues Kenneth Cukier, sen-ior editor of digital products at The Econo-

mist and the speaker at the 2017 CIMA Anthony Howitt lecture in September. The biennial lecture is named after Anthony Howitt, FCMA, who was CIMA president between 1972 and 1973, and who established

a charitable fund “for the promotion and dissemination of knowledge in account-ancy and other related subjects”.

In the talk, which was titled “Making Decisions Amidst the Data Deluge”, Cukier described how the ways we are making deci-sions are changing as a result of the rapid advances in technical innovation.

What’s changed, said Cukier, is that technology has become so powerful, the cost of memory has gone down, and data storage ability has massively increased, so that there has been a rise of the big data mindset. There has been a big advancement

DEEP DIVE

of how to create economic value from data, he said. “You can make decisions based on that data in a way that you really couldn’t previously.”

“Classical economists saw the world based on the three factors of production – land, labour, and capital. They hadn’t put data into the equation because it was so hard to collect, store, and process. But those con-straints have largely gone away now, so we can introduce data in ways that we couldn’t before,” he said. “We can put data into the mix of our decision-making, and maybe even automate it.”

The term big data means different things to different people, argued Cukier. “For some it means how we are applying statistics that can be amassed in a way that couldn’t be previously,” he said.

“But at its origins it meant something specific – it meant the amount of data that existed had surpassed the ability of the tech-nical skills to process it. They had to find a new term to explain how they were trying to address this challenge.

“At the same time a technique of artifi-cial intelligence called machine learning, that up until then hadn’t worked very well, started to show a lot of promise. Today the use of machine learning to process big data

THE VALUE MACHINES

The Economist’s Kenneth Cukier explains how artificial intelligence

and machine learning have created a new form

of value that will drive change in organisations and society as a whole.

44-45_lecture report_v4.indd 44 31/10/2017 17:44

DECEMBER 2017

46

DEEP DIVE / OPINION

NIC

K W

ILS

ON

46-47_richard howitt_opinion_v3.indd 46 01/11/2017 16:39

DEEP DIVE / OPINION

DECEMBER 2017

47

I ntegrated reporting and the dynamic business model are interlinked in the way they help companies and organisations defi ne and commu-nicate their business strategy, and in doing so deliver long-term value creation.

What integrated reporting has done is defi ne the business model as an essential building block, not

just for management internally, but as part of what investors expect when they’re rat-ing companies in terms of their prospects.

It’s a very diff erent situation from ten years ago, before the strategic report became a reality in the UK and when few major com-panies wrote down and communicated their business model. We’re now in a position where that situation is becoming the excep-tion rather than the norm.

Now we exist in a world where share-holders want to understand how a company can deliver long-term value creation and stakeholders want details of all aspects of its activities in a globalised, interdepend-ent, inter-related world, with changing soci-etal expectations.

In this context, stakeholder relations are absolutely crucial to value in a way that just wasn’t true 20-30 years ago. Therefore integrated reporting is a tool to help meet stakeholders’ expectations because they can see how the company is delivering against its targets. Stakeholders can also see that the company is looking at their expecta-tions seriously.

The business model comes into the equation because companies and other organisations cannot be all things to all peo-ple, but stakeholders don’t expect that

NIC

K W

ILS

ON

RICHARD HOWITT, CEO OF THE INTERNATIONAL INTEGRATED REPORTING COUNCIL

either. What they’re looking for is credibil-ity in a company to confi rm whether they can trust what a company is saying about its activities. The more clarity the company can off er in defi ning and indicating what is really intrinsic to it, the stronger is the bond of trust.

The business model may deliver on what some stakeholders want, which is a chal-lenge when we live in a world of diff erent interests that have to be resolved. But there are a lot of companies doing an awful lot of work to close the trust defi cit by accu-rately describing who they are and how they operate to their diff erent stakeholder com-munities. The business model is at the heart of whether they’re telling an authentic, believable story.

Even where companies and organisa-tions have to take a decision leading to neg-ative impacts, if external stakeholders can see that the business intrinsically has the right purpose and core, it’s much easier for them to accept that decision-making.

With regard to integrated reports, inves-tors say that not every bit of information, every line on every page, is important. The issue is whether the company is telling the story and has a story to tell – that it has worked out for itself what its business model and strategy is. They can agree or disagree with some of its forecasts and predictions, but the fact that it has gone through rigor-ous internal thinking and has clarity in its business model, is what the investor is rat-ing them on.

Integrated reporting can play a key role in devising a dynamic, living business model. The whole point underpinning inte-grated reporting is that there’s a shift to a

long-term, forward-thinking, and strategic vision for the company and its manage-ment. You only embrace the long term by recognising all the forces of change that exist in markets and then understanding how the company fi ts into that.

That change process doesn’t stop when a company produces its first integrated report in year one. It is a dynamic process, where integrated thinking, not just inte-grated reporting, becomes the company’s ethos. It’s a broader, more strategic and con-nected way of viewing how the company operates, with some powerful examples.

Take the Dutch technology group, Philips, which split from its electronics busi-ness to focus on healthcare. The group has completely changed its business model, and integrated reporting has been intrinsic to how it did that. Now, with demographic challenges and resource constraints aff ect-ing welfare, it needs to adapt to constant challenges.

Another good example is Italian insurer Unipol, which sits in a sector where trust is paramount. Questions it must answer are: Do you trust it to deliver when required, and will it still be there in 20–30 years? The group recognised it had a trust defi cit, so it used integrated reporting to articulate its business model to win support from its cus-tomers.

The risks and challenges that it is pric-ing day in and day out are continually chang-ing, so its business model needs to constantly evolve, which can be achieved through integrated thinking. With a con-stantly evolving business model, the com-pany can respond in a dynamic way to market and societal changes. ■

“Integrated reporting can play a key role in devising a dynamic, living business model.”

NEW46-47_richard howitt_opinion_v3.indd 47 03/11/2017 15:03

DECEMBER 2017

46

DEEP DIVE / OPINIONN

ICK

WIL

SO

N

46-47_richard howitt_opinion_v3.indd 46 01/11/2017 16:39

DEEP DIVE / OPINION

DECEMBER 2017

47

I ntegrated reporting and the dynamic business model are interlinked in the way they help companies and organisations defi ne and commu-nicate their business strategy, and in doing so deliver long-term value creation.

What integrated reporting has done is defi ne the business model as an essential building block, not

just for management internally, but as part of what investors expect when they’re rat-ing companies in terms of their prospects.

It’s a very diff erent situation from ten years ago, before the strategic report became a reality in the UK and when few major com-panies wrote down and communicated their business model. We’re now in a position where that situation is becoming the excep-tion rather than the norm.

Now we exist in a world where share-holders want to understand how a company can deliver long-term value creation and stakeholders want details of all aspects of its activities in a globalised, interdepend-ent, inter-related world, with changing soci-etal expectations.

In this context, stakeholder relations are absolutely crucial to value in a way that just wasn’t true 20-30 years ago. Therefore integrated reporting is a tool to help meet stakeholders’ expectations because they can see how the company is delivering against its targets. Stakeholders can also see that the company is looking at their expecta-tions seriously.

The business model comes into the equation because companies and other organisations cannot be all things to all peo-ple, but stakeholders don’t expect that

NIC

K W

ILS

ON

RICHARD HOWITT, CEO OF THE INTERNATIONAL INTEGRATED REPORTING COUNCIL

either. What they’re looking for is credibil-ity in a company to confi rm whether they can trust what a company is saying about its activities. The more clarity the company can off er in defi ning and indicating what is really intrinsic to it, the stronger is the bond of trust.

The business model may deliver on what some stakeholders want, which is a chal-lenge when we live in a world of diff erent interests that have to be resolved. But there are a lot of companies doing an awful lot of work to close the trust defi cit by accu-rately describing who they are and how they operate to their diff erent stakeholder com-munities. The business model is at the heart of whether they’re telling an authentic, believable story.

Even where companies and organisa-tions have to take a decision leading to neg-ative impacts, if external stakeholders can see that the business intrinsically has the right purpose and core, it’s much easier for them to accept that decision-making.

With regard to integrated reports, inves-tors say that not every bit of information, every line on every page, is important. The issue is whether the company is telling the story and has a story to tell – that it has worked out for itself what its business model and strategy is. They can agree or disagree with some of its forecasts and predictions, but the fact that it has gone through rigor-ous internal thinking and has clarity in its business model, is what the investor is rat-ing them on.

Integrated reporting can play a key role in devising a dynamic, living business model. The whole point underpinning inte-grated reporting is that there’s a shift to a

long-term, forward-thinking, and strategic vision for the company and its manage-ment. You only embrace the long term by recognising all the forces of change that exist in markets and then understanding how the company fi ts into that.

That change process doesn’t stop when a company produces its first integrated report in year one. It is a dynamic process, where integrated thinking, not just inte-grated reporting, becomes the company’s ethos. It’s a broader, more strategic and con-nected way of viewing how the company operates, with some powerful examples.

Take the Dutch technology group, Philips, which split from its electronics busi-ness to focus on healthcare. The group has completely changed its business model, and integrated reporting has been intrinsic to how it did that. Now, with demographic challenges and resource constraints aff ect-ing welfare, it needs to adapt to constant challenges.

Another good example is Italian insurer Unipol, which sits in a sector where trust is paramount. Questions it must answer are: Do you trust it to deliver when required, and will it still be there in 20–30 years? The group recognised it had a trust defi cit, so it used integrated reporting to articulate its business model to win support from its cus-tomers.

The risks and challenges that it is pric-ing day in and day out are continually chang-ing, so its business model needs to constantly evolve, which can be achieved through integrated thinking. With a con-stantly evolving business model, the com-pany can respond in a dynamic way to market and societal changes. ■

“Integrated reporting can play a key role in devising a dynamic, living business model.”

NEW46-47_richard howitt_opinion_v3.indd 47 03/11/2017 15:03

DEEP DIVE

DECEMBER 2017

48

NEW48-50_Case Study_PWC Retail.indd 48 03/11/2017 15:05

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With their vast supply chains, large retailers face the unenviable challenge of developing business models that are both sustainable and stand up to stakeholder

scrutiny. But Marks & Spencer and the John Lewis Partnership are doing just that and were both highly

commended recently at a prestigious awards ceremony.

hen suppliers to retail giant Marks & Spen-cer (M&S) and ASOS, two of the UK’s best-known brands, were found to have employed child labour last year, customers, sharehold-ers, and other stakeholders demanded change.

