The paths to a digital-first mindset in Insurance
Three pathways to agility, scalability and lower costs for Insurtech and Midmarket Insurance organizations
What CFOs need to get right when adopting subscription models
Four areas CFOs should focus on to ensure the shift to a recurring revenue model goes smoothly
A discussion with ex-HSBC Group Finance COO, Mark Winson-Pearce, on insights gained over a 30-year career in Financial Services
“I just don’t believe that a CFO can lead a modern, forward-looking business unless they understand technology. Period. If the CFO just sits in their office with a pen and paper and doesn’t really get on board with the technology agenda, I don’t see how they can be successful.”
How to lead in difficult times
Becky Barsellotti, CoFounder & Managing Director at GiANT London, shares two principles to help you lead with intention
Technology ecosystems that are greater than the sum of their parts
Today’s organizations are demanding more from their technology - and ecosystems are delivering
As I sit down to write this, the Prime Minister of the UK has just announced her resignation after just six short weeks on the job, global inflation remains on the rise and the markets are feeling the effects of slower economic growth.
And yet, while today’s environment feels unique, CFOs and finance leaders are now armed with more data, technology and new ways of working than ever before. Over the course of my career, I have seen various ‘eras’ come and go and without fail, the most successful businesses always use challenging times to innovate and emerge stronger than ever, often through accelerating or even shifting their business models altogether.
To this end, we’ve included an article on how CFOs are responding to inflation and also hear from Becky Barsellotti, Co-Founder and Managing Director at leadership consulting firm, GiANT London, on two principles that can help you guide your teams to success during challenging times.
For this issue’s cover story, we sat down with ex-HSBC Group Finance COO, Mark WinsonPearce, who shared insights from decades spent at various global Financial Services companies in roles that have spanned technology, transformation, finance operations, controls, people strategy and more.
Finally, we’ve included perspectives on the importance of technology ecosystems, how CFOs can help guide the successful adoption of subscription models and pathways to a digital-first mindset for Insurers.
Enjoy this Fall Issue as we start to close out a busy 2022!
Jeremy Suddards CEO, Aptitude Software
Pairing his deep technology expertise with a career spent at some of the world’s largest and most renowned Financial Services organizations, Mark Winson-Pearce has worked across a variety of functions giving him insights into what makes a business work. The former Global Finance Chief Operating Officer at HSBC recently sat down at Aptitude HQ in London with Christophe Kasolowsky and Nick Shah to discuss his definition of a Digital CFO, the danger of departmental objectives, and the four questions to ask before starting a finance transformation.
Nick: To start us off, could you give us a brief summary of your career and background?
processing to the cloud, growing our finance centers in India and Poland and significantly reducing the cost of the finance function.
Over his 35 year career, Mark has worked for some of the world’s largest financial institutions. Most recently, for 14 years he served as Global Finance Chief Operating Officer for HSBC leading their finance transformation. Prior to his time at HSBC, he held IT, Risk, Finance and Operations roles at Reuters, UBS, Credit Suisse and Santander. He is a board trustee at Unity Education Trust and volunteers with the RSPCA.
Mark: I spent the first half of my career in technology roles and the second half in finance and risk transformation roles. I started out as a computer programmer in the 1980s on the internet before it was called the internet! Back then I was Unix kernel programming, building device drivers, all sorts of hardcore stuff and then I accidentally found myself in financial services and writing trading room systems for UBS & Credit Suisse.
As time went on, I moved into transformation and COO roles at Credit Suisse, Santander and HSBC.
Over the next 14 years as Global Finance COO at HSBC, I oversaw technology, projects, transformation, controls, finance operations across the globe, people strategy and communications. During my time I delivered many large, complex projects including building a bespoke banking GL, deploying Oracle Fusion globally, IFRS 9, moving finance
Christophe: Let’s jump right in with our keynote question. We’ve seen the rise of the term ‘Digital CFO.’ What does being a Digital CFO mean to you? What does it look like in practice?
Mark: Admittedly, I think the term itself is a bit of a buzzword but that’s probably because I feel like I’ve been deeply involved with technology since I was 18 years old - my whole life has been digital. But I understand not every CFO or finance leader would have come up through so many tech-focused roles.
I think if I were to try and define a Digital CFO, it would be a person that understands the power of technology and knows how to leverage technology to grow their business. They are a business change agent.
I don’t believe that a CFO can lead a modern, forward-looking business unless they understand how to leverage technology. If the CFO sits in their office with a pen and paper and doesn’t really get on board with the technology agenda, I don’t see how they can be successful. If you’ve got a CFO that doesn’t understand how to digitalize their own department, how on earth are they going to understand how to lead a digital business?
Nick: So, let me ask you this: do you think, over the last 5 or 10 years, technology has become easier for CFOs to navigate? Has it become more straightforward to adopt?
Mark: I don’t think it’s easier. I think the implementation of solutions is easier. But I think today’s technology can still be quite bewildering for somebody who is not tech savvy. If you think about the median age of CFOs today, when they were starting out roughly 25 years ago in the mid 90’s they were just starting to access the Internet. Back then a computer was easy to understand; you had a desktop, you had a big monitor and an IT department to turn to for everything in the Data Center. Now most of your cloud solutions are managed offsite by vendors and you’ve got vast amounts of data, unimaginable processing power and a more complex architecture. So, I
think that can lead to terminology and concepts that are harder for CFOs to get their head around.
Christophe: Recently a former colleague working at one of the top 10 largest Banks in the world said their organization has as much data as Amazon, yet they aren’t equipping the finance function to be able to inform and instruct the business in an effective way. What would you say to that observation?
