Only the paranoid survive

19 February 2016

 

88% of companies in the Fortune 500 didn’t exist in 1955. Just think about what this means for finance. If we argue that newer, leaner companies, often in the sphere of technology, have far smaller and more efficient (and often cloud-based) finance functions, then surely as these companies grow there will be a paradigm shift in the expectations of finance in the future.

We all read many articles and blog posts talking about the pace of change in finance. Sometimes it can get a bit tiresome. But it’s hard to argue with numbers like that.

I recently watched a discussion between Brian Furness (PwC Partner), Andy McCorkell (PwC Director) and Jamie Lyon (ACCA Head of Corporate Sector) on what makes for an effective finance function. Talk about the rapid pace of change reminded me of a quote by Intel’s former CEO, Andy Grove, which makes up the title of this blog post.

If you were crafting a finance function from scratch how would it look? Would spreadsheets be used at all? Would it take 80 days to complete a budget cycle? I don’t think so. But let’s move back to the present. It shouldn’t take that long to form a budget. What’s the point if it takes that much time? Brian and Andy had an interesting take on this: the value in producing a budget is in asking really good questions and challenging current thinking, but the timescale must change dramatically.

The job of clever people is to ask difficult questions. In finance, the people asking those difficult questions are providing business insight. Part of the discussion I watched was around business partners, people who should sit firmly in this category. There was agreement that we haven’t quite cracked business partnering. But I think the problem is more fundamental than that. Companies have no common meaning of the term. Does your organisation really understand what it is, what it could be and what you expect? If not, that’s a problem.

True business partnering with digital transformation: that’s where the real conversation lies. Let’s plunge ourselves into a CFO’s worst nightmare. Margins decreased last month, sales dried up and there’s now a crisis in the market. You think there are cash flow problems coming down the track. But you don’t know. Your function is backward-looking: the forecasts you do have are taken from unreliable data sources and take days to patch together in Excel. There’s no real-time data: that was a pipe dream to think about in a decade’s time. There. That’s why digital is important. It seems to me that what happens with technology will be inevitable. If CFOs don’t make the digital changes, finance will be left behind (and the CFO might not be in post for long) or the business will go bust (if 20th century thinking permeates the whole enterprise). Does your function “get” the digital agenda? Many don’t.

There’s another quote from the past. Like the comments from Brian, Jamie and Andy, it sheds some more helpful light on what to do, rather than to simply be paranoid. On the theory of disruptive innovation, management thinker Clayton Christensen had this advice: “Disrupt your own business”. It’s time to disrupt your finance function.

Alex WrightAlexanderJWrightPhoto
Associate, Consulting
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