Though M&S reacted quickly to address the issue – launching a full investigation into employment practices in its entire sup-ply chain – the ripple effect has continued, as everyone within the company and out-side recognises the negative impact that such revelations mean for businesses. The incident reaffirms the need for transpar-ency across a company’s activities, no mat-ter how extended its operations are.

In this year’s PwC Building Public Trust in Corporate Reporting Awards, M&S was highly commended in the Innovation cat-egory for its efforts to convey transparency across the group and set out its corporate vision. Anthony Clarke, M&S’s deputy com-pany secretary, says: “Customers are at the heart of everything we do at Marks & Spen-cer, and the last decade has seen growing demand from customers for greater trans-parency about where and how retailers source their products.

“Customers are increasingly aware of

their personal impact on the world, and businesses must work hard to build and maintain their trust. We take transparency and traceability very seriously and have extremely high production standards.”

And it is not just customers who have an interest in the sustainability of the com-pany, but investors, too.

“Increasingly we know that our inves-tors are interested in creating sustainable value,” Clarke adds. “It is something that is recognised as a point of difference for M&S through Plan A – our eco and ethical plan. It is fully embedded into the way we do busi-ness, and the way we draft our reporting allows us to demonstrate this throughout the annual report and the dedicated Plan A report.”

Integrated reporting is a key pillar of M&S’s approach to producing its annual report, with Clarke outlining that the group focused on non-financial value creation throughout, from the chairman’s statement to the detailed divisional performance reviews, through to risk and governance.

“Our strategy was, first and foremost, to start early,” he explains. “Integrated reporting can only be a reflection of inte-grated thinking.

SHOP AND AWE

TH

E P

RO

JEC

T T

WIN

S

W48-50_Case Study_PWC Retail.indd 49 02/11/2017 18:00

DEEP DIVE

DECEMBER 2017

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NEW48-50_Case Study_PWC Retail.indd 48 03/11/2017 15:05

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With their vast supply chains, large retailers face the unenviable challenge of developing business models that are both sustainable and stand up to stakeholder

scrutiny. But Marks & Spencer and the John Lewis Partnership are doing just that and were both highly

commended recently at a prestigious awards ceremony.

hen suppliers to retail giant Marks & Spen-cer (M&S) and ASOS, two of the UK’s best-known brands, were found to have employed child labour last year, customers, sharehold-ers, and other stakeholders demanded change.

Though M&S reacted quickly to address the issue – launching a full investigation into employment practices in its entire sup-ply chain – the ripple effect has continued, as everyone within the company and out-side recognises the negative impact that such revelations mean for businesses. The incident reaffirms the need for transpar-ency across a company’s activities, no mat-ter how extended its operations are.

In this year’s PwC Building Public Trust in Corporate Reporting Awards, M&S was highly commended in the Innovation cat-egory for its efforts to convey transparency across the group and set out its corporate vision. Anthony Clarke, M&S’s deputy com-pany secretary, says: “Customers are at the heart of everything we do at Marks & Spen-cer, and the last decade has seen growing demand from customers for greater trans-parency about where and how retailers source their products.

“Customers are increasingly aware of

their personal impact on the world, and businesses must work hard to build and maintain their trust. We take transparency and traceability very seriously and have extremely high production standards.”

And it is not just customers who have an interest in the sustainability of the com-pany, but investors, too.

“Increasingly we know that our inves-tors are interested in creating sustainable value,” Clarke adds. “It is something that is recognised as a point of difference for M&S through Plan A – our eco and ethical plan. It is fully embedded into the way we do busi-ness, and the way we draft our reporting allows us to demonstrate this throughout the annual report and the dedicated Plan A report.”

Integrated reporting is a key pillar of M&S’s approach to producing its annual report, with Clarke outlining that the group focused on non-financial value creation throughout, from the chairman’s statement to the detailed divisional performance reviews, through to risk and governance.

“Our strategy was, first and foremost, to start early,” he explains. “Integrated reporting can only be a reflection of inte-grated thinking.

SHOP AND AWE

TH

E P

RO

JEC

T T

WIN

S

W48-50_Case Study_PWC Retail.indd 49 02/11/2017 18:00

DEEP DIVE

DECEMBER 2017

50

“However, throughout, we knew we had to be careful to balance integrated report-ing best practice with ensuring the report was readily comprehensible to a wide vari-ety of stakeholders, including institutional investors and retail shareholders.”

Continuing to innovate and move for-ward in terms of integrated reporting best practice was a key objective of this year’s report, says Clarke. “A new addition this year was the introduction of ‘value crea-tion in action’ case studies, which demon-strate how M&S really creates value on the ground, as well as a new spread offering external context as well as insights from our Customer Insight Unit.”

“Integrated reporting is a valuable tool for keeping the report focused, relevant, more coherent for stakeholders and easier for them to navigate. It helps to ensure that the report tells the story of a business that is more than the sum of its parts, and that has a clear strategy and the right operating model to grow profits in a sustainable way.”

For the John Lewis Partnership (JLP), the largest employee-owned company in the UK, its unique structure requires it to convey transparency and vision in its annual report. Simon Fowler, director of communications at JLP, explains the con-text of the partnership’s approach to report-

ing, which was highly commended in the PwC awards’ Private Business category.

He says that when John Spedan Lewis set up the partnership in 1929, he created a constitution that clearly defines how the business, its partners, and its staff are expected to behave towards customers, sup-pliers, the environment, the wider com-munity, and each other.

“As an employee-owned business, the partnership operates democratically and follows the principles of being fair, open, and transparent to all our stakeholders,” he says. “This extends to our annual report and accounts, and we take pride in being transparent with our partners and custom-ers. We will always go above and beyond what is needed for this report even though sometimes this may not be required as we are not a listed company.”

“Unlike shareholders in other busi-nesses, JLP’s partners own the business in perpetuity and therefore are responsible to future generations of partners for the partnership’s long-term sustainability,” Fowler explains. “With so much fundamen-tal change happening in society, the work-place, and in the retail sector, our ownership structure enables us to take a long-term view of our businesses and its strategy, which looks forward to 2028.”

Given that JLP sources 380,000 prod-ucts from around 13,000 suppliers in more than 90 countries, Fowler says it’s vitally important to explain supply chain impact in the report.

“JLP recognises that growing pressure on global supply chains, the people who work in them, and the natural environ-ment [is] likely to make our costs more volatile and impact the stability of our sup-ply,” he says. “Changes in society – such as growing public health pressures – will also require us to respond to ever more complex needs in our product offer if we are to attract and retain valued custom-ers.”

Integrated reporting is key to JLP’s approach. In 2013 an integrated reporting framework was introduced to help bring to life the connectivity between strategy, performance, JLP’s role in society, and long-term value creation, says Fowler.

“It has helped us design our commu-nication to give partners, as co-owners, a clearer, more forward-looking perspective on the business. For example, our busi-ness model is designed to help partners to understand the vast natural, social, and physical resources we depend on in order to achieve our purpose and to return value not just to us but to our stakeholders.” n

“WE TAKE PRIDE IN BEING TRANSPARENT WITH OUR PARTNERS AND CUSTOMERS.”Simon Fowler, director of communications, JLP

48-50_Case Study_PWC Retail.indd 50 02/11/2017 18:01

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DEEP DIVE

DECEMBER 2017

50

“However, throughout, we knew we had to be careful to balance integrated report-ing best practice with ensuring the report was readily comprehensible to a wide vari-ety of stakeholders, including institutional investors and retail shareholders.”

Continuing to innovate and move for-ward in terms of integrated reporting best practice was a key objective of this year’s report, says Clarke. “A new addition this year was the introduction of ‘value crea-tion in action’ case studies, which demon-strate how M&S really creates value on the ground, as well as a new spread offering external context as well as insights from our Customer Insight Unit.”

“Integrated reporting is a valuable tool for keeping the report focused, relevant, more coherent for stakeholders and easier for them to navigate. It helps to ensure that the report tells the story of a business that is more than the sum of its parts, and that has a clear strategy and the right operating model to grow profits in a sustainable way.”

For the John Lewis Partnership (JLP), the largest employee-owned company in the UK, its unique structure requires it to convey transparency and vision in its annual report. Simon Fowler, director of communications at JLP, explains the con-text of the partnership’s approach to report-

ing, which was highly commended in the PwC awards’ Private Business category.

He says that when John Spedan Lewis set up the partnership in 1929, he created a constitution that clearly defines how the business, its partners, and its staff are expected to behave towards customers, sup-pliers, the environment, the wider com-munity, and each other.

“As an employee-owned business, the partnership operates democratically and follows the principles of being fair, open, and transparent to all our stakeholders,” he says. “This extends to our annual report and accounts, and we take pride in being transparent with our partners and custom-ers. We will always go above and beyond what is needed for this report even though sometimes this may not be required as we are not a listed company.”

“Unlike shareholders in other busi-nesses, JLP’s partners own the business in perpetuity and therefore are responsible to future generations of partners for the partnership’s long-term sustainability,” Fowler explains. “With so much fundamen-tal change happening in society, the work-place, and in the retail sector, our ownership structure enables us to take a long-term view of our businesses and its strategy, which looks forward to 2028.”

Given that JLP sources 380,000 prod-ucts from around 13,000 suppliers in more than 90 countries, Fowler says it’s vitally important to explain supply chain impact in the report.

“JLP recognises that growing pressure on global supply chains, the people who work in them, and the natural environ-ment [is] likely to make our costs more volatile and impact the stability of our sup-ply,” he says. “Changes in society – such as growing public health pressures – will also require us to respond to ever more complex needs in our product offer if we are to attract and retain valued custom-ers.”

Integrated reporting is key to JLP’s approach. In 2013 an integrated reporting framework was introduced to help bring to life the connectivity between strategy, performance, JLP’s role in society, and long-term value creation, says Fowler.