Mark: I think that’s true of a lot of organizations. I think a big part of the problem lies with the fact that most organizations are not directive enough from the top down to be able to run a truly crossfunctional transformation. You may see separate transformation programmes across the functions and businesses all building their own bespoke data sets.
In these situations, each department is so focused on doing the best for their individual outcomes and what they don’t realize is, the value comes when they do the best for the organization, not just the function. You have to be able to get in a room together and agree on a data strategy. You have to think holistically about your data. When developing a cloud data agenda, focus less on identifying lots of new use cases and more on digitizing all the data that is currently available
and being used – a sort of ‘build it and they will come’ mentality. This allows an organization to create an accurate, holistic big data set that could service multiple requirements.
In my mind, a Digital CFO should be focusing on creating the best digital representation of the data in their business. If you’ve got the right data, you can put whatever algorithm or system you want on top of it. It’s all about organizing the data in a way that allows you to do something with it.
Christophe: How would you advise a CFO at the beginning of a finance transformation journey given your career experiences?
Mark: First of all, I’d ask the following questions: Does it really need to be just a finance transformation? Are you absolutely clear what your objectives are? Do you have a business case where you understand exactly what you are going to spend and what you’re going to get out of it? And finally, do you have the rest of the business represented in the room?
I ask this last question because almost certainly your objectives are pan-functional. Almost certainly you’re not going to be delivering results in a silo. And even if your objective was just to do something for the finance department, you
Today’s Digital CFO should think less about closing the books and meeting regulatory requirements and more about growing the business for customers and shareholders and creating an exciting environment where employees can develop their talent.
are 100% reliant on other functions to be able to achieve those goals. It’s certainly a challenge to get everyone to focus on the broader outcome than just a set of single transformations.
Going back to getting everyone represented in that room, listen, everybody around the table needs to be on the same page and needs to be completely committed to the outcome. Because it should all be about the organization. And it’s about creating a team that’s got the same vision around execution. And you’ve got to be single minded in the execution, because if you’re not focused about measuring and making sure that you hit your milestones then you’re going to spend more money and get fewer benefits.
Nick: Transformation can take years and in most cases the people around the table change. Any advice around how you manage a change programme as new leaders come in with new visions and priorities?
Mark: That’s an interesting one. I’d come back to being crystal clear when the program starts as to the objectives and the reasons the project was started in the first place. This can help establish a lineage and make it clear to everyone why and how you’re making decisions. You know, you’ve been on lots of projects where you
get two years in, and somebody will say ‘Why did we choose to do it that way? Can anyone remember?’
Christophe: Can finance teams use today’s technology options to address some of the legacy systems’ challenges further upstream to limit the amount of technology replacement they have to do?
Mark: The answer to that is obviously yes. It depends whether you’ve got the data in the format that you need it. As an example, a lot of the pain when moving to the cloud isn’t the data that you have, it is the data that you don’t have. It is sourcing the data, finding out how to get it. If you don’t get it through the ledger, could you get it via another route? You can use those workarounds. I’m not advocating reengineering the finance department from first principles, although that would be a good thing if you could do it.
Christophe: As a follow-on to that, does that put the ‘rip and replace the ERP’ transformation model at risk?
Mark: If the ERP vendors could do everything for an organization from front to back, which is what they promise they can do, the world would be a wonderful place. And I’m sure for many simpler organizations it does work. It’s pretty tough for the bigger, more complex ones; trying
to make it work well for everything a finance function needs - Accounts Payable, Budgeting, Reporting, GL, Operations, Treasury, Analytics –does a single solution really exist?
Christophe: How do you think finance functions will be different in 10 or 20 years’ time?
Mark: I’d like to believe that there won’t be such a thing as a finance function as we currently know it in 10 or 20 years’ time, and that people will have moved on from having the silos in the back office and silos in the front office.
They’ll run their business in a much more integrated way because they’ll have a data foundation for the organization, and they’ll run all of their functional apps around that data. I think organizations will be less concerned about where work is done and focus more on what’s the best outcome for the organization. The CFO will be somebody that’s focused on making business decisions rather than managing the intricacies of reporting.
Nick: Any final thoughts before we wrap up?
Mark: If there’s one thing I’ve learned in my career, it’s that for transformations, technology is not the thing that’s going to make you successful. The thing that’s going to make you successful is organizing a cross-functional team around the same objectives, to be on the same page and to be completely committed to the execution of your transformation. The technology will always work itself out. CFOs who are in charge of managing the bottom line for the firm should be strategically guiding the CEO on investment dollars. And as soon as the CFO sees separate siloed transformation investments they should be banging the table and not allowing that to happen.
Christophe: Thank you for sharing your insights and expertise, Mark!
‘The paths to a digital-first mindset in Insurance.’
Get your full copy here
At first glance, the finance department profiles of a Midmarket Insurance company and an Insurtech might look different. But peel back the curtain on the challenges, opportunities and goals in both types of Insurers and you will find many similarities.
Both are facing a constantly changing industry with new entrants and significant pressure to consistently innovate. Continued high expectations from regulators and other stakeholders and the anticipated rise of Environmental, Social and Governance (ESG) mandates will put additional pressure on the finance department. And as in other industries, Insurance CFOs and their teams must prioritize a shift away from looking in the rearview mirror at historical performance to focusing on the future. This requires Finance to provide timely access to finance data, insights and mechanisms to support new products, bundles and business models with agility.
Although facing similar market pressures, the unique histories and growth patterns of Midmarket Insurers and Insurtechs are evident in their finance architectures. These technical landscapes result in various obstacles and opportunities for each type of Insurer.
