categoryStrategy Management

A Practical Approach to Using Artificial Intelligence for CFOs – Part IV

Part IV Getting After It: Take the Next Step and Make Your Investment in AI

If you haven’t had a chance to read Part I – Leveraging AI in the CFO SuitePart II – The Benefits of AI and What You Will Need to Make It a Success and Part III Where to Invest in AI, How to Measure the Financial Impact and Select Projects yet, please do so before continuing on.

There are four major investments you’ll need to make to use AI successfully in your business.

1. Develop an AI Strategy: This investment is about learning how to apply AI to your activities and selecting your best course of action. Consider using outside experts to help augment your thinking in this area if you are just starting your AI journey.

  • The first step of strategy development includes learning about AI, determining how it will be applied to the CFO responsibility areas, assessing the value of AI application for those areas.
  • The second step is to gauge the data needs (availability, accuracy, volume) and the cost of “creating” data that can generate the output required. “Quality, effectiveness, efficiency and insight are the four key pillars that really make this valuable stuff…” according to Nick Frost, KPMG Audit Technical Lead Partner.¹ Watch for these characteristics in your data. If they aren’t present, be wary of how you use your final product.
  • Using the value noted in a. above and the cost determined in b. an AI Strategy targeting the areas where AI will have the most impact can be constructed.
  • Skill/System assessment and timeline. Determine where growth in skills and systems are needed. The scope of these needs will also help create the resources required and a timeline. From a risk perspective, consider starting small (high expected return, low initial investment) and allow for greater investment as success is realized.
  • Include a change management plan to assist employees and other stakeholders in understanding the strategy and the impact it will have on them.

2. AI Software Selection: The investment in software will include the cost of the software and the expenses of the internal and external team members working on the process.

  • Use your Strategic Plan to target AI vendors that serve the areas highest on your list.
  1. On premise or cloud solution
  2. Data storage costs
  3. Integration with current systems.
  • If AI is new to you stay small and focused on high return, bite-sized efforts you can learn from.
  • Use your network to validate claims made from vendors in terms of system results, implementation timeline and cost.
  • This investment will include the direct payments for the software and internal costs for the selection team to do their work.
  • Our “AI Capital Investment Analysis” tool will help you summarize and communicate your planned investment in AI.

3. Implementation to Operation: It is important to focus the cultural change required during this stage to create an environment that craves the new learning AI brings to the table. The combination of our team’s desire to use AI wisely and a sound AI system add up to success. If either is missing, there is a good chance your implementation will fail.

Here are the implementation steps:

  • Research and mitigate the risks related to the implementation and data management.
  • Train and hire the skills to manage the system and leverage the new capabilities created by the AI.
  • Identify and manage the risks that are likely to occur because of the implementation.
  • Procure and implement the technology that fits your strategy.
  • Monitor and adjust the AI inputs and outputs to create optimum value for the AI stakeholders.

4. Ongoing AI growth: Your AI strategy document is the road map that will be used to plan AI follow up. It is a living document that requires updating.

  • Manage the ongoing operating costs of the AI system
  • Implement AI applications per the Strategic Plan
  • Change the priorities in the Strategic Plan as necessary
  • Consider new applications (see 1 above)
  • Assess current operating AI systems for optimization annually.

Artificial Intelligence holds great promise for financial professionals. It’s a key ingredient to enhancing the business partnering momentum established in the new millennium. Creating our AI Strategy, securing the skills to choose, implementing and operating AI systems, and growing these capabilities are new challenges demanding the attention of the CFO. Developing more efficient and “smart” transaction systems while improving decision support activities are huge value drivers for businesses today. Our ability to harness the power of AI to these means will be a significant measure of our success.

We’d love to hear about your AI experience (email us at info@erpminsights.com)!

¹Eleanor O’Neill, “How is the accountancy and finance world using artificial intelligence?” CA Today, July 31, 2016

Achieving Sustainable Competitive Advantage

Today, businesses are operating in an intensely competitive environment. New products and markets are continuously being created disrupting the traditional offerings. To succeed in this environment, your business needs to shake up the status quo and avoid competing in exactly the same way as your rivals.