“It has helped us design our commu-nication to give partners, as co-owners, a clearer, more forward-looking perspective on the business. For example, our busi-ness model is designed to help partners to understand the vast natural, social, and physical resources we depend on in order to achieve our purpose and to return value not just to us but to our stakeholders.” n

“WE TAKE PRIDE IN BEING TRANSPARENT WITH OUR PARTNERS AND CUSTOMERS.”Simon Fowler, director of communications, JLP

48-50_Case Study_PWC Retail.indd 50 02/11/2017 18:01

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• New conference sessions and webcasts added monthly

Available for less than £1 per day for CIMA members and students, take advantage of this all-access pass to advance your career and subscribe today at www.cimaglobal.com/CGMAEssentials

© 2017 Association of International Certified Professional Accountants. All rights reserved. CGMA and Chartered Global Management Accountant are trademarks of the Association of International Certified Professional Accountants and are registered in the United States and other countries. The design mark is a trademark of the Association of International Certified Professional Accountants. 23090-344

23090-344 CPD Collection Ad.indd 1 9/11/17 9:04 AM

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IN PRACTICE3

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POWER OF STRATEGIC ALLIANCES; HOW TO FOSTER A CULTURE OF CREATIVITY; INSTITUTE NEWS; THE VIEW FROM

ANDREW HARDING, CE0 – MANAGEMENT ACCOUNTING

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CIMA on demand

CIMA on demand is our catalogue of over 130 online CPD courses, designed for busy fi nance and business professionals who need training that’s fl exible.

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IN PRACTICE3

Q&A: BOB BEEDHAM, CHAIR OF CIMA’S PROFESSIONAL STANDARDS COMMITTEE; HARNESSING THE

POWER OF STRATEGIC ALLIANCES; HOW TO FOSTER A CULTURE OF CREATIVITY; INSTITUTE NEWS; THE VIEW FROM

ANDREW HARDING, CE0 – MANAGEMENT ACCOUNTING

53_Section_3_v1.indd 53 31/10/2017 17:45

CIMA’s Professional Standards Committee oversees the regulation of CIMA members and registered students. This includes adherence to the requirements of external regulators. The committee approves changes to the Royal charter, byelaws, and regulations and is responsible for the Code of Ethics, and develops and oversees several monitoring regimes to ensure that members comply with these requirements. It also provides guidance for members on compliance, and ensures that CIMA’s professional standards and conduct processes remain up to date and command the confi dence of stakeholders and the public.

STANDARD-SETTER

QIf you could give advice to a newly qualifi ed management accountant, what would it be?

A I benefi ted early on in my career from the advice of Jack Burton, who put me on the accountancy path. For newly qualifi ed management account-

ants today, I would say put yourself in the position of the person receiving the information. What would be the fi rst question you would ask, and what kind of reac-tion are you trying to achieve? Sometimes you need to step back from the detail and look at the big picture before you present the information. We can all make that extra eff ort to do our chosen job that much better.

QHow do you see the future of ethics and professionalism developing for CGMA designation-holders?

A Every professional member needs to be respected and trusted if they are going to contribute to the success of businesses. CIMA members help

businesses to succeed and in so doing must uphold the highest professional standards. This is the foun-dation upon which everything else is built. Secondly, our members must grow and improve once they have obtained their qualifi cation. So continuing professional development and remaining relevant is vital if we want to be the leading profession that provides fi nancial and business advice. I am delighted that the continu-ing relationship with the American Institute of Certi-

fied Public Accountants (AICPA) through our Association is providing access to an even larger suite of lifelong learning resources for our members, and that together we will continue to support them through-out their careers, equipping them to respond eff ectively to the challenges that they will undoubt-edly face as the pace of change in business continues to accelerate. ■

IN PRACTICE

54-55_standards board_v2.indd 55 06/11/2017 12:20

choices and decisions. It is important that the Insti-tute supports the membership in as many ways as pos-sible, so we can all achieve that high level of competency and honesty. The PSC can help our members uphold these standards. Committee members have a wealth of knowledge and experience across a variety of busi-nesses. This, combined with talented and focused CIMA staff , provides a great opportunity to oversee the reg-ulatory framework within which our members oper-ate.

The purpose of regulation is to serve the public interest, and it includes helping our members to be the best professionals they can be. It can sometimes be diffi cult to achieve the right balance between robust regulation and proportionate enforcement.

This is why we sample our members’ CPD [continuing pro-fessional development] records – we trust all members to keep their CPD up to date, but by hav-ing a monitoring process, we stand up to public scrutiny. Eff ective regulation should be as easy as possible to under-stand and comply with, which is why the professional standards department always looks to pro-vide explanation and guidance.

QHow do you see the PSC’s role in helping members?

A Having been a member of the PSC for three years prior to becoming chairman, it is clear the pro-fession has credibility with employers and the

general public because the membership complies to a high standard of working practices and ethics. This creates a high level of trust. Without the trust of our stakeholders, our members cannot be considered val-uable employees or advisers.

I believe it is the role of the Institute to provide its members with the right and appropriate standards and also the tools to fulfi l their roles. The standards of pro-fessionalism set by the committee are core to the Insti-tute’s role, as is the guidance provided to support members in their adherence to those standards. I want to see members embracing the standards as a positive diff erentiator between them and the unqualifi ed and unregulated individuals out there who call themselves accountants.

QWhat do you want to achieve in your two-year term?

A The Institute has a vital role in ensuring we uphold the highest possible levels of profes-sionalism and ethics. Our members know what

is the right thing to do, and how to face up to diffi cult

choices and decisions. It is important that the Insti-tute supports the membership in as many ways as pos-sible, so we can all achieve that high level of competency and honesty. The PSC can help our members uphold these standards. Committee members have a wealth of knowledge and experience across a variety of busi-nesses. This, combined with talented and focused CIMA staff , provides a great opportunity to oversee the reg-ulatory framework within which our members oper-

The purpose of regulation is to serve the public interest, and it includes helping our members to be the best professionals they can be. It can sometimes be diffi cult to achieve the right balance between robust regulation and proportionate

This is why we sample our members’ CPD [continuing pro-fessional development] records – we trust all members to keep their CPD up to date, but by hav-ing a monitoring process, we stand up to public scrutiny. Eff ective regulation should be as easy as possible to under-stand and comply with, which is why the professional standards department always looks to pro-vide explanation and guidance.

DECEMBER 2017

54

IN PRACTICE

The gold standardAs he moves through his two-year term as chair of CIMA’s Professional Standards Committee (PSC),

Bob Beedham talks about ethics and professionalism.

IKO

N I

MA

GE

S/S

IMO

N C

RIT

CH

LE

Y

NEW 54-55_standards board_v2.indd 54 06/11/2017 14:40

CIMA’s Professional Standards Committee oversees the regulation of CIMA members and registered students. This includes adherence to the requirements of external regulators. The committee approves changes to the Royal charter, byelaws, and regulations and is responsible for the Code of Ethics, and develops and oversees several monitoring regimes to ensure that members comply with these requirements. It also provides guidance for members on compliance, and ensures that CIMA’s professional standards and conduct processes remain up to date and command the confi dence of stakeholders and the public.

STANDARD-SETTER

QIf you could give advice to a newly qualifi ed management accountant, what would it be?

A I benefi ted early on in my career from the advice of Jack Burton, who put me on the accountancy path. For newly qualifi ed management account-

ants today, I would say put yourself in the position of the person receiving the information. What would be the fi rst question you would ask, and what kind of reac-tion are you trying to achieve? Sometimes you need to step back from the detail and look at the big picture before you present the information. We can all make that extra eff ort to do our chosen job that much better.

QHow do you see the future of ethics and professionalism developing for CGMA designation-holders?

A Every professional member needs to be respected and trusted if they are going to contribute to the success of businesses. CIMA members help

businesses to succeed and in so doing must uphold the highest professional standards. This is the foun-dation upon which everything else is built. Secondly, our members must grow and improve once they have obtained their qualifi cation. So continuing professional development and remaining relevant is vital if we want to be the leading profession that provides fi nancial and business advice. I am delighted that the continu-ing relationship with the American Institute of Certi-

fied Public Accountants (AICPA) through our Association is providing access to an even larger suite of lifelong learning resources for our members, and that together we will continue to support them through-out their careers, equipping them to respond eff ectively to the challenges that they will undoubt-edly face as the pace of change in business continues to accelerate. ■

IN PRACTICE

54-55_standards board_v2.indd 55 06/11/2017 12:20

choices and decisions. It is important that the Insti-tute supports the membership in as many ways as pos-sible, so we can all achieve that high level of competency and honesty. The PSC can help our members uphold these standards. Committee members have a wealth of knowledge and experience across a variety of busi-nesses. This, combined with talented and focused CIMA staff , provides a great opportunity to oversee the reg-ulatory framework within which our members oper-ate.

The purpose of regulation is to serve the public interest, and it includes helping our members to be the best professionals they can be. It can sometimes be diffi cult to achieve the right balance between robust regulation and proportionate enforcement.

This is why we sample our members’ CPD [continuing pro-fessional development] records – we trust all members to keep their CPD up to date, but by hav-ing a monitoring process, we stand up to public scrutiny. Eff ective regulation should be as easy as possible to under-stand and comply with, which is why the professional standards department always looks to pro-vide explanation and guidance.

QHow do you see the PSC’s role in helping members?

A Having been a member of the PSC for three years prior to becoming chairman, it is clear the pro-fession has credibility with employers and the

general public because the membership complies to a high standard of working practices and ethics. This creates a high level of trust. Without the trust of our stakeholders, our members cannot be considered val-uable employees or advisers.

I believe it is the role of the Institute to provide its members with the right and appropriate standards and also the tools to fulfi l their roles. The standards of pro-fessionalism set by the committee are core to the Insti-tute’s role, as is the guidance provided to support members in their adherence to those standards. I want to see members embracing the standards as a positive diff erentiator between them and the unqualifi ed and unregulated individuals out there who call themselves accountants.

QWhat do you want to achieve in your two-year term?

A The Institute has a vital role in ensuring we uphold the highest possible levels of profes-sionalism and ethics. Our members know what

is the right thing to do, and how to face up to diffi cult

choices and decisions. It is important that the Insti-tute supports the membership in as many ways as pos-sible, so we can all achieve that high level of competency and honesty. The PSC can help our members uphold these standards. Committee members have a wealth of knowledge and experience across a variety of busi-nesses. This, combined with talented and focused CIMA staff , provides a great opportunity to oversee the reg-ulatory framework within which our members oper-

The purpose of regulation is to serve the public interest, and it includes helping our members to be the best professionals they can be. It can sometimes be diffi cult to achieve the right balance between robust regulation and proportionate

This is why we sample our members’ CPD [continuing pro-fessional development] records – we trust all members to keep their CPD up to date, but by hav-ing a monitoring process, we stand up to public scrutiny. Eff ective regulation should be as easy as possible to under-stand and comply with, which is why the professional standards department always looks to pro-vide explanation and guidance.