For example, Midmarket Insurers have likely been in business longer than most Insurtechs. They are more established in the market but face competition both from new entrants and from large, global players. They also have more established finance processes – and likely more legacy systems to contend with.
Most Insurtechs, on the other hand, are highly innovative and focused on exponential growth but may lack established finance processes and systems. They are more likely to have a digitalfirst mindset and use new customer engagement models. In addition, they may have a newer finance architecture, free of legacy systems.
To stay in the race, Midmarket Insurers and Insurtechs must innovate to meet existing and future challenges including:
• Providing the agility to grow and scale either organically or through acquisitions
• Lowering the overall cost of finance and supporting growth without constantly adding headcount
• Playing the role of transformation enabler (Midmarket insurers)
• Addressing ESG considerations
• Meeting high expectations from regulators and other stakeholders to constantly improve return on investment (ROI)
The continued movement to a Cloud-First architecture for finance has opened opportunities to deliver a digital, cost-effective finance function. Depending on the Insurer, this journey to a digital finance function can take multiple paths:
• Path 1: Finance as a Service
• Path 2: Leveraging a preconfigured solution with flexible deployment options
• Path 3: Extend the life of the existing finance architecture
Path 1: Finance as a Service
Finance as a Service involves implementing a complete, scalable, integrated technology solution provided by a third-party organization. The solution provides a set of ‘full-stack’ capabilities to enable finance processes and operations.
These highly automated finance solutions enable finance functions to focus on decision making while the technology and operational activities are fully managed by the third party. It also provides a path to rationalizing the skills needed within your finance organization, supported by industry professionals at the service provider.
This allows the Insurer the option to avoid decadeslong commitments by using new operating models and solutions. These digital finance insurance solutions can scale with a finance function and provide the increased flexibility to change in the future, if needed.
A CFO that opts for this Finance as a Service path can take full advantage of industry-leading best practices and accelerators. Insurtechs have the opportunity to put in place a digital-first, integrated finance architecture that can scale and grow without having to add headcount. This is a unique opportunity more likely feasible for Insurance start-ups and Insurtechs that are not dealing with legacy technology.
In addition to gaining an industry-specific, full-stack solution, the third-party solution provider also handles the ongoing services and support while maintaining configurations and performance-based monitoring of the solution. This will allow a small finance team to focus on running their business and meeting strategic objectives
versus managing the minutiae of transaction processing, software updates, performance monitoring, and more.
Summarized benefits:
• Industry-leading finance best practices and accelerators
• End-to-end solution
• Accelerated implementation
• Right-sized for the organization
• Scale with growth if/when necessary
• Reduce the total cost of finance operations
• Avoid long-term technology or services licenses
Insurtechs have the opportunity to put in place a digital-first, integrated finance architecture that can scale and grow without having to add headcount. This is a unique opportunity that Insurance start-ups and Insurtechs have because they are not dealing with legacy technology.
-David Fourie, Finance Transformation Partner, KPMG, LLP
Midmarket Insurers face a slightly different challenge to new entrants or Insurtech companies. They typically have well established ERPs which they have used for many years. Often, they have grown through acquisition which has led to greater complexity in finance processes and architecture. Investment in modernizing finance technologies can represent a challenge as the return-oninvestment analysis can show limited to no return.
As with Insurtech and start-up companies, Midmarket Insurers can approach the modernization of their finance processes with greater efficiencies. Investments made by third parties, such as KPMG, in preconfigured solutions leveraging insurance best practices and accelerators are providing a more efficient path to transformation. These offerings provide organizations with a variety of options where solutions can be “owned” or accessed through a Software as a Service (SaaS) solution. This allows the Insurer to enhance and complement the existing Cloud finance applications and avoid a ground-up build, while taking advantage of the standardization and built-in IP offered by a packaged solution.
For a Midmarket Insurer, using a preconfigured solution can help accelerate their growth by reducing the time it takes to close the books, improving finance processes, and gaining better access to data and analytics for decision making. For example, an Insurer may want to
utilize the Cloud GL they implemented a few years ago but are looking to implement a best-in-class subledger and reporting solution.
By implementing a preconfigured subledger and reporting solution within their private environment, the finance function can continue to use some of their existing technologies - including their Cloud General Ledger - while taking advantage of a digital finance solution that provides standardization, accelerators, and built-in intellectual property and allows them to move to a best practice finance operating model.
• Increase efficiency and lower cost of finance
• Reduce manual processes
• Reduce implementation time and time to value
• Move to a continuous, dynamic close cycle
• Extend the life of current technology solutions
• Access near real-time data
The insurance industry is rapidly changing, putting pressure on Insurtechs and Midmarket Insurers alike. However, by working within the existing architecture and the strengths of each type of insurer, finance teams can create a digital-first function that can power growth.
Title:
Organization:
Location: Boston
Mark brings over 20 years of experience in enterprise financial applications and has served in senior roles as a product vendor, consumer, and consultant. He has deep finance and operational knowledge across diverse industry sectors and has been focused on software solutions for financial regulatory compliance and modernization since 2007.
There’s nothing a CFO likes more than predictable revenue. While that whale-sized, surprise deal might make a quarter or career, it’s the steady, ever-increasing revenue that is rewarded by the market. In fact, research has shown introducing a recurring revenue business model could increase a company’s valuation by up to eight times.1
As consumers are becoming more comfortable with subscription and pay-as-you-consume business models in areas like entertainment, retail, transportation and food and drink, they have spread to a new batch of industries, including B2B. Subscription models seen in the market today include medical device companies offering payas-you-consume pricing on million dollar machines, subscriptionbased insurance plans, and banks replacing standard fees with more tailored subscription offerings.