When it comes to competitive advantage in business, it is critical to understand that advantage over rivals is rooted in differences. Of course, no one has advantage at everything, but what is important is for the business leaders to be able to identify key asymmetries that are capable of being converted into superior advantages.

Is competitive advantage sustainable?

Your business has a competitive advantage if you’re able to produce products at a lower cost than can competitors, or deliver more perceived value than can competitors, or a mix of the two.

However, you need to understand that your product costs differ with the product and application. Your customers are geographically dispersed, have different knowledge, varying tastes and other characteristics. As a result of these subtleties, you will realize that most advantages will extend only so far.

Thus, many at times, the advantage is only on certain products and/or services and among only a specific group of customers. The group’s earning potential and desire for a unique shopping experience determines the level of value placed on your company’s products and/or services.

With customer behaviors constantly shifting, competing on price alone is no longer sufficient. Today’s customers are looking far beyond lower prices, they want value for money and an unforgettable user experience. In many industries, technology has reduced or removed market entry costs and other barriers.

Your business might be able to achieve cost leadership but how is this reflecting on your margins? Take IKEA for example, one might argue that they are doing well with a cost leadership strategy. Fair enough. But if you look closer, the company has managed to combine all three of Michael Porter’s generic strategies to deliver its value proposition and unique customer shopping experiences.

These capabilities have been honed and improved on by IKEA over the years and are very difficult for a small start-up to copy as is. A small start-up lacks the investments needed to develop the market and capabilities to achieve efficient processing and economies of scale, thus preventing him from achieving equivalent costs.

Just as in IKEA’s example above, for your competitive advantage to be sustainable, your competitors must not be in a position to easily duplicate it, or they must not be able to duplicate the resources underlying it. This kind of unique offer demands your high level creativity and the ability to imagine differences that are possible and even those that are not currently possible.

These differences must not only be unique to your own eyes, but must also be valued by the customer enough to pay for that difference.

Some differences are not attractive enough to justify the additional cost of delivering them. Instead of being appreciated by the marketplace, they are viewed a negative attribute of the offering. In long run, the company ends up losing stupendous amounts of money because it is now trying to change the minds of customers, with no certainty of success.

Isolating Mechanisms

The concept of “Isolating Mechanisms” is borrowed from biology and describes the reproductive characteristics which prevents species from fusing. Applied to business strategy, this describes unique characteristics that prevent competitors from entering your marketplace and dethroning you.

Possessing these characteristics is key to sustaining your competitive advantage. Examples of isolating mechanisms include reputations, brand names, commercial and social relationships, tacit knowledge, network effects, skills gained through knowledge, significant economies of scale and complementary services.

Isolating mechanisms enable us to shift our focus from competing on price alone and find unique ways of increasing value. Today’s competition is very intense, and by providing more value to our customers we avoid being commodities.

How do we create value?

Having an edge over customers is not the same as achieving higher profitability. Think of Uber, the ride-sharing company. The company disrupted the taxi industry with its advanced technology and applications, making a name for itself. However, although the company has been taking in more revenues, it has also been losing money like crazy.

The relationship between wealth and competitive advantage is dynamic. In other words, wealth increases when competitive advantage increases or when the demand for the resources underlying it increases. That’s why it is critical to understand all the sources of your competitive advantage.

How many times have you come across statements that read, “We are the best in the world, We are the leaders, We are number one.” If you’re one of the organizations using these rhetoric, can you easily back your statements with facts? It is one thing to say you will be the best in the world in a certain industry, it’s quite another to explain how this is reflected in costs, differentiation and focus.

It is therefore important that your strategy clearly articulates how your overall intentions are translated into competitive advantage. Advantage over rivals only becomes more valuable if the number of customers grows and/or the quantity demanded by each customer also grows.

Increased demand will lead to an improvement in long-term profits only if the business is in possession of scarce resources that enable it to create a sustainable advantage.

1. Continuously Improve

What Got You Here Won’t Get You There. We are living in an ever-changing world where change is no longer a nice-to-have but a must. There is no guarantee that your current value proposition will continue to deliver stellar performance.

