The CFO’s Strategy Playbook: Context, Objectives, And Governance

Johannes Vogel

Part 2 of the CFO Strategy Playbook series

This series focuses on how CFOs are rethinking the organization of their teams, their values and vision, and the functional strategy that lays out the roadmap for achieving that vision.

Finance strategy context

Every functional strategy exists in the context of a bigger picture, which is the overall enterprise strategy and its competitive situation. Functional strategies refer to the current corporate strategy and provide answers how – in this case, the CFO team – sets out and defines its ways of supporting corporate strategy execution. The overall enterprise strategy acts are a guide and framework for other functional strategies. Frequently, IT and digitalization strategies should be considered, because existing and future systems will be key in providing sources of data for the finance team.

Amazon provides an example of how corporate strategy impacts functional strategies: Jeff Bezos in Amazon’s Annual Report 2016 states: “Here’s a starter pack of essentials for Day 1 defense: customer obsession, a skeptical view of proxies, the eager adoption of external trends, and high-velocity decision making.” By focusing the Amazon team on the need to stay in a “Day 1,” or start-up mindset, Bezos selects his four most important strategic guiding principles, which drive Amazon’s strategy execution both for overall corporate strategy and for most operative and support functions, including finance.

I recommend validating the key aspects of the corporate strategy that impact the finance team and, more important, to identify what implications and actions arise for the CFO team.

Objectives

Clearly stating the objectives of the finance strategy is important to create awareness, buy-in, and a sense of urgency for the finance transformation, which will follow the finance strategy definition process. Being clear about the objectives of the functional strategy will help to engage the finance and business teams working on the strategy.

Design principles and governance

It is helpful to give some thought to general design principles, which serve as a common framework for the finance strategy definition process. The design principles are defined by assessing corporate strategy, emerging strategic thrust topics, and the current and future situation. By providing transformational design principles, those working on the finance strategy receive the incentive to “think outside the box” and to leave behind the patterns of how business was done in the past.

Relevant design criteria for a finance strategy may include:

  • Process-organization and process management vs. departmental organization
  • Agile and adaptive approaches for projects and initiatives vs. classical waterfall models
  • Experimentation and acceptance of potential failures
  • Customer (operative business) orientation for the finance team
  • Focus on providing business insights and counsel to the business vs. providing commentary on variance actuals vs. budget
  • Forward-looking focus vs. explaining the past – 80% of time spend on future-oriented business insights, 20% on retrospective topics
  • Decisions powered by data-driven, analytical, predictive tools and methodologies
  • Cloud first (provide cloud-based software-as-a-service solutions) for future business requirements
  • Use of robotic process automation (RPA) and cognitive computing where possible
  • Results-orientation (get-it-done culture) vs. hierarchical decision cascades

This is only a selection of potential design criteria. Relevant design principles are also a function of the relative maturity of a finance organization. The principles support the alignment of ideas for the finance strategy and potentially provide the impetus to think of development potential for the finance team. In addition, the finance strategy governance can also describe how and by whom the finance strategy is drafted, released, and developed further in the future.

My next blog will discuss the importance of factoring in megatrends and innovation topics.

Read Part 1 of this series: The CFO’s Strategy Playbook: Seven Key Elements.


Johannes Vogel

About Johannes Vogel

Johannes Vogel is director of Finance & Regulatory for Finance Strategy & Digital CFO Services at BearingPoint. Johannes is an experienced professional in management consulting in the areas of finance strategy, finance process improvement, digital CFO services, and process management. He has worked with national and international clients in creating functional strategies for CFO teams preparing to support the business by creating value and business insights, while running a cost-efficient yet technologically modern organization. Other projects Johannes conducted with his clients included digital CFO assessments and benchmarking, as well as ERP and finance process implementations. Prior to consulting, Johannes worked in various finance functions of an Atlanta-based international media group. Johannes is a lecturer for a Master Program at the Universität der Künste in Berlin and likes to post on finance topics. In his time off, he enjoys playing guitar with friends and tries to spend as much time as possible with his sailing buddies somewhere off the coast of Croatia or elsewhere.