Ben Martin, Partner at CFGI, observes, “It’s kind of wild now. Everyone is moving to a subscription or a SaaS-based model. I think the biggest thing is that it allows you to forecast and get a better understanding of your
top line revenue. My clients are saying, hey, at the end of the day we want to be able to forecast what our revenue looks like over the next 6-12 months. I think it allows organizations to wrap their head around what that revenue ecosystem looks like a little bit easier.” A recent survey from Prophix Software2 indicates that only 20% of finance teams have the ability to forecast revenue and earnings beyond 12 months, indicating revenue forecasting is still a major challenge for CFOs.
While recurring revenue models can help with revenue predictability, introducing them into a business isn’t without its challenges. It requires changes to the way an organization sells, manages, distributes, tracks and reports on products and services. Consumer engagement models and products are now required to deliver a great customer experience month after month, and companies must commit ongoing investment into their offerings, or risk losing business. While it’s true the CFO might not own the product experience; they do play a direct role in the success
With subscription models continuing to expand across industries and verticals, the CFO has a significant role to play in making sure organizations can launch, manage, track and account for recurring revenue streams.
Source: 1 https:// conseroglobal. com/resources/howimportant-is-monthlyrecurring-revenuefor-investors/
Source: 2 https:// www.cfodive. com/news/only-20percent-cfos-canforecast-revenueearnings-beyond-yearsurve/599994/
Source: 3 https://offers. worldpay global.com/rs/850JOA-856/images/ ENGPR2022.pdf
Source: 4 https:// dealroom. co/blog/the-riseof-alternativepayments-is-eatingcard-supremacy
or failure of facilitating and accounting for these new business models.
So how do CFOs and their teams ensure the shift to a recurring revenue model goes smoothly? Here are four areas CFOs need to get right.
In the past, the primary business model for an organization may have been an annual contract that required few changes during the year or consumer transactions that happened at a point of sale with a clear exchange of goods or services. While not ideal, finance could manually account and report for those contracts and transactions if necessary. Not anymore.
Launching multiple recurring revenue models can introduce highly complex, detailed agreements which change constantly depending on upgrades, downgrades, promotional options and more. A host of new things must be considered including revenue recognition rules, usage tracking, payment success, pricing changes, and costs of the subscription service. As innovative and more complex subscription models evolve, a finance function must be able to account seamlessly for revenue streams. This automation must extend from business rule application to
automated journal entry postings across multiple GAAPs, to revenue recognition reporting to ensure new subscription models don’t result in manual processes and End-User Computing applications in finance.
For consumer-focused businesses that are shifting from individual, point-in-time sales to a recurring revenue model, this rule still applies. Revenue and accounting systems must be able to automate changes, pauses, payment failures and other lifecycle events. Finance needs to remain ‘better, faster and cheaper’ as new and more complex subscription models are implemented.
FP&A teams should be very involved in a move to recurring revenue models as the introduction will shift the metrics finance must measure. Some of the big ones like monthly and annual recurring revenue may already be captured, but the business will now need real-time reporting on things like customer cost per acquisition, lifetime value, churn rate, renewal rate and others. From a planning perspective, as new models - or even new products within an existing subscription model - are conceived, finance functions should be advising on what metrics are needed and the data points and system integrations necessary to support the reporting.
“I think one of the biggest headaches I’ve seen for organizations has been figuring out how to have your tech stack take you from business model A to business model B without total disruption. If you’re not thinking ahead in terms of how you’re going to organize your data, how you’re going to report off of it, then you’re walking into a mess before it’s even happened,” states Martin.
While marketing and product teams may take the lead on crafting product bundles, offerings and promotions, finance can add value to the process through scenario modeling the impact of the offer on the balance sheet. Having integrated subscription management and revenue accounting capabilities can simplify this and provide accounting with the ability to change assumptions on recurring revenue models and dynamically tweak products to better conform with regulatory requirements or KPI goals.
FP&A teams can also make good use of the ability to combine the enhanced customer data with revenue data to help the function deliver better analysis and insights to the business.
When you extend product offerings from transactional sales models to subscriptions, the sheer number of repeat payments you need to collect will undoubtedly rise. This increase in the number of payment transactions can mean added complexity for finance teams around expanding payment choice for consumers, meeting regulatory requirements and minimizing churn stemming from payment issues.
In today’s digital environment, streamlined buying journeys and one-click payments are a day-today occurrence and consumers have a certain expectation
around payment choice and experience. A 2022 study from Worldpay, Inc.3 reported that digital wallets comprised almost half of e-commerce transaction value globally in 2021 and are projected to rise. At the same time Alternative Payments including digital wallets, account-to-account (A2A) payments with open banking and buy-now-pay-later (BNPL) are continuing to consume market share.4 Organizations need to understand what payment types to offer and support while ensuring they have the systems and
And I would say taxes are now another new area that is relevant for payments. In addition to tax variations across jurisdictions, we’re also starting to see digital service taxes applied in certain areas,” states Paul Roberts, Head of Payments for Aptitude Software.
There are several other areas to consider for payments, including routing to optimize transaction fees or the management of each business entity, fraud and protection layers, speed to access funds (merchant of record), as well
processes to scale and measure cost effectiveness.
In addition to having the right payment options available for your customers, organizations need payment systems that are secure and compliant with regulations like PCI-DSS Level 1 compliance, which regulates the processing, storage and transmitting of card payment data, as well as regional standards such as Strong Customer Authentication (SCA), a new requirement of the second Payment Services Directive (PSD2) which went into effect in 2020. This will ensure that digital payments are processed with multifactor authentication, to increase payment security.
