Re-engineering the roles and tasks of the Finance Officer
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RE-ENGINEERING THE ROLES AND TASKS OF THE FINANCE OFFICERCase Study, Concepts and Debatable Ideas
Kenny OngCNI Holdings Berhad
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Intro: CNI
1. 20 years old2. Core Business: MLM3. Others: Contract Manufacturing, F&B Retail,
Export/Trading, eCommerce, Shared Services4. Malaysia, Singapore, Brunei, Indonesia, India,
China, Hong Kong, Philippines, Italy, Taiwan, Oman, United States, Vietnam
5. Staff force: ± 5006. Distributors: 200,0007. Products: Consumer Goods and Services
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Re-engineering the major roles of the Finance Officer
It’s all about expectations
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Finance Role?
Finance Officer
SBUs, Divs, Depts
Corporate HQ
Strategy
Results
Request
Service
Policies
Service
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Finance Function Objectives?
TransactionalCost reduction, Efficiency, Agility, Fast Copy
AP, General Ledger, B/S analysis, Accounting, Fixed Assets, AR, Facilities
Value-addedBudgeting, Reporting, Financial Analysis, Forecasting, Tax, Legal, Treasury
Consistency, Analysis, Value creation, customization
Systems, Standardize, Benchmarking, ERP, Streamlining, Automation, Governance
Best PracticesProcess improvement, service innovation, secondary KPIs, internal customers
Transformation
Market Leadership, Competitive Differentiation, Business model, M&A
Direct Business Impact, primary KPIs, external customers
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Finance Role vs. Measurement
TransactionalCost reduction, Efficiency, Agility, Fast Copy
Value-added
Best Practices
Consistency, Analysis, Value
Process improvement, service innovation, secondary KPIs, internal customers
TransformationDirect Business Impact, primary KPIs, external customers
TimeCostQuantityQuality
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Finance Role vs. Measurement
TransactionalCost reduction, Efficiency, Agility, Fast Copy
Value-added
Best Practices
Consistency, Analysis, Value creation, customization
Process improvement, service innovation, secondary KPIs, internal customers
TransformationDirect Business Impact, primary KPIs, external customers
TimeCostQuantityQuality
InnovationService
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Finance Role vs. Measurement
TransactionalCost reduction, Efficiency, Agility, Fast Copy
Value-added
Best Practices
Consistency, Analysis, Value
Process improvement, service innovation, secondary KPIs, internal customers
TransformationDirect Business Impact, primary KPIs, external customers
TimeCostQuantityQuality
InnovationServiceKPI
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Finance Role vs. Measurement
TransactionalCost reduction, Efficiency, Agility, Fast Copy
Value-added
Best Practices
Consistency, Analysis, Value
Process improvement, service innovation, secondary KPIs, internal customers
TransformationDirect Business Impact, primary KPIs, external customers
TimeCostQuantityQuality
InnovationServiceKPIImpact
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Career Guide for Finance Officers
• Go Wide, Dig Deep
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Finance’s Role and Business Intent
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"The digital watch didn't come from established watch companies, the calculator
didn't come from slide rule or adding machine companies, video games didn't come from board-game manufacturers Parker Bros or Mattel, the ballpoint pen didn't come from
fountain pen manufacturers, and Google didn't come from the Yellow Pages"
Bob Seidensticker, Futurehype
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What’s wrong with Business Strategy Today?
Long-term Plans
Objectives
Strategies
Enablers
Resources
Also known as L.O.S.E.R.
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What’s wrong with Business Strategy Today?
1. Biggest Threats often come from OUTSIDE your normal industry
2. Planning from the base of an ‘Existing’ organization vs. zero-based
3. Using Sunk Costs for decision making and planning4. Traditional Analysis (e.g. SWOT) based only on known
or existing assumptions or knowledge5. Spending too much time in market research and
analysis6. Defining the company from a Product/Service
perspective vs. Category vs. JTBD (e.g. Coca-cola)7. Wrong Benchmark – already successful vs. what made
them successful8. Implementing BSC and PMS to improve Business
Model and Strategy
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Finance Role and the Business Model
How to fail without trying
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Funds: What do Investors look for?
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Market Value
0
10
•M&A
•P/E
•Investor
•Etc.
Strategic Control
0
10
•I.P.
•Monopoly
•Gov-linked
Business Model
0
10
•USP
•Profit Mod.
•Mkt Disc.
•Growth
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What is the Business Model?
USP
Market Discipline
Profit Model
•Air Asia
•Tata Nano
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What is the Business Model?
USP
Market Discipline
Profit Model
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Business Model: Profit Model
Revenue
Cost
MarginCash Flow
Assets
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RevenueFinancial
Learning & Growth
Internal Process
Customers
Cost Margin
Strategy + BSC
Cash Flow Asset
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What is the Business Model?
USP
Market Discipline
Profit Model
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Intro: Market Discipline
"They are the most innovative"
"Constantly renewing and creative"
"Always on the leading edge"
"A great deal!"