DECEMBER 2017

54

IN PRACTICE

The gold standardAs he moves through his two-year term as chair of CIMA’s Professional Standards Committee (PSC),

Bob Beedham talks about ethics and professionalism.

IKO

N I

MA

GE

S/S

IMO

N C

RIT

CH

LE

Y

NEW 54-55_standards board_v2.indd 54 06/11/2017 14:40

© 2017 The Chartered Institute of Management Accountants. All rights reserved. CIMA is a trademark of The Chartered Institute of Management Accountants and is registered in the United Kingdom, United States and other jurisdictions.The design mark is a trademark of the Association of International Certifi ed Professional Accountants.

Uncover a world of possibilities for your futureDiscover a different perspective on global business. Learn more about the award-winning CIMA Islamic Finance qualifi cation.

cimaglobal.com/differentperspective

© 2017 The Chartered Institute of Management Accountants. All rights reserved. CIMA is a trademark of The Chartered Institute of Management Accountants and is registered in the United Kingdom, United States and other jurisdictions.The design mark is a trademark of the Association of International Certifi ed Professional Accountants.

UK Islamic Finance Campaign-fullpagead.indd 1 9/5/17 3:15 PM

IN PRACTICE

DECEMBER 2017

57

As one of the world’s largest auto manufacturers, the Renault-Nissan-Mitsubishi Allia

nce has built a

dynamic business model that reflects how the multi-partner organisation works. By Lawrie Holm

es.

Partnering up

57-59_in practice_renault nissan_v2.indd 57 01/11/2017 16:43

© 2017 The Chartered Institute of Management Accountants. All rights reserved. CIMA is a trademark of The Chartered Institute of Management Accountants and is registered in the United Kingdom, United States and other jurisdictions.The design mark is a trademark of the Association of International Certifi ed Professional Accountants.

Uncover a world of possibilities for your futureDiscover a different perspective on global business. Learn more about the award-winning CIMA Islamic Finance qualifi cation.

cimaglobal.com/differentperspective

© 2017 The Chartered Institute of Management Accountants. All rights reserved. CIMA is a trademark of The Chartered Institute of Management Accountants and is registered in the United Kingdom, United States and other jurisdictions.The design mark is a trademark of the Association of International Certifi ed Professional Accountants.

UK Islamic Finance Campaign-fullpagead.indd 1 9/5/17 3:15 PM

IN PRACTICE

DECEMBER 2017

57

As one of the world’s largest auto manufacturers, the Renault-Nissan-Mitsubishi Allia

nce has built a

dynamic business model that reflects how the multi-partner organisation works. By Lawrie Holm

es.

Partnering up

57-59_in practice_renault nissan_v2.indd 57 01/11/2017 16:43

IN PRACTICE

When you are working with several of the world’s leading carmakers to develop vehicles on every continent, you need to have a clearly understood plan for navigating the complex challenges that

are affecting the industry. While carmakers are renowned for creating and refining some of the most innovative management practices, it’s also a precari-ous sector to be in. As well as the economic factors and constantly changing tastes that can dramatically raise or lower expectations of the industry’s leaders, increasing environmental concerns are also shaping levels of demand.

In this context, the Renault-Nissan-Mitsubishi Alli-ance has grown to become the world’s fourth-largest carmaker, manufacturing one in every nine cars pro-duced on the planet, and has devised a business plan that can adapt to this multitude of changing variables.

“A dynamic business model is very important to us, especially considering the challenges that the auto-motive industry is currently facing,” says Jérémie Papin, the Alliance’s head of financial strategy. “But mostly I would say that the key to a successful business model is its ability to understand and constantly embrace cus-tomers’ needs.”

“Another key factor to a successful business model

is to be conscious of the levers and key assets it is made of,” says Papin. “For Groupe Renault, I would name a few that enable the company to look at the future with confidence, even if this future is fast changing and complex. These would include Alliance synergies for resource communalisation, a customer-centric approach written in our DNA, and a comprehensive regional organisation and footprint.”

Papin says there have been significant challenges to developing a business model that encompasses the complex mix of strategic alliances that the group has been finessing for 18 years. Since 1999, Renault has proved, within the Alliance, with Nissan and now Mit-subishi Motors, its ability to build strong partnerships, says Papin, the right-hand man of the Alliance’s chair-man and CEO Carlos Ghosn, arguably the world’s best strategist when it comes to motor manufacturing.

Papin’s skillset, honed at investment banks Deutsche Bank, Lehman Brothers, and Nomura after earning degrees in economics and political science and a master’s degree in corporate finance, both gained in France, were put to the test when he arrived at Renault in 2009.

Development of the Alliance has taken place in sev-eral stages. In 2002, a set of cross-functional teams, staffed by people from Renault and Nissan, started to seek out opportunities. By 2009, a much more trans-parent process was in place, featuring cross-functional teams and functional task teams managed by a small

DECEMBER 2017

58

57-59_in practice_renault nissan_v2.indd 58 01/11/2017 16:43

team of dedicated Alliance directors in order to accel-erate synergies and best-practice sharing. The Alliance adopted its current name last September, a year after Nissan acquired a controlling stake in Mitsubishi.

“It has not been an easy journey, but I think the success relies on a specific approach. We call it ‘win-win’, which means that any project should benefit all parties,” he says. “Win-win does not mean all benefits are equal for the parties in every project, but that we engage in joint projects every time all partners are bet-ter off economically thanks to the project.

“The consequence today is more than €5 billion of savings, going towards €10 billion in 2022. Today we are facing new challenges in the automotive value chain: the application of new technology – electric vehicle, autonomous driving, and connected cars – is chang-ing the shape of the value chain,” says Papin, who is also responsible for strategic partnerships and new ventures.

He says that means new entrants, the emergence of mega suppliers, and a need for increased collabora-tion between original equipment manufacturers (OEMs) and innovators. Papin says new questions arise, in terms of liability, development methods, revenue sharing, and the relation with the end customer. “Our approach is that collaboration will become attractive for each stakeholder as long as we have a clear strategy and a clear technology plan,” he says.

For Renault-Nissan-Mitsubishi, having a business

model that is flexible enough to incorporate a number of alliances offers several pluses. “The first benefit of our strategic alliance is scale,” Papin says. “It creates a virtuous circle where, by enabling better and optimised development, at the best cost, it directly serves qual-ity and customer satisfaction,” he says.

“More concretely, if we think of Groupe Renault’s strategic plan: We plan on spending €18 billion until 2022, and thanks to the Alliance with Nissan and Mit-subishi, it will give us access to over €50 billion worth of research and development.”

Papin says another benefit of strategic alliances reflected in the case of Renault is the direct impact of synergy. “Cost avoidance helps us free resources in order to focus on more projects,” he says. “There’s the abil-ity for a relatively small OEM to offer a very wide prod-uct portfolio and an easier regional presence thanks to shared investments and optimised return on capi-tal employed.”

“All in all, we are in a position today, and this is thanks to the strategic alliance we have, to ensure that we are ready to meet all automotive industry challenges, regulations without having to compromise,” he adds.

“Ensuring the right culture is also a matter of resil-ience and conviction,” he says.

“We have to be sure that everybody, at each level of the company, buys into the benefits from the Alli-ance. We have to explain the causes for our growth momentum at Renault and make the link with the efforts to build projects within the Alliance.” n

Hala Farouk Almoayyed, the executive director of Almoayyed Contracting Group (ACG), one of Bahrain’s largest private employers, has had to rework the firm’s business model to address a changing economic environment.

In recent years the falling oil price has had a big impact on the Middle Eastern region where ACG – a building services company that employs around 6,000 people – undertakes most of its work. “As client spending has gone down it has forced a rethink on the business model with greater onus on effectiveness and efficiency,” she says.

One adaptation has been to seek out alliances with potential partners in the region. ACG, which sits in the group of companies called YK Almoayyed & Sons, has continued to thrive in Bahrain after Almoayyed’s grandfather began trading in the 1920s. The company has traditionally undertaken a lot of work for the Bahrain government and private developers.

One area where the group has responded to changing circumstances is to develop more housing with facilities to capture more alternative energy sources. “We are always looking at the most efficient energy for households,” says Almoayyed, who regularly features in the Forbes list of the 50 most powerful Arab women.

“By delivering greater societal value we are benefiting from what is a virtuous circle,” she adds. “Although the core business is still there, the business model should change with changing market conditions.”

THE WINDS OF CHANGE

THE RENAULT-NISSAN-

MITSUBISHI ALLIANCE

9.96MILLION

OF ALL CARS SOLD

WORLDWIDE

VEHICLES SOLD BY ALLIANCE IN 2016, WHICH IS...

11%

GE

TT

Y IM

AG

ES

The assembly line at Nissan’s American manufacturing plant in Canton, Mississippi.

DECEMBER 2017

59

IN PRACTICE

57-59_in practice_renault nissan_v2.indd 59 01/11/2017 16:43

IN PRACTICE

When you are working with several of the world’s leading carmakers to develop vehicles on every continent, you need to have a clearly understood plan for navigating the complex challenges that

are affecting the industry. While carmakers are renowned for creating and refining some of the most innovative management practices, it’s also a precari-ous sector to be in. As well as the economic factors and constantly changing tastes that can dramatically raise or lower expectations of the industry’s leaders, increasing environmental concerns are also shaping levels of demand.

In this context, the Renault-Nissan-Mitsubishi Alli-ance has grown to become the world’s fourth-largest carmaker, manufacturing one in every nine cars pro-duced on the planet, and has devised a business plan that can adapt to this multitude of changing variables.

“A dynamic business model is very important to us, especially considering the challenges that the auto-motive industry is currently facing,” says Jérémie Papin, the Alliance’s head of financial strategy. “But mostly I would say that the key to a successful business model is its ability to understand and constantly embrace cus-tomers’ needs.”

“Another key factor to a successful business model

is to be conscious of the levers and key assets it is made of,” says Papin. “For Groupe Renault, I would name a few that enable the company to look at the future with confidence, even if this future is fast changing and complex. These would include Alliance synergies for resource communalisation, a customer-centric approach written in our DNA, and a comprehensive regional organisation and footprint.”

Papin says there have been significant challenges to developing a business model that encompasses the complex mix of strategic alliances that the group has been finessing for 18 years. Since 1999, Renault has proved, within the Alliance, with Nissan and now Mit-subishi Motors, its ability to build strong partnerships, says Papin, the right-hand man of the Alliance’s chair-man and CEO Carlos Ghosn, arguably the world’s best strategist when it comes to motor manufacturing.