“PSD2 was a big, big flag to everyone about the importance of strong customer authentication, data and personal information storage and country-specific rules.
as other compliance standards like Card-on-File and Transaction Flagging. What is important for CFOs, however, is to minimize this with a single point of integration for global payment methods, compliance, and expertise without the fuss of managing multiple vendors.
In survey after survey, business leaders are asking CFOs and the finance function to move into a more strategic role within the organization and tasked with driving business growth. With subscription models exploding and recurring revenue rewarded by the markets, finance leaders must be thinking about how to implement these business models in a way that is automated, profitable, and delivers an exceptional client experience every time.
While recurring revenue models can help with revenue predictability, introducing them into a business isn’t without its challenges. It requires changes to the way an organization sells, manages, distributes, tracks and reports on products and services.
There’s no escape - at the grocery store, in the stock market, in the news, in the elections, seemingly everywhere you turn, inflation is here, and it’s a whole lot less transitory than the Fed, European Central Bank and others initially claimed. With the latest Consumer Price Index1 (all items) coming in at 8.3%, surprisingly higher than the previous month, and the S&P closing at a new low2 for the year, CFOs are scrambling and looking for new strategies to succeed.
For many of today’s finance leaders, this is the first time in their career that they are working within this environment. However, CFOs have more data and technology at their disposal than they did decades ago, and some see the current challenges as an exciting chance to separate themselves from their competitors.
Inflation affects all aspects of the economy, from consumer spending, business investment and employment rates to government programs, tax
policies, and interest rates. It not only impacts what consumers and businesses pay for goods and services today, but also impacts the calculation of investment returns.
It’s easy to think that inflation only exists outside a company’s financial statements at a macro level, however inflation shows up on a company’s financials in a few hidden ways including inventory calculations, interest cost, and higher input costs. Ultimately, this extrapolates out to key finance metrics such as Return on Equity (ROE) and terminal values. If a company’s future cash flows have to be discounted due to higher cost of borrowing or shrinking margins, both future earnings and multiples (due to higher risk) compress, causing a compounding hit to a company’s valuation.
With purchasing power eroding, standing still can feel like moving backwards. “CFOs have little control over inflation itself, but it adds cost pressure that they must navigate their businesses through,” says Alexander Bant, Practice Vice President, Finance
at Gartner.3 “When faced with challenges that could harm profitability, the instinctive CFO response is to reduce costs near-term or delay spending until inflation subsides.” While these tools may help some companies, a longer term outlook will help others even more – especially in the face of prolonged inflation.
What tools do CFO’s have to respond?
It may be tempting to look back 40 years for insights on responding to soaring prices, however, that would be a mistake. The current environment - and the role of the CFO - fundamentally differ from what they were four decades ago. A global economy, consumer demand shifts, a supply chain disrupted by a pandemic, nearly historic low unemployment4, and other factors unique to today simply did not exist the last time inflation was this high. That’s not to say that CFOs have to just wait until inflation goes away. They can get ahead of it by focusing on value creation for their customers while embracing or accelerating digital transformation efforts.
Warren Buffett5 has been quoted saying, “The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business.” On the flip side, if pricing power is not your organization’s strong suit, how can it become one?
Look to companies like Apple, Starbucks, and even CVS. At first glance, it would seem that these three companies have nothing in common. One makes hardware and software, the other is a strong consumer brand with thousands of competitors, and the third is a pharmacy and convenience store that historically has been a price taker, not a price setter. All three, however, have strong means to combat inflation with their walled ecosystems.
Apple’s iOS customers are less likely to switch to a competitor compared to Android users, Starbucks built an entire payment ecosystem in its rewards program, and CVS has diversified its business line to include healthcare providers, which might have some of the strongest pricing power across industries. Three different companies, three completely different approaches bound by
a long term approach to tackling enterprise value creation.
Businesses also have the ability to embrace or accelerate their digital transformation efforts. A Gartner survey6 shows that 78% of CFOs will increase or maintain enterprise digital investments through 2023 even if inflation persists. This flies directly in the face of temptations to reduce spend. This is because technology is often deflationary over the long run.
When thinking about how to fund digital bets in an inflationary environment, however, leaders should avoid traditional, rigid funding models that prevent flexible resource allocation. Instead, focus on targeted KPIs that can be measured in real time, and explain a digital deflation story to your investors. Technologies in automation, business process outsourcing, machine learning, and key vendor relationships can all help reduce labor cost in the short and long run while still positioning the organization for future growth.
Today’s CFOs have access to detailed data and technology tools that put them in a
Source: 1 https://www. bls.gov/news. release/cpi.nr0.htm
Source: 2 https:// www.cnbc. com/2022/09/22/ futures-inch-higherfollowing-another-dayof-losses-after-fedrate-hike-sell-offs.html
Source: 3 https:// www.gartner. com/en/newsroom/ press-releases/202205-19-gartner-says78-percent-of-cfoswill-increase-ormaintain-enterprisedigital-investmentsthrough-2023-even-ifinflation-persists
Source: 4 https:// dealroom. co/blog/the-riseof-alternativepayments-is-eatingcard-supremacy
Source: 5 https:// www.business insider.com/warrenbuffett-pricingpower-beats-goodmanagementberkshire-hathaway -2011-2
Source: 6 https:// www.gartner. com/en/newsroom/ press-releases/202205-19-gartner-says78-percent-of-cfoswill-increase-ormaintain-enterprisedigital-investmentsthrough-2023-even-ifinflation-persists
Source: 7 https:// www.forbes. com/sites/jimdeloach/ 2022/02/22/how-cfos -can-solve-theinflation-puzzle/?sh =7b4698c02b38
significantly better place to respond to inflation than in previous decades. The ability to generate cost models based on constantly fluctuating inflation can help CFOs walk the fine line between ensuring profitability and losing customers through needless price hikes.