You therefore need to deepen your advantage and widen the gap between your customer’s value and cost. Many businesses are comfortable with the status quo and the way things are currently being done. The assumption is that everyone knows what they are doing. This is a very dangerous way of running the business.

Time and again, you must re-examine each aspect of your products, processes and details of how value is delivered, not just from cost controls or incentives (financial) point of view but also from the stakeholder (non-financial) point of view.

Are you carefully studying their attitudes, decisions and feelings?How strong are the isolating mechanisms surrounding key value delivery methods?

Having answers to the above questions will help you anticipate and prepare for problems before they occur.

2. Broaden the extent of advantage 

There is always a part of the market that is currently not being served and needs exploiting. Sometimes, in order to create value you don’t have to compete in exactly the same market as your current competitors.

Extending an existing competitive advantage brings your company into new fields and new competitors. What are the special skills and resources that are underlying your current advantage? Can you build on these existing strengths?

The challenge for many leaders is that when looking at their company’s capabilities, they do so only at face value or generalizations. The real danger in this is that they end up diversifying into products, markets and processes they know nothing about, or have limited knowledge of. After venturing into these new avenues and performing dismally, they wonder why this is the case.

To successfully extend your advantage, you need adequate knowledge and know-how of your new territories. Failure to have this important information at your disposal is a recipe for disastrous consequences.

You should not expect to take existing products to non-traditional customers, or create new products for existing customers, or create new products for new customers and expect overnight success if you have not first done your homework and defined the value proposition all these customers are seeking.

3. Strengthen your isolating mechanisms 

As mentioned earlier on, isolating mechanisms prevent rivals from replicating your products or service offerings, or the resources driving your advantage.

Now that you have identified and defined characteristics that are essential for your business to increase value and succeed, you need not rest on your laurels, but rather, create new ones and/or strengthen existing ones. The aim is to have as much little imitative competition as possible and have increased value flow to your business.

Depending on the nature of your business and industry, you need to locate that set of competitive advantages that allows you first to survive and then to thrive. For instance, in tech-related industries, having stronger patents, brand-name protections and copyrights works best. In other industries where the collective knowledge of groups drives performance, strengthening this isolating mechanism depends on turnover rates.

Another broad approach to strengthening isolating mechanisms is to have a moving target for imitators. This approach ensures you are always steps ahead of your competitors. By the time your rivals figure out how to replicate much of your proprietary know-how and other specialized resources it would be too late for them.

Continuously improving your products, services, processes, systems, proprietary knowledge etc. makes it very difficult for rivals to imitate and catch up with you.

Remember, no one has advantage at everything. Chances are that your rivals are already trying to differentiate and are doing it better. Don’t lose heart. As the old saying reads, “Do not put all your eggs in one basket.” That is, do not be over reliant on any one attempt to gain a single competitive advantage.

Press where you have advantages, side-step situations in which you do not have and exploit your competitors’ weaknesses and avoid leading with your own. Obstacles will always be there but you need to be adaptable so that you can react to setbacks without losing your business. It is all about where to play and how to win.

How CFOs Can Play a Greater Role in Strategy Setting & Execution

These days there is a lot of talk about the transformation of the finance organization from being a traditional back-office function to playing a more strategic advisory role. The CFO is being touted as the CEO’s wingman responsible for helping him/her execute the company’s strategy and improve performance. Once regarded as the bean-counter of the organization, finance is being demanded to partner with operations and sales and help grow the beans.

Despite the transformation of the finance organization’s role over the years, can we certainly say that CFOs and finance executives have successfully embraced their new strategic advisory role? Are they delivering reliable advice and information for the company CEO and the Board to act on? Can the CEO confidently vouch for the CFO and his abilities in helping shape and drive the company’s future direction?