Papin’s skillset, honed at investment banks Deutsche Bank, Lehman Brothers, and Nomura after earning degrees in economics and political science and a master’s degree in corporate finance, both gained in France, were put to the test when he arrived at Renault in 2009.

Development of the Alliance has taken place in sev-eral stages. In 2002, a set of cross-functional teams, staffed by people from Renault and Nissan, started to seek out opportunities. By 2009, a much more trans-parent process was in place, featuring cross-functional teams and functional task teams managed by a small

DECEMBER 2017

58

57-59_in practice_renault nissan_v2.indd 58 01/11/2017 16:43

team of dedicated Alliance directors in order to accel-erate synergies and best-practice sharing. The Alliance adopted its current name last September, a year after Nissan acquired a controlling stake in Mitsubishi.

“It has not been an easy journey, but I think the success relies on a specific approach. We call it ‘win-win’, which means that any project should benefit all parties,” he says. “Win-win does not mean all benefits are equal for the parties in every project, but that we engage in joint projects every time all partners are bet-ter off economically thanks to the project.

“The consequence today is more than €5 billion of savings, going towards €10 billion in 2022. Today we are facing new challenges in the automotive value chain: the application of new technology – electric vehicle, autonomous driving, and connected cars – is chang-ing the shape of the value chain,” says Papin, who is also responsible for strategic partnerships and new ventures.

He says that means new entrants, the emergence of mega suppliers, and a need for increased collabora-tion between original equipment manufacturers (OEMs) and innovators. Papin says new questions arise, in terms of liability, development methods, revenue sharing, and the relation with the end customer. “Our approach is that collaboration will become attractive for each stakeholder as long as we have a clear strategy and a clear technology plan,” he says.

For Renault-Nissan-Mitsubishi, having a business

model that is flexible enough to incorporate a number of alliances offers several pluses. “The first benefit of our strategic alliance is scale,” Papin says. “It creates a virtuous circle where, by enabling better and optimised development, at the best cost, it directly serves qual-ity and customer satisfaction,” he says.

“More concretely, if we think of Groupe Renault’s strategic plan: We plan on spending €18 billion until 2022, and thanks to the Alliance with Nissan and Mit-subishi, it will give us access to over €50 billion worth of research and development.”

Papin says another benefit of strategic alliances reflected in the case of Renault is the direct impact of synergy. “Cost avoidance helps us free resources in order to focus on more projects,” he says. “There’s the abil-ity for a relatively small OEM to offer a very wide prod-uct portfolio and an easier regional presence thanks to shared investments and optimised return on capi-tal employed.”

“All in all, we are in a position today, and this is thanks to the strategic alliance we have, to ensure that we are ready to meet all automotive industry challenges, regulations without having to compromise,” he adds.

“Ensuring the right culture is also a matter of resil-ience and conviction,” he says.

“We have to be sure that everybody, at each level of the company, buys into the benefits from the Alli-ance. We have to explain the causes for our growth momentum at Renault and make the link with the efforts to build projects within the Alliance.” n

Hala Farouk Almoayyed, the executive director of Almoayyed Contracting Group (ACG), one of Bahrain’s largest private employers, has had to rework the firm’s business model to address a changing economic environment.

In recent years the falling oil price has had a big impact on the Middle Eastern region where ACG – a building services company that employs around 6,000 people – undertakes most of its work. “As client spending has gone down it has forced a rethink on the business model with greater onus on effectiveness and efficiency,” she says.

One adaptation has been to seek out alliances with potential partners in the region. ACG, which sits in the group of companies called YK Almoayyed & Sons, has continued to thrive in Bahrain after Almoayyed’s grandfather began trading in the 1920s. The company has traditionally undertaken a lot of work for the Bahrain government and private developers.

One area where the group has responded to changing circumstances is to develop more housing with facilities to capture more alternative energy sources. “We are always looking at the most efficient energy for households,” says Almoayyed, who regularly features in the Forbes list of the 50 most powerful Arab women.

“By delivering greater societal value we are benefiting from what is a virtuous circle,” she adds. “Although the core business is still there, the business model should change with changing market conditions.”

THE WINDS OF CHANGE

THE RENAULT-NISSAN-

MITSUBISHI ALLIANCE

9.96MILLION

OF ALL CARS SOLD

WORLDWIDE

VEHICLES SOLD BY ALLIANCE IN 2016, WHICH IS...

11%

GE

TT

Y IM

AG

ES

The assembly line at Nissan’s American manufacturing plant in Canton, Mississippi.

DECEMBER 2017

59

IN PRACTICE

57-59_in practice_renault nissan_v2.indd 59 01/11/2017 16:43

DECEMBER 2017

61

IN PRACTICE

TECH NOTESLeadership expert Sir Ken Robinson on how to harness the power of creativity in the workplace.

A QUESTIONING MIND

P rofessor Sir Harry Kroto won the Nobel Prize for Chemistry in 1996. He was also a professional

designer. I asked him what diff erences there are, if any, between creativity in the arts and sciences: in the studio and the laboratory. He said that for him the process is the same, even though the outcomes are diff erent. In all creative processes we are pushing the boundaries of what we know now, to explore new possibilities; we are drawing on the skills we have now, often stretching and evolving them as the work demands.

In the early stages, being creative may involve playing with an idea, doodling, or improvising around the theme. It may begin with a thought that is literally half-formed – as a sketch, a fi rst plan, or a design; the fi rst notes of a melody or the intimation of a solution to a problem. There may be several ideas in play and a number of possible starting points. Creativity doesn’t always require freedom from constraints or a blank page. A lot of creative work has to conform to a specifi c brief or set of conventions, and great work often comes from working within formal constraints. When US President John Kennedy declared in 1961 that America would land a man on the moon and bring him safely back to

earth, he mobilised a ferment of creativity and innovation that involved billions of dollars, millions of individuals, and hundreds of institutions embracing scores of disciplines. The challenge was clear and so were the constraints. No one asked if he could adjust the laws of gravity or possibly move the moon a little closer.

The sonnet has a fi xed form to which the writer must submit. Japanese haiku makes specifi c formal demands on the poet, as do many other forms of poetic structure. These do not inhibit the writer’s creativity; they set a framework for it. The creative achievement and the aesthetic pleasure lie in using standard forms to achieve unique eff ects and original insights.

Because being creative involves doing something, it will always involve using some form of media. These may be physical media, such as steel, wood, clay, fabric, or food; they may be sensory media, like sound, light, the voice, or the body; they may be cognitive media, including words, numbers, or notation. Whatever the media, there is an intimate relationship between the ideas and the media through which they take shape. This is true whether the task is designing a building, or developing a mathematical theorem, a scientifi c

hypothesis, or a musical composition. Creativity is a dialogue between the ideas and the media in which they are being formed. Dancers do not begin from a verbal proposition and try to dance it. Dance evolves in the making. It is a material process of movement and refl ection on movement. Often it is only in developing the dance, the image, or music that the idea emerges at all.

Creativity is not only about generating ideas; it involves making judgements about them. It involves elaborating on the initial ideas, testing and refi ning them and even rejecting them in favour of others that emerge along the way. Sometimes creative works arrive in the world more or less fully formed and need no further work. It’s said that Mozart made few revisions to many of his compositions. The poet John Milton was blind. Each morning he dictated whole sections of his epic work Paradise Lost to his daughters and made only minor changes to the text. Good for them. Usually, creative work is more tentative and exploratory.

Evaluating which ideas work and which do not can involve standing back in quiet refl ection. Deciding which ideas work can be an individual or collective process, involve instant judgements or long-term testing. There

NEW61-63_Tech_Notes_Dubai_v2.indd 61 03/11/2017 15:06

DECEMBER 2017

61

IN PRACTICE

TECH NOTESLeadership expert Sir Ken Robinson on how to harness the power of creativity in the workplace.

A QUESTIONING MIND

P rofessor Sir Harry Kroto won the Nobel Prize for Chemistry in 1996. He was also a professional

designer. I asked him what diff erences there are, if any, between creativity in the arts and sciences: in the studio and the laboratory. He said that for him the process is the same, even though the outcomes are diff erent. In all creative processes we are pushing the boundaries of what we know now, to explore new possibilities; we are drawing on the skills we have now, often stretching and evolving them as the work demands.

In the early stages, being creative may involve playing with an idea, doodling, or improvising around the theme. It may begin with a thought that is literally half-formed – as a sketch, a fi rst plan, or a design; the fi rst notes of a melody or the intimation of a solution to a problem. There may be several ideas in play and a number of possible starting points. Creativity doesn’t always require freedom from constraints or a blank page. A lot of creative work has to conform to a specifi c brief or set of conventions, and great work often comes from working within formal constraints. When US President John Kennedy declared in 1961 that America would land a man on the moon and bring him safely back to

earth, he mobilised a ferment of creativity and innovation that involved billions of dollars, millions of individuals, and hundreds of institutions embracing scores of disciplines. The challenge was clear and so were the constraints. No one asked if he could adjust the laws of gravity or possibly move the moon a little closer.

The sonnet has a fi xed form to which the writer must submit. Japanese haiku makes specifi c formal demands on the poet, as do many other forms of poetic structure. These do not inhibit the writer’s creativity; they set a framework for it. The creative achievement and the aesthetic pleasure lie in using standard forms to achieve unique eff ects and original insights.

Because being creative involves doing something, it will always involve using some form of media. These may be physical media, such as steel, wood, clay, fabric, or food; they may be sensory media, like sound, light, the voice, or the body; they may be cognitive media, including words, numbers, or notation. Whatever the media, there is an intimate relationship between the ideas and the media through which they take shape. This is true whether the task is designing a building, or developing a mathematical theorem, a scientifi c

hypothesis, or a musical composition. Creativity is a dialogue between the ideas and the media in which they are being formed. Dancers do not begin from a verbal proposition and try to dance it. Dance evolves in the making. It is a material process of movement and refl ection on movement. Often it is only in developing the dance, the image, or music that the idea emerges at all.

Creativity is not only about generating ideas; it involves making judgements about them. It involves elaborating on the initial ideas, testing and refi ning them and even rejecting them in favour of others that emerge along the way. Sometimes creative works arrive in the world more or less fully formed and need no further work. It’s said that Mozart made few revisions to many of his compositions. The poet John Milton was blind. Each morning he dictated whole sections of his epic work Paradise Lost to his daughters and made only minor changes to the text. Good for them. Usually, creative work is more tentative and exploratory.