Organizations can also model the impacts of adjusting product quality and quantity or creating new bundles or offerings. This can provide additional pricing tiers that can keep customers at the original price point while providing additional value for those who are less price conscious.
The pressures of inflation can also present the needed push to realign pricing models all together. For example, organizations might look to implement a subscription business model or usage-based model that can make them more appealing to price-conscious customers.
Embracing new opportunities.
Forbes7 describes today’s landscape as “a unique opportunity for leading CFOs to elevate scenario planning activities and other next-generation finance capabilities
with the objective of contributing an enterprise wide solution to a puzzling challenge with numerous moving pieces.”
While inflation has not been seen at this level in 40 years, more recent history shows us that some of the most innovative and transformative companies emerged from the financial crisis of 2008. Uber, Airbnb, Doordash, Slack and Zoom are now all household names despite being less than 15 years old. By focusing on value creation, data-driven decisions and a digital-first business model, they were able to rise above market challenges. Today, organizations face a similar pivot point better equipped and with more tools than ever before.
CF Os have little control over inflation itself, but it adds cost pressure that they must navigate their businesses through. When faced with challenges that could harm profitability, the instinctive CFO response is to reduce costs near-term or delay spending until inflation subsides.
of CFOs will increase or maintain enterprise digital investments through 2023 even if inflation persists
It is undisputed that we find ourselves in difficult times. It’s during these challenging times that effective leadership becomes more important than ever. But what does effective leadership look like? In this short article, we look at two key leadership principles which will help you lead your team more effectively amidst the current challenges.
Title: Co-Founder & Managing Director at GiANT London
Organization: GiANT Worldwide
Location: London
Becky is a specialist at unlocking the potential of people and teams. Working with corporate clients across the world, she has a diverse experience of working with teams of all different shapes and sizes to take their performance to the next level.
In addition to this client work, Becky trains elite level leaders to accelerate their influence through understanding the ‘Jedi’ mind tricks of personality. At her core Becky is an adventurer, loves to travel and has recently run her first marathon in Amsterdam. Link to full bio
The premise of the Support Challenge Matrix is simple: to be a liberating leader you have to learn to calibrate the right balance of high support and high challenge for each member of your team. The good news is that we can all be liberating leaders if we are intentional; the bad news is that none of us are natural Liberators.
Some of us are very competitive, task focused and highly driven. We don’t need to learn how to bring High Challenge, rather we have to learn how to balance that
with High Support. Some of you are highly relational, empathetic, caring and always aware of others’ needs. For you, High Support is a given, and learning how to increase the Challenge will be the growth opportunity.
When leaders are accidental they create either Dominating or Protecting cultures and that never allows a team to perform at its best.
Sadly, leaders define culture so if you don’t like the culture of your team then one of two things has
happened - you’ve either abdicated leadership or you’re looking in the mirror at your own dysfunction!
The first question to ask yourself is: what’s it like to be on the other side of my leadership right now? Have an honest look at the Support Challenge Matrix and ask which quadrant you are functioning in most often each day. Remember, we probably enter all the quadrants at some point throughout every day, but the key is to know what growth looks like for us as leaders and to stay intentional - to ask ourselves, where do I need to grow in terms of supporting or challenging my team, and how might that look for each of them?
This tool is a natural companion to the Support Challenge Matrix and forces you to regularly ask if you are really willing to ‘fight for the highest possible good’ in the lives of those
you lead. All the HR research shows that people leave leaders, they don’t leave organizations. In an era of full employment, the ability to retain and develop your key talent is one of the most important skills for all leaders. When your team believes you are for them and committed to their long term success they will give you everything. Even if they eventually move on, they will remain brand ambassadors for you and your organization.
The Leader Mindset tool asks three important questions for you to think through for each person you lead. You can use these in 1:1 discussions or simply to guide your own thinking at the start of your
working week. A word of advice on the third question, ‘How do I help them get to the next level?’ Make sure there is alignment between what you constitute as their ‘next level’ and their vision for their own future. It may not be in the same profession! However, being led by someone who is committed to being a Liberating Leader and genuinely committed to their long term future will engender a huge sense of loyalty and commitment.
In summary, your ability to successfully lead ‘uphill’ in these difficult times is determined by your willingness to hold up the mirror to your own leadership and use these simple but profound tools. Are you
willing to work at being a Liberating Leader? Are you committed to fighting for the highest possible good of all those you lead? Most leadership is accidental. For those of you who are courageous enough to get intentional, you can thrive in the complexity and uncertainty of today’s economic challenges.
The first question to ask yourself is: what’s it like to be on the other side of my leadership right now?
Title: Head of Product Strategy & Innovation
Organization: Aptitude Software
Location: Boston
Julie has held multiple roles during her tenure at Aptitude. Currently, as the Head of Product Strategy and Innovation, Julie leads a team dedicated to understanding the needs of the finance and technology community and translating those needs into new solutions.
There have been many boardroom debates about the right approach to building out a technology architecture. Some IT teams prefer the consistency of working with a single vendor to build out a vertically integrated, ‘wall-to-wall’ architecture. This can reduce costs -though not always over the long term - but sacrifice flexibility and depth of capability.