Unfortunately, although progress has been made in reshaping the finance organization, there is still more room for improvement. Various research findings have revealed what many finance professionals do not like to hear – CFOs in the majority of organizations are not providing enough strategic counsel to the CEO. In these organizations, the focus is still on cost control and accurate financial reporting. There is minimal provision of forward-looking information to support decision making. The desire by the CFO to provide strategic input to board-level decision making is there, but constant unnecessary fires that need putting out are consuming much of the CFO’s energy, resources and time.

There is no doubt that the modern business environment requires the organization’s CFO to be strategic in nature. With disruptive changes taking place everywhere at unprecedented levels, it is the responsibility of the CFO and his team to protect the organization against the threats, harness the opportunities and strengthen the organization’s competitiveness. This means moving beyond cost management and wearing the new strategic hat of the business. Unless the CFO and the other finance executives transform, partner with the business and facilitate meaningful strategic conversations, finance business partnering will remain a far-fetched reality for many.

What then should CFOs do to command a seat around the strategy table?

Know Their Organizations Inside Out

Many finance professionals have a narrower view of the organization. All they know are the numbers and that is it. Ask them to articulate to you their company’s mission, vision and strategy, you will be fortunate enough to get a good answer. In order to play a strategic advisory role to the CEO and the Board, CFOs must have a clearer understanding and knowledge of what the organization stands for. They need to know where the organization is coming from, the direction it is heading, what the constraints as well as a deeper understanding of its differentiating capabilities.

In today’s technological and information age, CEOs are looking for real-time insights to help them make better decisions. In order to make these decisions, they need to have accurate information on the drivers of the business (both internal and external). Thus, it is imperative for finance to know what is driving the numbers to enable the finance team tell a better story of the organization’s strategic performance. Knowing the numbers alone is not good enough. You need to have a bigger picture, knowledge and an understanding of how the different functions of the organization collaborate together to ensure successful execution of the strategy.

Adapt to The Changing Environment & Provide Reliable Insights

Volatility, uncertainty, complexity and ambiguity are the norm these days. These factors alone are disrupting business models and causing company strategies to quickly become obsolete. Strategies that might have helped you to achieve higher performance in the past are no longer sufficient to sustain that performance. The risk landscape is rapidly evolving and the number of risks influencing enterprise performance are also sky-rocketing..

CFOs and management teams therefore need to be on the guard against the disruptive forces threatening the existence of their businesses. Achieving this success means a continuous scanning of the playing field to identify and evaluate possible threats and opportunities. In this environment, it is therefore critical for finance to improve its Financial Planning & Analysis (FP&A) capabilities and provide reliable actionable insights to improve strategic decision making. For example, the function must be able to model various scenarios and their outcomes and evaluate their respective impact on the overall strategy of the organization. In doing so, there is need to consider all sources of data, its reliability, relevance and accuracy.

Embrace Modern Technologies

Technology and digital transformations are also constantly evolving. With these new innovations comes both risks and opportunities. As a CFO you should be asking yourself – Which technologies can the organization embrace to optimize processes and drive performance? Is our organization’s performance management framework integrated enough to support decision making.

These days technology is acting as an enabler to drive strategic execution and performance. Yes you might have standardized your processes, data management systems and implemented a cloud-based solution, but think of Artificial Intelligence, Robotics, Advanced Analytics, Cognitive Computing, Machine Learning, E-Commerce, and Internet of Things (IoT). What impact do these technologies have now, and in the future on your business model? Do they threaten to force your business out of existence or sustain and enhance it?

The CFO needs to partner with the CIO/CTO and establish how the information strategy fits into the bigger picture. Which areas of the business should leverage technology to drive innovation and strategic success? Since CFOs in most organizations have taken over the responsibility of IT investments, the CFO must be conversant in IT language, and be able to clearly communicate the benefits accrued to the organization from investing in any one of these new technologies. He or she must also be able to lead the conversation around the table and secure buy-in from the CEO and other senior executives.

Turn Threats into Opportunities

CFOs and finance executives are known to say no to majority of company investments which in most cases causes them to be at loggerheads with their CEOs. Many finance professionals are trained to identify risks and everything capable of going wrong which often blinds them to the bigger picture. There is nothing wrong with identifying risks but what is important is for the CFO to avoid constantly saying no to strategic investments.