Evaluating which ideas work and which do not can involve standing back in quiet refl ection. Deciding which ideas work can be an individual or collective process, involve instant judgements or long-term testing. There

NEW61-63_Tech_Notes_Dubai_v2.indd 61 03/11/2017 15:06

you come up with something that does work.”

I asked Sir Harry Kroto how many of his experiments failed. He said about 95% of them, although he also said that, of course, failure is not the right word: “You’re just finding out what doesn’t work.” Albert Einstein put the point sharply: “Anyone who has never made a mistake has never tried anything new.” I don’t mean to say that being wrong is the same thing as being creative, but if you are not prepared to be wrong, it is unlikely that you’ll ever come up with anything original.

Hungarian chemist and philosopher Michael Polanyi makes a distinction between “focal” and “subsidiary” awareness in his book Personal Knowledge. If you’re knocking a nail into a piece of wood with a hammer, the focus of your attention is on the head of

IKE

R A

YES

TAR

AN

/SYN

ER

GY

AR

T

the nail. You also have to be aware, in a subsidiary way, of the weight of the hammer and the arc of your arm. It is important that this relationship is the right way round. If you start to focus on what your arm is doing, you’re likely to miss the nail. Polanyi continues: “Subsidiary awareness and focal awareness are mutually exclusive. If a pianist shifts his attention from the piece he is playing to the observation of what he’s doing with his fingers while playing it, he gets confused and may have to stop. This happens generally if we switch our focal attention to particulars on which we had previously been aware only in their subsidiary role.”

In any creative work the focus of our attention has to be right. Although there are always points where criticism is necessary and generative thinking has

DECEMBER 2017

62

IN PRACTICE

are likely to be dead ends − ideas and designs that do not work. There may be failures and changes before the best outcome is produced. You can see examples of the iterative nature of creative work in the successive drafts of poems and novels, of scholarly papers, or in designs for inventions and so on. Thomas Edison famously ran through dozens of ideas and designs for the light bulb before settling on the final version.

Terence Tao may be the greatest living mathematician. In 2006, at the age of 31, he received the Fields Medal for mathematics, the equivalent of the Nobel Prize. He says that discovery in mathematics is always about trial and error: “You come up with a wrong idea,” he says, “work on it for a month and realise it doesn’t work, and then you come up with the next wrong idea and then finally, by process of elimination,

NEW61-63_Tech_Notes_Dubai_v2.indd 62 03/11/2017 15:06

to be given time to fl ower. At the right time and in the right way, critical appraisal is essential. At the wrong point, it can kill an emerging idea. Similarly, creativity can be inhibited by trying to do too much too soon or at the same time. The fi nal phases are often to do with refi ning the detail of the expression: with producing the neat copy so to speak. Trying to produce a fi nished version in one move is usually impossible. Unless you are dealing with John Milton, asking people to write a poem right away in their best handwriting can inhibit the spontaneity they need in the initial phase of generating ideas. They need to understand that creativity moves through diff erent phases, and to have some sense of where they are in the process. Not understanding this can make people think that they are not creative at all.

This is an edited extract from Out of Our Minds: The Power of Being Creative, 3rd edition, by Sir Ken Robinson, Ph.D.

SIR KEN ROBINSON, Ph.D., is an internationally recognised leader in the development of creativity, innovation, and human resources. In 2003, he received a knighthood from H.M. Queen Elizabeth II for his services to the arts. He is co-author of The New York Times bestsellers The Element: How Finding Your Passion Changes Everything and Finding Your Element: How to Discover Your Talents and Passions and Transform Your Life. ■

DECEMBER 2017

63

IN PRACTICE

UNDERSTANDING AND MANAGING

GROUP DYNAMICSBy Gill Hasson

W hether it’s a meeting at work, in a classroom, or a social occasion, when there are three

or more people with a common reason to be together, then those people can be considered a group.

And whether that group is made up of three people or 30 people, they’re each going to have their own individual temperament, quirks, and characteristics, and they will each take on distinct roles and behaviours when they’re in a group.

“Group dynamics” is the term for the effects of these roles and behaviours on other group members and the group as a whole. A group’s dynamic is the force that impacts on the motivation, development, or stability of a group. It’s characterised by forces of personality, ambition, energy,

and ideas. In a group with a positive dynamic, individuals work towards collective decisions; they trust and encourage one another and take responsibility for making positive things happen.

But in a group with poor group dynamics, the behaviour of one or more of the group can be disruptive. Separate individuals could be overly critical or negative of others’ ideas. Emotions can often run high; some individuals could be full of enthusiasm while others are sarcastic or appear uninterested.

Dealing with different personalities and personal agendas are common challenges at work and in social situations. It helps to be more aware of what’s going on between people if you want to manage these dynamics.

1Practise people watching. In a variety of situations, observe people and notice how they act and react to each other. Try to get a

sense of what is going on between them. Observe how the group interacts. Be aware of how different individuals interact with each other – how they behave differently with one person compared to another.

2Be aware of non-verbal communication. What’s that telling you about how they really feel? What combination of

non-verbal language – the gestures, facial expressions, tone of voice, etc. – leads you to conclude that a person is feeling a particular way about the group or other individuals in the group?

3Be aware of “matching and mirroring”. People who are in tune with each other “mirror” each other; they tend to use the

same posture and body language. These are natural signs of a shared liking, harmony, and understanding. Look for how other people do or don’t mirror each other.

4Remind people of what you have in common. When individuals’ different quirks, characteristics, and agendas appear to be

creating poor group dynamics, fi nd a way to remind them why you’re together – what you all have in common and what you’re all aiming for.

5Focus on communication. Open communication is central to good business dynamics. Find out how people feel. Ask people not just

what they think about issues, problems, and achievements, but also how they feel about them.

This is an edited extract from Gill Hasson’s Emotional Intelligence Pocketbook: Little Exercises for an Intuitive Life, which has been shortlisted for the 2018 CMI Management Book of the Year in the “Commuters Read” category.

About the authorGILL HASSON is a teacher, trainer, and writer whose books include Confi dence Pocketbook: Little Exercises for a Self-Assured Life.Follow on Twitter: @gillhasson

FOR READING PEOPLE BETTER:5

TIPS

61-63_Tech_Notes_Dubai_v2.indd 63 02/11/2017 18:23

you come up with something that does work.”

I asked Sir Harry Kroto how many of his experiments failed. He said about 95% of them, although he also said that, of course, failure is not the right word: “You’re just finding out what doesn’t work.” Albert Einstein put the point sharply: “Anyone who has never made a mistake has never tried anything new.” I don’t mean to say that being wrong is the same thing as being creative, but if you are not prepared to be wrong, it is unlikely that you’ll ever come up with anything original.

Hungarian chemist and philosopher Michael Polanyi makes a distinction between “focal” and “subsidiary” awareness in his book Personal Knowledge. If you’re knocking a nail into a piece of wood with a hammer, the focus of your attention is on the head of

IKE

R A

YES

TAR

AN

/SYN

ER

GY

AR

T

the nail. You also have to be aware, in a subsidiary way, of the weight of the hammer and the arc of your arm. It is important that this relationship is the right way round. If you start to focus on what your arm is doing, you’re likely to miss the nail. Polanyi continues: “Subsidiary awareness and focal awareness are mutually exclusive. If a pianist shifts his attention from the piece he is playing to the observation of what he’s doing with his fingers while playing it, he gets confused and may have to stop. This happens generally if we switch our focal attention to particulars on which we had previously been aware only in their subsidiary role.”

In any creative work the focus of our attention has to be right. Although there are always points where criticism is necessary and generative thinking has

DECEMBER 2017

62

IN PRACTICE

are likely to be dead ends − ideas and designs that do not work. There may be failures and changes before the best outcome is produced. You can see examples of the iterative nature of creative work in the successive drafts of poems and novels, of scholarly papers, or in designs for inventions and so on. Thomas Edison famously ran through dozens of ideas and designs for the light bulb before settling on the final version.

Terence Tao may be the greatest living mathematician. In 2006, at the age of 31, he received the Fields Medal for mathematics, the equivalent of the Nobel Prize. He says that discovery in mathematics is always about trial and error: “You come up with a wrong idea,” he says, “work on it for a month and realise it doesn’t work, and then you come up with the next wrong idea and then finally, by process of elimination,

NEW61-63_Tech_Notes_Dubai_v2.indd 62 03/11/2017 15:06

to be given time to fl ower. At the right time and in the right way, critical appraisal is essential. At the wrong point, it can kill an emerging idea. Similarly, creativity can be inhibited by trying to do too much too soon or at the same time. The fi nal phases are often to do with refi ning the detail of the expression: with producing the neat copy so to speak. Trying to produce a fi nished version in one move is usually impossible. Unless you are dealing with John Milton, asking people to write a poem right away in their best handwriting can inhibit the spontaneity they need in the initial phase of generating ideas. They need to understand that creativity moves through diff erent phases, and to have some sense of where they are in the process. Not understanding this can make people think that they are not creative at all.

This is an edited extract from Out of Our Minds: The Power of Being Creative, 3rd edition, by Sir Ken Robinson, Ph.D.

SIR KEN ROBINSON, Ph.D., is an internationally recognised leader in the development of creativity, innovation, and human resources. In 2003, he received a knighthood from H.M. Queen Elizabeth II for his services to the arts. He is co-author of The New York Times bestsellers The Element: How Finding Your Passion Changes Everything and Finding Your Element: How to Discover Your Talents and Passions and Transform Your Life. ■

DECEMBER 2017

63

IN PRACTICE

UNDERSTANDING AND MANAGING

GROUP DYNAMICSBy Gill Hasson

W hether it’s a meeting at work, in a classroom, or a social occasion, when there are three

or more people with a common reason to be together, then those people can be considered a group.

And whether that group is made up of three people or 30 people, they’re each going to have their own individual temperament, quirks, and characteristics, and they will each take on distinct roles and behaviours when they’re in a group.

“Group dynamics” is the term for the effects of these roles and behaviours on other group members and the group as a whole. A group’s dynamic is the force that impacts on the motivation, development, or stability of a group. It’s characterised by forces of personality, ambition, energy,

and ideas. In a group with a positive dynamic, individuals work towards collective decisions; they trust and encourage one another and take responsibility for making positive things happen.