Other organizations have shifted to a ‘best-of-breed’ or composable approach that utilizes solutions from multiple vendors to gain the best capabilities available. But simply having many, high-quality technology solutions is not enough. They have to work in concert with each other to increase the value they add to their customers.
The technology ecosystem concept takes the best-of-breed approach one step further.
Thanks to cloud computing, open source, and other innovations, technology vendors are building out ecosystems that are greater than the sum of their parts and benefit both customers and the vendors themselves. As a recent Forbes article eloquently summarized, “The walled garden of monolithic, enterprise offerings is simply too
siloed in this environment of broad choices. The future of business belongs to ecosystems.”1
The definition of a technology ecosystem can vary slightly but they all include the notion of an interconnected, interdependent, integrated network. McKinsey defines it as a model “which is generally built around a larger set of key providers, each focusing on a specific domain or product and all of them functioning in concert… It puts a premium on interoperability between providers and rests on collective accountability. When effectively implemented, it gives the business access to a greater range of capabilities and plug-and-play flexibility.”2
While technology ecosystems could be considered a new and disruptive innovation just a few years ago, they have become more widely accepted and their popularity continues to grow. Early day discomfort for vendors who were not only accustomed to working in silos, but also in competition with one another has alleviated, and the opportunity to come together to offer a better solution is top priority. While
ecosystems have changed the competitive landscape, they have also improved technological advancements as a whole.
By utilizing open source approaches or integration with other vendors, ecosystems are enabling companies to leverage existing technologies faster and preventing vendors from having to provide expertise in areas outside their core competencies. This ultimately encourages quicker advancements in technology, drives higher quality standards and supports the growth of both existing and emerging industries, as we have seen with the rise of Fintech and Insurtech. For example, according to an Accenture3 2017 report, 96% of insurers reported a belief that digital ecosystems are impacting the insurance industry. Flash forward to a 2021 survey4 and 54% of insurers reported actively seeking ecosystems—the highest of all the industries surveyed.
Ecosystems are also a product of the shift over the last 5-10 years in the role technology plays in an organization. In 2017, a McKinsey survey on the role of technology found that 48% of respondents selected ‘Scaling down costs’ as one of their top three digital priorities. In 2020, a follow-up survey5 found that just 10% of respondents identified cost savings as a top three digital priority. Customers are increasingly expecting their technology solutions to not just reduce costs but to drive revenue and competitive advantages.
Technology ecosystems provide vendors with the ability to go to market faster, enhance
the capabilities offered by their solutions, and create innovative new business models, powered by the cloud. So, what’s in it for customers?
In the days of single vendor stacks, the pressure was on that vendor to deliver any capability the business might need or risk jeopardizing their position within the customer. Not surprisingly, this could result in long wait times and sub-par functionality if the vendor was operating outside its core competencies.
With a technology ecosystem, customers no longer have to wait for a single vendor to develop new or niche capabilities. Instead, a technology ecosystem can provide quicker access to capabilities that may be too expensive or time consuming for a single vendor to build internally. Implementation times are reduced, return on investment can be recouped faster and customers gain access to the best technologies, sooner.
In the typical modernization roadmap, organizations often leave the implementation of emerging technologies like Artificial Intelligence, Machine Learning or other analytics tools until the end. This process can result in these technologies feeling like boltons rather than an integrated piece of the IT architecture.
By taking an ecosystem approach, organizations can ensure that emerging technologies have already been thoughtfully
Source: 1 https://www. forbes.com/ sites/forbestechcouncil/ 2021/07/23/the-futurebelongs-to-ecosystems/ ?sh=677fe645b2a9
Source: 2 https://www. mckinsey.com/ capabilities/mckinseydigital/our-insights/ building-a-techservices-ecosystemto-deliver-productsnot-applications
Source: 3 https:// acnmedia. accenture.com/PDF/ Accenture-The-Riseof-Insurtech.pdf
Source: 4 https://www. accenture. com/_acnmedia/PDF164/AccentureStrategy-Insurers-GoAll-In-Ecosystems -POV.pdf
Source: 5 https://www. mckinsey.com/ capabilities/mckinseydigital/our-insights/ building-a-techservices-ecosystemto-deliver-productsnot-applications
Source: 6 https://www. bcg.com/ publications/2019/ do-you-needbusiness-ecosystem
integrated into the holistic solution which can decrease wait times and increase efficiency and performance.
It’s natural that technology providers will typically be focused on a specific area of the business. CRM Software providers provide solutions for sales and marketing teams. HR solution providers typically focus capabilities on compensation, administrative and talent management solutions to name a few. And finance and accounting software businesses may focus on finance transformation, compliance and revenue management solutions. But this can create a siloed tech stack that prevents innovation and data sharing across functional areas.
Technology ecosystems can encourage cross-functional collaboration and data sharing, unlocking new use cases. The customer benefits from the integration of software solutions across the business which can lead to enhanced performance and business insights.
A huge benefit of technology ecosystems
has to do with their flexibility and modular design. A customer benefits from the stable, trusted integration between modules with the flexibility to select what they need for their business. A Boston Consulting Group article highlights, “Ecosystems are particularly attractive when consumers’6 needs and tastes are heterogeneous or unpredictable or when technological trajectories are dynamic or uncertain.” This defines most businesses, especially as the pace of change – both external market factors and internal business model changes – seems to get increasingly faster.
Today, organizations demand more from their technology solutions without the need for long, drawn out modernization programs. Business units are demanding better UI, plug and play capabilities and a simple way to access technology. Technology ecosystems can give companies the technology value and experience they want while still providing vendors with a profitable solution that expands their market reach.