Instead of only seeing the threats and keeping the company purse closed, the CFO must also be able to identify the upside of the risks. They should help the CEO take a calculated risk that is within the risk tolerance and appetite levels of the organization. In order to advance in today’s business climate, successful execution of certain strategies requires the organization to develop a certain degree of risk appetite, otherwise the organization should not expect to make great leaps forward if it is always risk averse.

What else do you think CFOs should do to be successful strategic advisers to the CEO?

Are You Using Scenario Planning To Improve Decision Making?

As the business and macro-economic environment continue to change at rapid paces and increasingly getting complex, the pressure on the finance organization to support the core business by strategically addressing volatility, uncertainty and risk is also intensifying.

This fast changing environment is making it extremely difficult for organizations to forecast business performance with a greater degree of certainty. What we used to consider extraordinary is now the ordinary and the previously unthinkable is now reality. In this environment, organizations need to become more proactive, flexible, adaptable and not reactive. Traditional planning cycles such as the static annual budget are no longer ideal for this dynamic economy.

Past Performance is Not a Predictor of Future Performance

Despite significant evidence indicating this rapid change, many organizations are still relying on the annual budget for planning and evaluation purposes. What we tend to forget is the fact that the annual budget gives a false view of a stable future. By the time the annual budgeting process is over, the majority of the assumptions used to compile the budget are outdated. Additionally, most budgets solely use historical performance as a baseline for predicting future performance. Again, this ignores the fact that past performance cannot be used to mirror future performance.

Most budgets prepared by companies only have a financial focus, normally adding or deducting a percentage to previous year’s numbers. They lack specific consideration of the forces driving the business and value creation. The link between the strategy, planning, resource allocation and performance reporting processes is broken.

With the current volatility, uncertainty and complexity in today’s environment, companies need to adopt an agile mindset and new ways of planning. Working together with the other business functions, Finance can drive this process and lead its success. Taking advantage of the function’s analytical and risk management strengths, finance executives can use scenario planning to help decision makers identify and understand possible future events and their impact on strategy execution and business performance.

Scenario Planning

Instead of taking a static view of the future and basing key decisions on gut feel, scenario planning helps business leaders understand their business environment (any significant emerging threats and opportunities), identify the critical drivers of value and correlate their impact on performance, both operationally and strategically. It achieves this by enabling decision makers frame a number of questions on the strategic intent of the organization.

Regardless of your business’s industry sector, scenario planning is useful for getting different views of the future that reflect volatility, uncertainty, and complexity thereby helping you identify gaps in your organization’s ability to respond to threats and opportunities. Once you have identified the blind spots and gaps in your company’s response capabilities, you can then start building a dynamic risk management framework and gain knowledge of the risks you have direct control of or influence and those that you do not have.

When conducting a scenario planning exercise, organizations must:

  • Define the purpose and scope of the exercise.
  • Examine the internal and external environment for emerging trends and issues.
  • Identify possible realistic future scenarios and evaluate their impact on the business.
  • Formulate strategic and operational responses to each scenario.
  • Monitor performance related triggers and regularly challenge assumptions

Scenario Planning is Not About Predicting the Future Accurately

Instead, it is about understanding the environments in which your business operates, discovering new insights, and increasing adaptability to changes in these environments. By constantly taking uncertainty into account when making decisions and also encouraging alternative thinking, you will be able test and evaluate the robustness of your company’s strategies against a range of possible futures. This in turn will assist you broaden your perspective and develop robust response plans.

Critical to note is that scenario planning is a continuous process rather than a once-off exercise and must be incorporated into processes for managing the business on an ongoing basis. The macro-economic environment is constantly changing and as such, an ongoing review of the drivers of performance and trigger points is necessary.

You need to constantly ask questions on the social, technological, economic, environmental, political and legal influencing factors and indicators.