But in a group with poor group dynamics, the behaviour of one or more of the group can be disruptive. Separate individuals could be overly critical or negative of others’ ideas. Emotions can often run high; some individuals could be full of enthusiasm while others are sarcastic or appear uninterested.

Dealing with different personalities and personal agendas are common challenges at work and in social situations. It helps to be more aware of what’s going on between people if you want to manage these dynamics.

1Practise people watching. In a variety of situations, observe people and notice how they act and react to each other. Try to get a

sense of what is going on between them. Observe how the group interacts. Be aware of how different individuals interact with each other – how they behave differently with one person compared to another.

2Be aware of non-verbal communication. What’s that telling you about how they really feel? What combination of

non-verbal language – the gestures, facial expressions, tone of voice, etc. – leads you to conclude that a person is feeling a particular way about the group or other individuals in the group?

3Be aware of “matching and mirroring”. People who are in tune with each other “mirror” each other; they tend to use the

same posture and body language. These are natural signs of a shared liking, harmony, and understanding. Look for how other people do or don’t mirror each other.

4Remind people of what you have in common. When individuals’ different quirks, characteristics, and agendas appear to be

creating poor group dynamics, fi nd a way to remind them why you’re together – what you all have in common and what you’re all aiming for.

5Focus on communication. Open communication is central to good business dynamics. Find out how people feel. Ask people not just

what they think about issues, problems, and achievements, but also how they feel about them.

This is an edited extract from Gill Hasson’s Emotional Intelligence Pocketbook: Little Exercises for an Intuitive Life, which has been shortlisted for the 2018 CMI Management Book of the Year in the “Commuters Read” category.

About the authorGILL HASSON is a teacher, trainer, and writer whose books include Confi dence Pocketbook: Little Exercises for a Self-Assured Life.Follow on Twitter: @gillhasson

FOR READING PEOPLE BETTER:5

TIPS

61-63_Tech_Notes_Dubai_v2.indd 63 02/11/2017 18:23

DECEMBER 2017

64

IN PRACTICE

I N ST I T U T EN E W S

Salary survey predicts pay increases

CGMA designation holders across the world are expecting an average year-on-year salary increase up from 4% to 5% in the coming year. This is one of the main fi ndings of the recently published Association of International Certifi ed Professional Accountants 2017 member and student salary survey. The sur-vey also reveals that, globally, the average salary for a CGMA designation holder is $89,000 and 82% are expecting a pay rise in the year ahead.

A further fi nding is that CIMA students anticipate, on aver-age, a 10% salary increase in the next year as they progress on the route to earning the CGMA designation.

The survey also looked at participants’ commitment to con-

tinuing professional development (CPD). The top three skills that respondents are looking to invest in over the next 12 months are strategy (38%), performance (31%), and negotiating (27%).

Andrew Harding, FCMA, CGMA, chief executive – manage-ment accounting at the Association, said: “The skills and expe-rience [management accountants] use to overcome challenges and seize opportunities are clear for employers to see. This is refl ected in the salaries and positions being off ered globally.”

More information on the survey can be found on the Asso-ciation’s Salary Insights Tool at salary.aicpaglobal.com, where CGMA designation holders and CGMA students can compare their salary across the profession.

64-65_Institute_News_v1.indd 64 03/11/2017 13:04

IN PRACTICE

DECEMBER 2017

65

New members required for CIMA’s Panel of CPD Assessors

Elections to Council 2018

Submission of 2017 CPD records

CIMA is inviting members to apply to become a member of its Panel of CPD Assessors. The role of the panel is to ensure quality within CPD submissions. It also receives and con-siders reports from monitoring staff on cases of non-compliance and determines the appro-priate action.

Being a member of the Panel of CPD Asses-sors is voluntary, bringing benefits that can further your own development and career. If you are interested in the role, please email no later than January 5th 2018 your current CV, a brief outline of why you are interested, and what value you would bring to the role to: cpd.monitoring@aicpa-cima.com.

Retirements by rotationNotice is given that, as the term of office of the council member in each of the following CIMA electoral constituencies (EC) expires at the end of the Annual General Meeting in 2018, elections will be held in February 2018. Nominations for candidates (fellows) to fill the vacancies may be made by six or more mem-bers (three of whom must be fellows) whose registered addresses are in the EC concerned.

EC Current memberEC1 Central London and North Thames Amarjeet HansEC2 South West England and South Wales Nigel DaviesEC3 East Midlands and East Anglia Kevin BraggEC3 East Midlands and East Anglia Andrew McGunnigleEC3 East Midlands and East Anglia Sue StaplefordEC4 West Midlands Bina KakadEC5 North East England Howard Whitehead *EC6 North West England and North Wales Robert BeedhamEC7 Scotland Alasdair MacnabEC11 Central Southern England Michael Agate *EC11 Central Southern England Richard SharpEC19 Australasia Chandana Panditharatne *

* Members not eligible to stand again, having served on Council for nine or more years

Nomination forms for candidates for election may be obtained from the Corporate Affairs department at CIMA by emailing at corporate.affairs@aicpa-cima.com. The form and other information are also available to download at bit.ly/2yoA3V2. Please read the rules carefully before completing the form.

The nomination must be received on the prescribed form by 12 noon UK time on Monday January 8th 2018 and should be clearly marked for the atten-tion of the Corporate Affairs Manager. A scanned and emailed copy of a signed and completed form would be considered acceptable.

The Corporate Affairs department will acknowledge receipt of the nomi-nation form promptly, either through an automated process or by individual acknowledgement. It is, however, the candidate’s responsibility to ensure that his/her form has been received. In order to avoid uncertainty, it is recom-mended that, if candidates do not receive such confirmation, they contact the Corporate Affairs department directly (corporate.affairs@aicpa-cima.com) BEFORE the closing date, to actively seek such confirmation.

In the event there is more than one candidate for a vacancy, a ballot will be conducted.

As a CIMA member you are required to under-take CPD and keep a record of your learning and development activities throughout the year. If you have been selected to submit your 2017 CPD record, please do so by the deadline given in the email you have received.

You are only required to submit your record for the last 12 months, but you can do so in any format as long as it covers the six steps of the CIMA Professional Development Cycle. Members who have been selected to submit by using the Competency and Learning web-site are not required to submit until Septem-ber 2018.

If you have any queries or would like fur-ther guidance, please visit the CPD section of the CIMA website or email cima.contact@aicpa-cima.com.

Failure to submit your CPD record upon request, as prescribed by Regulations Part I, 13-18, may lead to disciplinary action by CIMA.

64-65_Institute_News_v1.indd 65 03/11/2017 13:05

DECEMBER 2017

64

IN PRACTICE

I N ST I T U T EN E W S

Salary survey predicts pay increases

CGMA designation holders across the world are expecting an average year-on-year salary increase up from 4% to 5% in the coming year. This is one of the main fi ndings of the recently published Association of International Certifi ed Professional Accountants 2017 member and student salary survey. The sur-vey also reveals that, globally, the average salary for a CGMA designation holder is $89,000 and 82% are expecting a pay rise in the year ahead.

A further fi nding is that CIMA students anticipate, on aver-age, a 10% salary increase in the next year as they progress on the route to earning the CGMA designation.

The survey also looked at participants’ commitment to con-

tinuing professional development (CPD). The top three skills that respondents are looking to invest in over the next 12 months are strategy (38%), performance (31%), and negotiating (27%).

Andrew Harding, FCMA, CGMA, chief executive – manage-ment accounting at the Association, said: “The skills and expe-rience [management accountants] use to overcome challenges and seize opportunities are clear for employers to see. This is refl ected in the salaries and positions being off ered globally.”

More information on the survey can be found on the Asso-ciation’s Salary Insights Tool at salary.aicpaglobal.com, where CGMA designation holders and CGMA students can compare their salary across the profession.

64-65_Institute_News_v1.indd 64 03/11/2017 13:04

IN PRACTICE

DECEMBER 2017

65

New members required for CIMA’s Panel of CPD Assessors

Elections to Council 2018

Submission of 2017 CPD records

CIMA is inviting members to apply to become a member of its Panel of CPD Assessors. The role of the panel is to ensure quality within CPD submissions. It also receives and con-siders reports from monitoring staff on cases of non-compliance and determines the appro-priate action.

Being a member of the Panel of CPD Asses-sors is voluntary, bringing benefits that can further your own development and career. If you are interested in the role, please email no later than January 5th 2018 your current CV, a brief outline of why you are interested, and what value you would bring to the role to: cpd.monitoring@aicpa-cima.com.

Retirements by rotationNotice is given that, as the term of office of the council member in each of the following CIMA electoral constituencies (EC) expires at the end of the Annual General Meeting in 2018, elections will be held in February 2018. Nominations for candidates (fellows) to fill the vacancies may be made by six or more mem-bers (three of whom must be fellows) whose registered addresses are in the EC concerned.

EC Current memberEC1 Central London and North Thames Amarjeet HansEC2 South West England and South Wales Nigel DaviesEC3 East Midlands and East Anglia Kevin BraggEC3 East Midlands and East Anglia Andrew McGunnigleEC3 East Midlands and East Anglia Sue StaplefordEC4 West Midlands Bina KakadEC5 North East England Howard Whitehead *EC6 North West England and North Wales Robert BeedhamEC7 Scotland Alasdair MacnabEC11 Central Southern England Michael Agate *EC11 Central Southern England Richard SharpEC19 Australasia Chandana Panditharatne *

* Members not eligible to stand again, having served on Council for nine or more years

Nomination forms for candidates for election may be obtained from the Corporate Affairs department at CIMA by emailing at corporate.affairs@aicpa-cima.com. The form and other information are also available to download at bit.ly/2yoA3V2. Please read the rules carefully before completing the form.

The nomination must be received on the prescribed form by 12 noon UK time on Monday January 8th 2018 and should be clearly marked for the atten-tion of the Corporate Affairs Manager. A scanned and emailed copy of a signed and completed form would be considered acceptable.

The Corporate Affairs department will acknowledge receipt of the nomi-nation form promptly, either through an automated process or by individual acknowledgement. It is, however, the candidate’s responsibility to ensure that his/her form has been received. In order to avoid uncertainty, it is recom-mended that, if candidates do not receive such confirmation, they contact the Corporate Affairs department directly (corporate.affairs@aicpa-cima.com) BEFORE the closing date, to actively seek such confirmation.

In the event there is more than one candidate for a vacancy, a ballot will be conducted.

