CFOs & Business Model

CFOs must own the business model. No two ways about it. It's not about the budget. It's not about closing the books. It's about the strategic business model: the go-forward plan, the strategic initiative, and the investments that a company is betting on.

If you look at the CFOs role five years ago, it was essentially dominated by governance and compliance. The CFO was viewed as the "numbers person" who made sure the books and finance were all in line. Although these requirements are still a priority, the expectations have changed, and the role of the modern CFO is now broader.

Today, the CFO is the CEO's right-hand person. The modern CFO is responsible for more than just finance in a world of rapid market changes, a challenging regulatory environment, and global competition. They are expected to have a much more significant stake in business ownership and are directly responsible for critical business decisions. There are two primary reasons for this shift: new business models and technology and data availability.

One of the most critical changes of recent times is that the traditional business model built around the product economy is obsolete. The mainstream adoption of recurring revenue models is relatively new. The pace of companies shifting to subscription-based service models over the past decade is staggering. Consumers (both individuals and companies) are forcing this change as they demand flexibility in their consumption methods. Inversely, the pace of technological innovation is allowing companies to release new offerings and compete at levels never seen before. However, although companies know that when subscription models are executed properly, they are inherently more profitable, the metrics and benchmarks required to run these models are not in the public domain. They are not required to be disclosed financially.

The lack of public disclosure means defining the benchmarks and positioning for success has to come from within the organization. It involves ongoing learning and instilling the whole business model across the company, including the executive team and board, and then living the new business model every day. There is only one function that has financial and operational visibility into all other functions – the office of the CFO.

Secondly, the modern CFO's office has all the information and data to be proactively forward-looking and steer the business. The CFO needs to have a very clear understanding of what influences change, the key business drivers, and the business metrics. The evolution of the traditional Financial Planning and Analysis (FP&A) group within the CFO's function into more of an FD&A, where D stands for Data, further enables the CFO to help steer other parts based on financial benchmarks deeper within each function. The availability of data and the capability to analyze that Data with accuracy data speed allows for much more granular action items. The CFO has to be able to digest those takeaways and then educate the executive staff to help them make the right decisions to move your business forward.

Fortunately, we have new business data and tools to help us – we have deep insights into our customer behavior, our spending behavior, our buying behavior, and many tools to analyze that Data.

The best CFOsdata set forth on this road only after they've set in place a compliance and governance structure that allows the books to close and for appropriate internal controls and reporting. Today, those are table stakes but must always remain the CFO's top priority. But once that's in place, you can widen your horizon and act as a trustworthy business advisor and strategist to help optimize and run the business model for the company.

Begin assuming that everything you think you know about staying competitive is no longer relevant. So, instead of merely reporting on the company's health, start asking why? Then, if you don't like the results, try to change things.

Owning the business model is the only way you'll be able to empower your teams, solidify your company's relationships with your customers, and be the prime catalyst for significant growth in your business.