Examples of questions that you might ask include:

  • If you are an automaker, what is the impact of autonomous and electrical vehicles on our current business model? Are self-driving cars the future and how should we respond?
  • If you are consumer company, how would the organization respond to growing emerging markets and the rise of the middle class workers?
  • How would the organization respond to unexpected loss of a major contract that has sustained the company for a long time to a competitor?
  • What are the short-term and long-term implications of a major product recall on your market position, reputation and the organization’s ability to meet strategic performance?
  • What is the range of likely impacts on our brand, customers and supply chain, if one of our key suppliers files for bankruptcy?
  • What competing products or disruptive forces will have the potential of threatening and forcing us out of business?
  • What is the impact on our quarterly and annual performance targets of material short term changes in key external variables such as commodity prices, inflation rates, interest and exchange rates, GDP and consumer spending?
  • How would the organization respond to unexpected external events such as a major natural disaster, political or regulatory actions, or occurrence of a pandemic?
  • What are the likely advantages and disadvantages of moving our enterprise systems to a cloud-based platform versus retaining them in-house?
  • What are the global business implications of UK leaving the European Union, and how would our organization react to such a move?
  • What are the implications to the business of a data breach on key account information?

By systemically monitoring a series of performance related triggers, the organization will be able to anticipate major trends and changes in the industry or broader business environment, respond dynamically, gain competitive advantage and seize growth opportunities in both developed and emerging markets.

Scenario planning is more than a business threat analysis tool. It also helps you identify emerging opportunities, improve your business model and proactively address industrial and environmental uncertainties.

Preparing for and Responding to Disruption

Regardless of the nature of your business, you are either already dealing with disruptive forces operating within your industry or are preparing your company for change and disruption. Today’s business environment is different compared to what it was decades ago where everything was predictable and you would operate your business with greater certainty. Things have changed. Businesses across all sectors have to deal with a fast-paced changing environment and the message to current and future business leaders is “Disrupt or be Disrupted”.

Increased regulatory changes, advanced technological developments, a new breed of competitors, increased volatility and uncertainty, among other factors, are all changing the way companies operate and execute their strategies.

Companies that are failing or fail to adapt to this dynamic environment are digging an early grave for themselves. Sooner or later they will join the history books as the once regarded “Too Big To Fail” corporations.

In an era of constant change, uncertainty and increasing complexity, business leaders ought to challenge accepted ways of doing things and reappraise their business models to see if  they are still fit for purpose. Unfortunately, many people are reluctant to adapt and change. Fear of the unknown often causes people to resist change, and this at times, results in far-reaching consequences. What used to work, say five or ten years ago, might no longer work in the current environment.

As a result of this fast changing environment, companies have to adapt a highly disruptive approach to managing almost every aspect of their business. As Marshal Goldsmith nicely puts it – What Got You Here Won’t Get You There. This ever-changing environment requires a new style of leadership and thinking. There is need, on the part of companies, to completely abandon legacy ways of thinking and embrace disruptive solutions.

 

What can companies do to prepare themselves for change and disruption?

 

Acknowledge That Disruption is Inevitable

Although it is difficult to predict the future with greater certainty and confidence, it is critical for organizations to know and understand that they are operating in an environment that is very unpredictable. Surprises are everywhere and these can abound anytime. To make it worse, we now live and function in a globalized and very interconnected world. Just because you are located in certain jurisdiction does not mean that events in another jurisdiction or industry will not have any major implications on your business.

The forces driving disruption within one industry might not necessarily have a direct impact on your business, but rather, indirectly affect the operations and performance of your business. What cross-industry issues are likely to have an impact on your business now and in the future and at what magnitude?

Instead of focusing on the past alone, management and their teams should start looking at the future and anticipate those forces capable of transforming the company’s existence and its operating model. In other words, having sharp risk-sensing tools capable of identifying risks and opportunities. This includes asking tougher questions about issues affecting the future of the organization, and having the right capabilities to respond accordingly.

You must be able to quickly identify any sudden shifts in the business environment that are capable of rendering your company’s broader strategy less relevant than it was in the past. In today’s era of data and analytics, companies can take advantage of these new technologies and use them to help predict the future and make fact-based and confident decisions. The challenge for many companies is having that ability to rise above all the noise out there and obtain the right insights for effective future decision making.