As a CIMA member you are required to under-take CPD and keep a record of your learning and development activities throughout the year. If you have been selected to submit your 2017 CPD record, please do so by the deadline given in the email you have received.

You are only required to submit your record for the last 12 months, but you can do so in any format as long as it covers the six steps of the CIMA Professional Development Cycle. Members who have been selected to submit by using the Competency and Learning web-site are not required to submit until Septem-ber 2018.

If you have any queries or would like fur-ther guidance, please visit the CPD section of the CIMA website or email cima.contact@aicpa-cima.com.

Failure to submit your CPD record upon request, as prescribed by Regulations Part I, 13-18, may lead to disciplinary action by CIMA.

64-65_Institute_News_v1.indd 65 03/11/2017 13:05

DECEMBER 2017

66

TECH DISRUPTION“With the relentless nature of technology and disruptors, you have to be constantly scanning

externally, questioning and challenging everything both

internal and external to ensure you remain agile.”Nick Read, p24

BUSINESS REPORTING“Integrated reporting can play a key

role in devising a dynamic, living business model.”

Richard Howitt, p46

TURN BACK FOR...

STANDARDS“Sometimes you need to step back

from the detail and look at the big

picture.”Bob Beedham, p54

Technology is driving trans-formation. It is estimated by Intel that

there will be 200 billion connected smart devices worldwide by 2020 – up from 2 billion in 2006. It is also predicted that rev-enues from cloud ser-vices and SaaS (software as a service) will pass the $200 billion milestone in 2020.

Blockchain, which is still in its infancy, has the potential for wide and varied applications and scalability. Banks in major financial centres are already creating blockchain solutions, and IBM estimates that by 2020, 65% of the world’s banks will have blockchain solu-tions in production.

This glimpse into the future will require us to rethink how we operate and do busi-ness ourselves; it will require us to be a pro-fession that recognises, leads, and exploits the opportunities that change offers.

Author, entrepreneur, and “change guru” Seth Godin said: “The easiest thing is to react. The second easiest is to respond. But the hardest is to initiate.”

It is impossible not to agree with this – we need to get ahead of change and cre-ate the future we want to see. If we are react-ing, we are too late.

We are not alone: Companies around the world are initiating change. A 2016 KPMG survey revealed that four in ten com-panies expect to be transforming them-selves into significantly different entities in the next three years, and 65% will pur-sue growth through partnerships and alli-ances.

There are some signs of a public back-lash to the disruption seen in some indus-tries, but business models have – and will continue to be – radically transformed.

“This glimpse into the future will require us to rethink how we operate and do business.”

Business transformation itself is not new. For example, it is well known that Rolls-Royce has changed over many years from a manufacturer and cyclical vendor of large aero engines to its “Power-by-the-Hour” service-based model.

Earlier this year, Rolls-Royce Marine announced the signing of a new Power-by-the-Hour agreement with the Norwegian shipping and logistics company Nor Lines. Using the power of big data, Rolls-Royce will monitor through onboard sensors the equipment it has installed on a small num-ber of cargo vessels. It will also plan and perform maintenance and repairs on the equipment remotely or, if necessary, send a service engineer to do the work. Nor Lines pays a fixed charge per hour of operation, per ship for Rolls-Royce to carry out this work.

In the IT sector we have also seen chang-ing business models. For example, IBM has moved from hardware to services and data, and Google is still the leading search engine but has also moved into driverless cars and consumer products.

The response of CIMA and the AICPA has been to create our new Association. In building on the best of our two organisa-

tions, we are expanding recognition of the CGMA designation around the world so that our members – whether working in an SME, large company, or multinational – have an enhanced passport to career success.

We continue to carry out our thought leadership research across the world – including recently a large number of round-tables in South Africa, the UK, and the US – as part of our Future of Finance research. This will inform a refresh of our syllabus and the CGMA Competency Framework, and also feed into CPD for our members to help future-proof their careers.

Our research on business models is also moving forward. Talking directly to the busi-ness community, over the summer we car-ried out a global consultation on the business model framework (in the CGMA Rethinking the Business Model white paper), and held successful roundtables on every continent.

This work is clearly important for devel-oping learning and knowledge for the man-agement accounting profession. It also means we can continue to lead and deliver for our members and students in today’s – and tomorrow’s – uncertain and rapidly changing world. n

SU

KI

DH

AN

DA

THE ASSOCIATION OF INTERNATIONAL CERTIFIED PROFESSIONAL ACCOUNTANTS

THE VIEW FROM ANDREW HARDING, CEO – MANAGEMENT ACCOUNTING

66_CEO Column_v2.indd 66 31/10/2017 17:48

Boost your career

As a Pioneer you will be at the forefront of promoting and driving the adoption of the world’s first standard for management accounting in your organisation.

Registration is free and you will:

• Gain access to expertise via the global practitioner community

• Receive invitations to exclusive webinars to build your knowledge

• Use the framework to build benchmarking data around the effectiveness of your finance function

• Lead best practice standards in your organisation

by joining the Global Management Accounting Principles Pioneer Community today

Sign up now at:

cgma.org/gmappioneerPlease feel free to invite your colleagues to join

Read more about the Global Management Accounting Principles at: cgma.org/principles© 2017 Association of International Certified Professional Accountants. All rights reserved. CIMA and The Chartered Institute of Management Accountants are trademarks of The Chartered Institute of Management Accountants and are registered in the United Kingdom and other countries. The design mark is a trademark of the Association of International Certified Professional Accountants. 978-1-85971-848-3.

DECEMBER 2017

66

TECH DISRUPTION“With the relentless nature of technology and disruptors, you have to be constantly scanning

externally, questioning and challenging everything both

internal and external to ensure you remain agile.”Nick Read, p24

BUSINESS REPORTING“Integrated reporting can play a key

role in devising a dynamic, living business model.”

Richard Howitt, p46

TURN BACK FOR...

STANDARDS“Sometimes you need to step back

from the detail and look at the big

picture.”Bob Beedham, p54

Technology is driving trans-formation. It is estimated by Intel that

there will be 200 billion connected smart devices worldwide by 2020 – up from 2 billion in 2006. It is also predicted that rev-enues from cloud ser-vices and SaaS (software as a service) will pass the $200 billion milestone in 2020.

Blockchain, which is still in its infancy, has the potential for wide and varied applications and scalability. Banks in major financial centres are already creating blockchain solutions, and IBM estimates that by 2020, 65% of the world’s banks will have blockchain solu-tions in production.

This glimpse into the future will require us to rethink how we operate and do busi-ness ourselves; it will require us to be a pro-fession that recognises, leads, and exploits the opportunities that change offers.

Author, entrepreneur, and “change guru” Seth Godin said: “The easiest thing is to react. The second easiest is to respond. But the hardest is to initiate.”

It is impossible not to agree with this – we need to get ahead of change and cre-ate the future we want to see. If we are react-ing, we are too late.

We are not alone: Companies around the world are initiating change. A 2016 KPMG survey revealed that four in ten com-panies expect to be transforming them-selves into significantly different entities in the next three years, and 65% will pur-sue growth through partnerships and alli-ances.

There are some signs of a public back-lash to the disruption seen in some indus-tries, but business models have – and will continue to be – radically transformed.

“This glimpse into the future will require us to rethink how we operate and do business.”

Business transformation itself is not new. For example, it is well known that Rolls-Royce has changed over many years from a manufacturer and cyclical vendor of large aero engines to its “Power-by-the-Hour” service-based model.

Earlier this year, Rolls-Royce Marine announced the signing of a new Power-by-the-Hour agreement with the Norwegian shipping and logistics company Nor Lines. Using the power of big data, Rolls-Royce will monitor through onboard sensors the equipment it has installed on a small num-ber of cargo vessels. It will also plan and perform maintenance and repairs on the equipment remotely or, if necessary, send a service engineer to do the work. Nor Lines pays a fixed charge per hour of operation, per ship for Rolls-Royce to carry out this work.

In the IT sector we have also seen chang-ing business models. For example, IBM has moved from hardware to services and data, and Google is still the leading search engine but has also moved into driverless cars and consumer products.

The response of CIMA and the AICPA has been to create our new Association. In building on the best of our two organisa-

tions, we are expanding recognition of the CGMA designation around the world so that our members – whether working in an SME, large company, or multinational – have an enhanced passport to career success.

We continue to carry out our thought leadership research across the world – including recently a large number of round-tables in South Africa, the UK, and the US – as part of our Future of Finance research. This will inform a refresh of our syllabus and the CGMA Competency Framework, and also feed into CPD for our members to help future-proof their careers.

Our research on business models is also moving forward. Talking directly to the busi-ness community, over the summer we car-ried out a global consultation on the business model framework (in the CGMA Rethinking the Business Model white paper), and held successful roundtables on every continent.

This work is clearly important for devel-oping learning and knowledge for the man-agement accounting profession. It also means we can continue to lead and deliver for our members and students in today’s – and tomorrow’s – uncertain and rapidly changing world. n

SU

KI

DH

AN

DA

THE ASSOCIATION OF INTERNATIONAL CERTIFIED PROFESSIONAL ACCOUNTANTS

THE VIEW FROM ANDREW HARDING, CEO – MANAGEMENT ACCOUNTING

66_CEO Column_v2.indd 66 31/10/2017 17:48

Boost your career

As a Pioneer you will be at the forefront of promoting and driving the adoption of the world’s first standard for management accounting in your organisation.

Registration is free and you will:

• Gain access to expertise via the global practitioner community

• Receive invitations to exclusive webinars to build your knowledge

• Use the framework to build benchmarking data around the effectiveness of your finance function

• Lead best practice standards in your organisation

by joining the Global Management Accounting Principles Pioneer Community today

Sign up now at:

cgma.org/gmappioneerPlease feel free to invite your colleagues to join

Read more about the Global Management Accounting Principles at: cgma.org/principles© 2017 Association of International Certified Professional Accountants. All rights reserved. CIMA and The Chartered Institute of Management Accountants are trademarks of The Chartered Institute of Management Accountants and are registered in the United Kingdom and other countries. The design mark is a trademark of the Association of International Certified Professional Accountants. 978-1-85971-848-3.

Coming in 2018A new digital experience

with FM magazine

In addition to six issues of FM magazine in the mail, you will have year-round access to our top-notch content on the new

FM magazine website. The website will be replacing the app. Sign up below to learn when the site is launched.

www.cgma.org/fmmag

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