The Agile CFO

Finance Leadership in Changing TimesTim Richardson

For CFO Symposium, Strategy GroupMelbourne, Nov 2010

www.growthpath.com.au

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My experience of change

• Indonesia 97-99

– didn’t see it coming

• Multinational SAP roll-out ASEAN

– classic top-down change

• Change to market-minus pricing

– top-down, with side-effects

Rise of China as a disruptive competitor:

saw it coming, but consistently underestimated

EU expansion 2007

saw it coming, all good

EU Carbon trading

side effects very surprising

The internet (ongoing)

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Change in the real world

• The Game of Change

Change is the stronger player

But you get to make moves and influence the outcome

• Tactics can be much more important than expected

• Need to know: How do external forces interact with internal strengths and weaknesses?

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Agility

• Focus + Agility are accuracy of insight, speed of reaction, flexibility and self-knowledge

... knowing what’s happening outside

... how your business really adds value for customers,

... being able to quickly work out the profitability of something you’ve never done before.

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Focus & Agility case studyFast response to new channel leads to market dominance

• The CFLi case shows the huge benefits from speed and accuracy of profitability models designed around market requirements/buying process/decision making.

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Case Study: CFLi• CFLi = Compact Fluorescent Lamp (integrated)

• Illustrates rise of Chinese manufacturing

• The weaknesses of strategic planning

• The supremacy of the consumer channel

• My role: Finance Director of CFLi

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Internet business

Focus & Agility: repositioning the organisation

• By analysing external changes and by studying the added value, different channels have different futures

• This means shifting resources and focus

• Finance alone can’t do this, but the analysis aligns the allocation of resources to added value, prioritises change and identifies new ways to measure performance.

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First: Some ways the internet drives change

• Rapid change in hardware and software capabilities

• Radical new revenue models

– Give away product, sell advertising

– Partial Abandonment of DRM

– Shifting to recurring revenue streams (turning boxes to services)

• Innovation: no longer professional to consumer but becoming the other way

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Second: The speed of change

• It’s the speed of change which has been hard to get right

• Kodak believed that analog film would hang on in developing markets: wrong

• But Apple was not first to market with MP3, and Microsoft had tablet computers ten years ago.

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Opportunities & Threats:Some generic questions

• What new competitors will there be?• What new markets?• What new technologies?• How will barriers to entry change?• Where will added value lie?• Is scale going to be more or less important?• Will vertical integration be more or less attractive?• What will happen to the cost of product delivery?• Will you be bundled?

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Case study

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Conclusion: CFO’s role

• No need for radical reinvention of the Finance role• Look at what strengths Finance brings, and how to

deploy those to increase agility• Some relevant Finance capabilities:

– Conceptual strengths, introspective– Synthesising and leveraging information– Biased for short-term, tactical considerations– Biased to quantify and measure

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The CFO’s Agenda

Probe and challenge added value• Do SWOTs: the best thing you already know• Prepare/recruit/develop your team to be

more flexible and closer to the business• Innovate on core finance processes to free

time for supporting agility• Empower fast decisions based on contribution

margin

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Further reading

Please see http://www.growthpath.com.au for content on transforming the finance team, and achieving agility and focus in small and medium sized businesses.

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Questions asked after the presentation

See speaker notes