Take social media technology as an example. It has changed and continues to change the relationship between brands and customers. Control of brands has shifted to consumers. Consumers are constantly talking to each other on various social media platforms about different brands – the good, the bad and the ugly. It is no longer a case of the marketing team pushing the company’s products and services to the consumers, but rather listening to them.

Unfortunately, many companies are still reliant on internal sources of data to make key strategic decisions. They have not yet embraced new systems to mine unstructured external sources of data and tap into consumer conversations to hear what is being discussed about their products and services. Companies need to be reminded that managing in this environment requires them to adapt to this transition, get a grip on social media and start holding profitable conversations with consumers.

Given the massive proliferation of data, focusing on the right information is therefore a must.

 

Challenge Current Strategic Thinking

It is one thing acknowledging that forces of disruption are inevitable, and another thing to challenge current strategic thinking. What do you do when you have identified the various forces threatening to disrupt your business? Do you sit down, relax and allow nature to take its course?

Unfortunately, in today’s hyper-competitive and complex business environment, once an organization has identified potential disruption forces, it is critical to review the organization’s strategic choices and find ways of responding to the threats or opportunities presented on the table. This might require you to review your market and product portfolios and select the best candidates for investment. Some of the questions that you might ask yourself are:

  • Given the finite resources at our disposal, what are the strategic choices that  we should focus on and invest in?
  • Which markets, customers and segments should we invest in now to position ourselves for the future?
  • Who are our important stakeholders and how do we plan to satisfy their multiple sets of demands?
  • How best can we realign our value chain in order to optimize our business performance and competitive advantage?

For many companies, their market share is under pressure from intense competition by current and new competitors. In order to survive and not disappear into the thin air, these companies must adapt and transform their business models. Strategies that might have worked for them in the past are now deemed unreliable. As a result, these companies have to respond faster and differently compared to their competition.

What is key is getting everyone within the company on the same journey. For people at the bottom to shed legacy ways of thinking, the tone of message from the top must be right. Leaders have the duty to provide a clear framework and steps required to move the organization from one position to the next. They must clearly communicate the plan to everyone, from top to bottom, and ensure the response plan is aligned with the overall company strategy and easily understood organization-wide.

When there is full buy-in and accountability from the top, there is a higher probability of buy-in from the lower level employees. A command-and-control approach cannot keep pace with a dynamic business environment.

 

Execute the Plan More Effectively

Various research findings have concluded that most companies, irrespective of industry, are good at planning but poor at effectively executing these plans. A lot of work and resources goes into these planning processes, unfortunately, these yield unsatisfactory results.

The difference between success and failure frequently comes down to how the organization implements its strategic plan. So often, there is a misalignment between strategy and implementation, resulting in poor performance. Preparing and responding to disruption requires business leaders to craft a simple to understand, but effective strategy, that is communicated consistently across the organization.

Clear communication of strategy throughout the company is key to creating alignment. Additionally, clear communication  helps establish common goals for the different business unit managers to work collectively toward. On the contrary, poor communication creates barriers to effective execution. Getting everyone to work towards the same objectives improves cohesion.

In order to make sure that you are moving in the right direction, you must design and implement KPIs that measure progress towards achieving strategic goals. This helps set expectations and help identify any problems regarding execution.

Executing the plan effectively also demands the organization to have the right talent in place to implement the strategic choices that have been made. In most cases, lack of talent in key strategic positions has been proved to inhibit business growth. It is therefore imperative for leaders to know and understand that the capabilities required for success today are quite different from those that were needed in the past.

For example, the finance function of the past had chartered accountants as the team members. Today, the function has people with diverse backgrounds. This is because, as the role of the finance function evolves from being a bean counter to a bean grower, managing the function requires very different capabilities.

The onus is therefore on the company to develop and implement an effective talent sourcing strategy that attracts and optimizes talent and resources, and ultimately improve business performance.

Now or later, every business will experience some form of disruption. Business leaders must understand that disruptions will happen, and with each disruption comes risk and opportunity.

Are you prepared for the change and ready to respond?

 

 

 

 

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