How CFOs Are Hedging Their Bets To Find Success In The Digital Era

Richard McLean

Any large, developed company is somewhat constrained by the success of its existing business. CFOs are asked to provide capital and funding for new initiatives and innovation – yet the pressure is on to retain the business that has driven profitability in the past. People want incremental investments, but the reality is, businesses can’t afford to do everything. How do you choose what to pursue and what to stop, and when is the right time to stop?

Essentially, the business is placing bets on opportunities, and the role of finance is to help the business narrow the odds by guiding strategic investment decisions. Having better insights and better information helps the business be more successful in its “gambling,” so to speak.

Using maturity to your advantage

Using your market presence also increases your odds of success. In today’s business climate, the big disruptor is the digital economy. The speed of change of everything is much faster than it used to be. In the past, companies could make bad decisions, and frankly, there weren’t too many competitors nipping at their heels. Now, new competitors are emerging all the time.

But large, mature businesses have an advantage. New startups can come along with new inventions quickly. It’s quite difficult for them to capture market share without an established market presence. For every startup that succeeds, there are hundreds that fail.

Having an established business with an installed base of loyal customers is a very powerful asset. The business is in a strong position that enables it to bring new innovations to market faster than small players that have many barriers of entry. But to succeed, established businesses need to avoid complacency and keep innovating. For finance, this means ensuring that resources are made available to fund the right innovations at the right time.

Facing the spectrum of risks

Whether your business is established or a startup, having good systems, good information, and a real-time view of the world in which you operate helps minimize risk and uncertainty. Basing decisions on gut feel and instinct does the opposite.

You can’t avoid risk and uncertainty by simply maintaining the status quo. If you become complacent and focus only on doing what you’ve always done, something will change to disrupt your business quite materially. As a cautionary tale, just look to Nokia’s fall from market leadership. At the press conference announcing the company’s acquisition by Microsoft, Nokia CEO Stephen Elop asserted that even though the company did nothing wrong, somehow it lost. Quite clearly, it did do something wrong: It became complacent. It didn’t innovate at a time when it could and should have.

Maintaining forward momentum

CFOs need to be vigilant about staying current and investing in innovation. To keep your business fresh and moving forward, you must keep growing, evolving, and innovating based on insights that are accurate and realistic. If you don’t, the danger is that you’ll miss opportunities. Miss enough opportunities and you’ve not only lost the bet, you’ve lost your business.

For insights from fellow CFOs on how they are hedging their bets in the digital era, download the infographic and check out these business cases.

Richard McLean

About Richard McLean

Richard McLean, regional CFO for SAP Asia Pacific Japan, oversees all key finance and administrative functions for field and regional headquarters, supporting more than 18,000 employees. He has more than 20 years of experience in senior finance roles with leading global companies across a range of industries, including financial services, investment banking, automotive, and IT. He joined SAP in 2008.