CFOs can manage risk with their eyes closed. Yet in today’s dynamic business and technology landscapes, uncertainty is the new risk. While yesterday’s finance leaders saw the world in black-and-white, tomorrow’s must see shades of gray to create new value. There was a lot of talk about this at the “CFO of the Future Summit” — a meeting of the minds of more than 30 current and future CFOs held at Harvard University.
Over the last three years, in speaking to finance chiefs at the Harvard event, we’ve witnessed the continuous evolution of finance chiefs into strategic business partners — a meaningful evolution that’s been transformational for both finance organizations and for businesses. The next logical step? The CFO becomes the chief value architect for the business. But here’s the rub: Value creation has a whole new look.
As non-traditional business models emerge, revenue growth will come from a new universe of collaboration, data sharing, and outcomes-focused customer strategies. CFOs will have to navigate an ecosystem of partners, competitors, and customers where boundaries are uncertain.
In this spirit, here are five things that CFOs can do to create value when the old rules no longer apply.
1. Find your place in the ecosystem.
Summit participants told us in a pre-event survey that the top three reasons their company would join an ecosystem were to enhance revenue growth, position against traditional competitors, and build internal capabilities.
That is not surprising. What is surprising is that attendees believe that developing ecosystem strategies is among the most difficult things to do — even more challenging than optimizing current business value, generating new business value, and creating dynamic capacity. Why? Creating a sustainable ecosystem strategy involves doing all of those things. While the network effect of ecosystems inherently multiplies value for the business, it multiplies complexity for the finance organization.
CFOs must face this complexity with grit and gusto. As value architects, they must lean into their enterprise view and disciplined risk management mindset to determine the company’s role in the ecosystem. CFOs should approach this knowing that data is the new currency of value creation. This is why investing in analytics and artificial intelligence is key to get the most from enterprise and customer data.
By upping their data game, CFOs can make the company an attractive partner. This is necessary in era of coopetition, where companies are increasingly likely to join forces with strange bedfellows and “frenemies” to develop market-making solutions that fuel new growth.
2. Evolve valuation models.
Just as it’s always been, the CFO’s role is as both guardian and champion of value, green-lighting potential and red-lighting pitfalls when it comes to investment decisions. What’s different now is that tried-and-true valuation models do not necessarily apply in this new ecosystem world.
As companies develop new business models, many will invest in products and services that will, by design, take time to generate profit. This will require CFOs to not only evolve their valuation models, but also to make trade-offs to protect overall profitability.
While the CFO must act as an arbiter of value using data-driven valuation models, some finance organizations are still grappling with an “us vs. them” relationship with the business. It sounds simple, but to be a respected influencer of investment decisions — and not be viewed as “Dr. No” — the CFO must focus on what is said as well as how it is said. Being candid and transparent about valuation processes is critical. As one attendee reminded us, “Tone matters in finance organizations.
3. Embrace the power of culture.
The uninitiated might assume that culture doesn’t come up much in a gathering of finance leaders. After all, they just want to focus on calculations, compliance, and control, right? Wrong. Now more than ever, CFOs recognize that creating new value for the business is connected to the strength of the finance culture.
As CFOs focus more on strategy, growth. and transformation, finance culture needs to come with them.
“I think having a purpose-driven organization [is key.] It’s hard for people to rally around a dollar number. Everyone wants to grow. Everyone wants to hit a certain dollar [amount]. But find the passion within the organization and the purpose and rally behind that,” explained a software sector finance leader.
As a CFO once explained to her former CEO, “I need to hire the best and the brightest … and yes, they have tattoos.”
That is exactly what the CFO of a global consumer goods company did. By balancing risk monitoring and empowerment, she helped create a growth mindset within finance that centered the organization through a period of significant change. It was daunting work. It involved breaking people of what had been sacred at the company without losing sight of the core values.
CFOs must also build a culture across the business and with ecosystem partners. An inclusive organization that welcomes difference will be important, particularly as the future finance workforce will include unconventional talent.
As this CFO once explained to her former CEO, “I need to hire the best and the brightest … and yes, they have tattoos.” Another CFO looks to hire “lions with wings.” Those are people with dynamic backgrounds who have demonstrated strength through change and can embody the culture.
4. Balance the core and the cutting-edge.
It’s a wonder that more CFOs don’t suffer from whiplash considering the push-and-pull they must feel each day from serving two contradictory mandates. As I described it last year on CFO.com, this is the modern finance feat of staying stable and being dynamic to fuel corporate growth and value creation.
The pressure to be brilliant at the basics and pivot to the “new” continues to be a top-of-mind issue for CFOs. The consensus at the event was that navigating the healthy tension between the core and the cutting-edge is intensifying.
One finance leader described it this way: “The pivot is constant. It’s not a yearly pivot. It’s a daily, weekly, always trying to migrate to the right spot.” Entire finance organizations, not just leadership, must be able to walk and chew gum at the same time to balance ensuring compliance and control with cultivating innovation.
CFOs can take charge of these dual agendas by changing how they allocate their time.
Several who were interviewed to provide expert insights and direction to the summit have done this. Another consumer goods industry CFO initially spent 65% of her time on core functions and 35% focused on the future. Now, her attention has flipped. She spends 65% of her time on business transformation and sustainable future growth, and 35% on core functions.
5. Make your principles your compass.
Managing through uncertainty is daunting for seasoned and future CFOs alike. However, many are finding a port in the storm by anchoring the work of finance in core principles. No matter how much change swirls within and around a company, these fundamentals remain constant.
At a rapidly-growing software company that works with an ecosystem of partners and developers, the finance organization completed an initiative to double-down on the “why” of their work instead of the “what.” Efforts like this help to inspire people and solidify the culture behind a shared sense of purpose and clearly articulated principles. One of the company’s finance leaders views the effort as a catalyst for helping her organization get a seat at the table with the business units.
Finance leaders who take an adaptive approach to value creation — one that does not shy away from evolving processes, capabilities, technologies, culture, and talent — will be standouts. As one CFO participant warned, “Chaos is coming.” The message to CFOs? Time to act so your organization can move fast enough to create new value whatever the future holds.
Christian Campagna is senior managing director of Accenture Strategy’s CFO and enterprise value strategy practice.