In the days of single vendor stacks, the pressure was on that vendor to deliver any capability the business might need or risk jeopardizing their position within the customer. Not surprisingly, this could result in long wait times and sub-par functionality if the vendor was operating outside its core competencies.
Title: Partner
Organization: CFGI
Location: New York City
Ben brings over 14 years of experience providing accounting and advisory services to both public and private companies across a range of industries, including manufacturing, consumer markets, media & entertainment, technology, and life sciences. During his tenure with CFGI, Benjamin has assisted clients with a wide range of complex technical accounting issues. Link to full bio
I was a non-accounting undergrad but ended up doing grad school and started my career in public accounting with one of the Big 4though I admit I kind of resisted it! After spending time as an internal auditor in the medical device field, I made the jump into the industry and took roles with two different med device companies. I really felt that I needed to get hands-on experience working within a company. In 2015, I took a job with CFGI as they were opening their New York office. Back then there were 10 of us and it’s been a really fun ride growing the operations and the Brand to what it is now. I love what I do - the good days are really good, let’s put it that way!
When I’m on the road living out of a suitcase, every morning is a different story. But when I’m actually at home, I do have a routine. I’d like to say I’m as disciplined as Jeremy Suddards about not looking at my phone in the morning but - I’ll be 100% honest with you - the first thing I do when I roll over is I look at my phone. One day I’ll achieve the goal of not looking at my phone first thing, but we’re not there yet!
Then I’ll do a 2 to 5 minute mindfulness meditation to clear my head for the day and get rid of any anxieties that I have. It just helps kind of ground me and center me for
the day. Then I take the first hour or hour and a half in the morning just for myself. It’s catching up on emails, getting my day set up correctly, reviewing my calendar. At a certain level you get so busy. You’re in meetings all the time and the only time you can get stuff done is in the morning or at night. So, my sacred time is in the morning. Once I have all my emails done I like to go to the gym -again, try to get my body in shape and ready to go for the day. After that it’s heads down and all about the clients! That’s why I’m a bit protective of my time earlier in the day because I know once we get started, that’s it.
I like making people happy. There’s nothing better for me than having a client that’s up against the wall, not sure how they’re going to get through a particular situation - it doesn’t matter what it is. To be able to kind of swoop in and help them out, get them over the hurdle, that’s always what makes my job worthwhile. My clients’ best interests are my best interests and even though I’m an extension of CFGI, I’m plugged into their ecosystem.
Every time period has its own challenges - yes we’re coming out of Covid, we’re dealing with high inflation and a tight labor market.
But I always come back to the fact that that everything’s going to be okay! What I’ve found is oftentimes it’s very easy to get caught up with emotion. You see the markets aren’t doing well. You see interest rates going up. The knee-jerk reaction is to start making irrational decisions. It’s a lot easier said than done but I try and counsel my clients that everything is cyclical. It is going to come back around at some point in time and it just becomes a little bit of a waiting game. We’re going to get through this! Do the things you need to do to manage in the moment, but also don’t panic and blow up your whole strategic plan.
On where finance teams continually miss the boat
One of the most common mistakes I see finance functions make is having a disconnect between accounting and finance. It may not seem obvious, but finance and accounting can really speak two very different languages. If you don’t have the proper go between or if people are not able to translate or meet somewhere in the middle, there’s going to be a disconnect between what’s happening on the finance side and what’s happening on the accounting side. Accounting really feeds into the rest of finance so it’s critical to get the accounting correct and get the foundation of the finance organization built out so that you can actually be able to perform your financial duties
appropriately and with accurate numbers. When I see a joined up accounting and finance function, I usually find they have a really strong FP&A team that can act as a bridge between the two groups.
One of the most forward-thinking clients I had put out what I thought was a phenomenal five-year strategic plan. As they indicated the steps of their business strategy over time, they added the tech stack build out that underpinned each step along the way. So you could clearly see how the systems really married up as they were building out the finance function and how it was going to deliver and feed into reporting as well. Putting together a plan like this keeps business and strategic growth in lockstep with technical growth and avoids kneejerk reactions to change.
The two books I have going right now - and you are going to laugh at me because they’re just all over the spectrum - are The Seven Spiritual Laws of Success by Deepak Chopra and Hells Angels: The Strange and Terrible Saga of the Outlaw Motorcycle Gangs by Hunter Thompson. I am all over the map. In terms of what I’m watching, admittedly, I loved the new Top Gun movie so that’s something I’ve been rewatching a few times
here and there and the Fox series, The Old Man.
On memorable careeer moments
The first was making partner at CFGI. I think that if you talk to a lot of people at different firms, regardless of the industry they’re in, that’s usually a pretty defining moment. It’s not just the hard work that went into it, it’s seeing the vision. Eight years ago, before we were a larger company and had private equity backing, we saw something here and I was able to see it through. It’s been really, really awesome.
The second thing for me in terms of career defining moments, is seeing the people around me get promoted and achieve those big career milestones, whether it’s getting managing director, partner, director, what have you. It’s even more gratifying for me because it means that that I’m mentoring and supporting the people around me and helping them climb that ladder. I’ve always been a mentor - or tree leader as we call it at CFGI - and it’s something I’ve taken seriously throughout my career. You have to invest in your people and care about them. I just try to be that person that if people seek counsel, they can come to me.
I’ve always been a mentor - or tree leader as we call it at CFGI - and it’s something I’ve taken seriously throughout my career. You have to invest in your people and care about them. I just try to be that person that if people seek counsel, they can come to me.