Reset 100 – Part 2

We hope you enjoyed the first part of our Reset 100 series. In this Part 2, we'll focus on the broad topic of Business Strategy.

Modern CFOs' role is evolving at a rapid pace. They are increasingly a core part of the strategic business decision-making teams. If not aiding in creating the right strategic path for the company, at a minimum, they are bringing a financial impact lens to each of those business decisions. With the backdrop of macro volatility over the past 12 months and the time of the year we are currently in, it is the best time to evaluate business strategy from the following four (4) perspectives.

1. Revisit Market and Competitive Landscape

Most markets and companies have gone through unique journeys during the last three years. Some thrived after almost dying, and others are dying after claiming unprecedented heights. Business-wise, COVID was a boon for some and a curse for others. Many companies have raised a lot of funding, made in-roads in adjacent markets, or pivoted to a new market they probably were not considering pre-COVID. The shakeout of the after-effects of COVID is mostly behind us, but we currently find ourselves in another unprecedented and perhaps prolonged period of pain.

So looking at the market holistically, there have been significant changes to the landscape in which a company operates, and it's a perfect time to take a step back and re-evaluate the market dynamics. In collaboration with the executive team, CFOs should try to appreciate:

• The impact of COVID on their existing and prospective customers. How has it impacted their users?
• Does the current softness in the market affect their customers/ ICPs?
• What are their customers' key priorities for the next 1-3 years? How have they changed over the last three years?
• Is your value proposition still aligned with their priorities? Can you do anything to align it further?
• Which new competitors have come up lately? How well capitalized are they?
• How has the existing set of competitors evolved / responded to the market?
• How is the competitors' value proposition different than yours? Is that better aligned with customers' priorities?
• Can you correlate the "coming of age" of competition with a change in buyer behavior?
• What is my Total Addressable Market (TAM) currently? Has it reduced / increased over the last three years?
• How's our market share evolution been?

Answers to these questions enable you to contextualize your company in the market vis-a-vis the competitors and allow you to think about various strategies to tackle the situation. Examples of such strategies could be opening a new sales channel or trying a new marketing strategy; harnessing a particular part of your product or introducing new revenue streams; enhancing customer service or tinkering with pricing; reducing spending on a specific area, or hiring for some unique assets in different geo. Whatever it is, this relook at the landscape is guaranteed to open new perspectives to approach your business.

2. Exec team alignment on the company's core competencies and differentiation

Once you have a good grip on the current stage of the market as well as your competencies and competitive differentiation, the next step is to share these findings and get alignment with the executive team.

These strategic reviews are never accomplished in a silo, ideally, so other members of the team are likely already involved in the exercise. However, it's still critical to lay out the overall results before the whole team and ensure complete alignment between all departments.

Going through this exercise, everyone would have an opportunity to air their views, question the CFO's assumptions, push her further to make it more factual, and bring in perspectives from all functional departments to have everyone onboard with the results. Such re-evaluation of competencies and differentiation becomes the basis for all critical strategic directions and company objectives over the next one to three years. In addition, the alignment across the board increases the chances of more impactful execution.

3. Re-evaluate KPIs 

To achieve the right set of outcomes, organizations need the right set of OKRs. And it's well known that the more measurable the objectives are, the better the chances of companies achieving them.  

With the latest set of company objectives in place for the next year or so, it makes sense to review the leading and lagging KPIs impacting such objectives and ensure alignment on them as well. Questions like the right focus metrics, their definition, calculation of each, etc., are critical to answer.

In the recent past, as businesses have grown in complexity, it makes more sense to track both leading and lagging KPIs so that both the efficacy of input / process and the final impact can be evaluated. In addition, these learnings could further aid in strategizing for future periods.

Further, beyond the general financial metrics, it is becoming essential for CFOs to analyze sales and recruiting funnel evolution regularly. This data is a treasure trove for quickly evolving market dynamics that most folks do not examine in real time and end up missing essential cues.  

4. 3-yr Financial Plan 

While most businesses have gestation periods of longer than 12 months, it is surprising that companies mostly only do one year of budgeting and planning. Given this nearsighted view of the business, they end up under-investing in long-term value creation opportunities, which may put them at a massive competitive disadvantage in a fast-evolving market./p>

CFOs should look at Planning and Budgeting as mutually interdependent but separate exercises. One can always do a GL code level budget only for the next financial year, but the Planning process has to be for three years at a minimum. It provides an opportunity to look at additional streams of revenue that could only be introduced later in Y2 or even Y3 but requires investment in Y1. As the RoI on such investments is never understood without a 3-yr plan, companies would completely miss those line items with huge long-term value potential. Another good example is sales or other GTM-related investments that might only bear fruit in Y2 or Y3. Further, back-office functions may have a delayed RoI in general, and having Y2 and Y3 plans helps contextualize the investment correctly, which might be critical for optimum scaling of the operations.

Lastly, it becomes powerful to analyze the viability of Y2 and Y3 plans at the end of Y1 to evaluate how well the company has executed in Y1 and whether the competitive dynamics have shaped up as expected.  

With the help of these four interrelated strategic activities, CFOs can ensure that the executive team better understands the context within which the plans would be executed for the next 12 months and chase the market in a much more thoughtful and impactful manner than they otherwise could. 

In the next part, we'll cover the Budgeting process in detail.

As always, we are happy to be a brainstorming partner and discuss ways to unlock your full potential. So do not hesitate to reach out to have a discussion. We care for your success!

***