Crowdsourced Financing Tramples On Established Truths

Christian Horak

Part 2 in a 4-part series. Read Part 1,  Part 3, and Part 4.

In the first edition of this blog series, I set out to illustrate how the new industrial revolution is redefining nearly every aspect of the enterprise, as change and innovation accelerate at an astonishing speed. Understanding the different technology breakthroughs is essential for finance leaders today, as fundamental business concepts are being turned on their heads. Establishing a flexible strategy for business-model changes, partnerships, and acquisitions to cope with the growing speed of innovation and competition has become the new mandate of a more strategic finance function that supports the leadership with innovation along the value chain.

This second article examines the crowdsourced funding aspect of this digital disruption.

An innovation beacon that’s kicking history into a new era

Access to capital, and the limits thereof, have traditionally been among the defining parameters of any economic system. Capitalism, at its very core, relies on the free flow of capital. In the past, however, an independent inventor, for example in a rural area, had close to zero chances of creating an expensive prototype of their invention, let alone bringing it to market at scale to challenge an incumbent vendor or brand with a new product. In the 21st century, with the advent and growth of crowdfunding sources such as Kickstarter, the history of innovation, manufacturing, and marketing is being “kicked” into a new era. This is having a growing impact on the world of finance.

Competition where you least expect it

In the “old” world, concepts such as cost, profit, cash, revenue per employee, or risk were the overriding concerns of most finance professionals. Now, in the new era of finance, strategic concerns such as time-to-market, market share, growth velocity, brand equity, and customer loyalty are taking a stronger hold in the minds of finance leaders. It is simply not enough any longer to “flawlessly manage” the finances of the enterprise. Today, finance leaders must step up to a strategic role to help their enterprises face competition, not only from established companies in their space, but from an ever-accelerating and growing phalanx of upstarts and innovators that simply weren’t there the year before.

The importance of an innovation ecosystem

The next generation of competitors will be able to tap into digital technologies, ubiquitous capital, and marginal-cost, distributed manufacturing. Their near-zero employee enterprises can leverage global distribution channels with minimal delay and cost. With this trend, it’s ever more important for enterprises to discover and evaluate the risks posed by this competition as early as possible. It has become imperative for the enterprise to become more agile in its go-to-market approach. Companies must realize the ever-growing significance of maintaining an innovation ecosystem of their own.

A new strategic mandate

Finance leaders are managing this new competitive landscape by:

  • Ensuring real-time flow of information to minimize competitive response times
  • Increasing the ability to change financial models, prices, and planning assumptions
  • Establishing a maximum of automation for routine tasks to free up time and attention to strategic tasks such as business model changes, partnerships, mergers, or acquisitions
  • Employing predictive foresight to preempt risks and maximize planning flexibility

The next blog in this series will explore cryptocurrencies – an innovation beacon that is challenging the most fundamental economic concepts. Look for that on Wednesday, June 7.

For a look at the technology behind cryptocurrencies, see Running Future Cities on Blockchain.

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Christian Horak

About Christian Horak

Christian Horak is a Global VP at SAP responsible for the positioning, messaging and thought leadership, awareness and demand generation content for SAP S/4HANA Finance Line of Business Solutions (Accounting & Financial Close, Treasury & Financial Risk Management, Collaborative Finance Operations, etc.), as well as SAP JAM Collaboration & Communities.