Excellent/attractive price
Minimal acquisition cost and hassle
Lowest overall cost of ownership
"A no-hassles firm"
Convenience and speed
Reliable product and service
"Exactly what I need"
Customized products
Personalized communications
"They're very responsive"
Preferential service and flexibility
Recommends what I need
"I'm very loyal to them"
Helps us to be a success
Product Leadership
OperationalExcellence
CustomerIntimacy
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Operational Excellence(low cost producer)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
Product Leadership(best product)
Customer Intimacy(best total solution)
Strategy: Value Disciplines
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Operational Excellence(low cost producer)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
Product Leadership(best product)
Customer Intimacy(best total solution)
Strategy: Value Disciplines
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Operational Excellence(low cost producer)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
Product Leadership(best product)
Customer Intimacy(best total solution)
Strategy: Value Disciplines
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Operational Excellence
• Competitive price
• Error free, reliable
• Fast (on demand)
• Simple
• Responsive
• Consistent information for all
• Transactional
• 'Once and Done'
Operational Excellence
• Competitive price
• Error free, reliable
• Fast (on demand)
• Simple
• Responsive
• Consistent information for all
• Transactional
• 'Once and Done'
Customer Intimacy
• Management by Fact
• Easy to do business with
• Have it your way (customization)
• Market segments of one
• Proactive, flexible
• Relationship and consultative selling
• Cross selling
Customer Intimacy
• Management by Fact
• Easy to do business with
• Have it your way (customization)
• Market segments of one
• Proactive, flexible
• Relationship and consultative selling
• Cross selling
Product Leadership
• New, state of the art products or services
• Risk takers
• Meet volatile customer needs
• Fast concept-to- counter
• Never satisfied - obsolete own and competitors' products
• Learning organization
Product Leadership
• New, state of the art products or services
• Risk takers
• Meet volatile customer needs
• Fast concept-to- counter
• Never satisfied - obsolete own and competitors' products
• Learning organization
Strategy: Value Disciplines
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The McPlaybook*
Make it easy to eat• 50% drive-thru• Meals held in one
hand
Make it easy to prepare• High Turnover• Tasks simple to learn
& repeat
Make it quick• “Fast Food”• Tests new products
for Cooking Times
Make what customers want• Prowls market for new
products• Monitored field tests
*Adapted from: Businessweek , Februrary 5th 2007
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Operational Excellence(low cost producer)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
Product Leadership(best product)
Customer Intimacy(best total solution)
Strategy: Disciplines
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Operational Excellence(low cost producer)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
Product Leadership(best product)
Customer Intimacy(best total solution)
Strategy: Disciplines
HP well-balanced portfolio, mass customization
Acer super lean cost structure, aggressive pricing
Apple powerful products, premium
pricing, limited range
Still Doing well in 2009
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What is the Business Model?
USP
Market Discipline
Profit Model
•Air Asia
•Tata Nano
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Finance Role and Strategic Planning
‘Hope’ is not a strategy
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What is Strategic Planning?
Strategic
Planning
Variables:
Research
Growth
Risks
Stakeholders
Constraints
SWOT
Misc.
Output:
Plans
Priorities
KPIs
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What is your Goal?
1. Cost Reduction
2. Growth
3. Both?
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Growth Strategy
1. Base Retention
2. Share Gain
3. Positioning4. Adjacent Market
5. New Business
GROWTH
“Double-Digit Growth”, Michael Treacy
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•Increase switching cost
•Customize products
•Preempt Defections
•Brand
•Neutralize Competitor advantages
•Superior Value
•Buy market share
•Spot growth opportunities
•Organized search
•Promising Market?
•Make or Buy?
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Side Notes on Cost Reduction Strategy
Cost Reduction
Business Model
•USP
•Profit Model
•Market Discipline
•Invest/Divest
Operational
•Finance, HR, IT
•Supply Chain
•R&D
•Sales & Marketing
5% - 30%
30% - 80%
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Strategy vs. Focus
Upturn Flat Downturn
Fight Complacency
Sharpen Edge
Keep Momentum
Conquer
NPD Cycle Time
Improve Edge
Extensions
Counter Competitor
Innovation
Acquire
Profits
Build momentum
Sales
Cash Flow
Innovation/R&D
Focus ‘Breakthroughs’
JV, In-source, Out-source
Eliminate bottom 20%
Improve Top 15% revenue-generating products
↓ R&D, ↑Sales
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Revenue
Base Retention
Share Gain Positioning Adjacent Market
New Business
Financial
Learning & Growth
Internal Process
Customers
Cost Margin
Strategy + BSC
Cash Flow Asset
Satisfaction
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Operational Excellence(low cost producer)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
Product Leadership(best product)
Customer Intimacy(best total solution)
Strategy: Disciplines, Priorities, and KPIs
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Operational Excellence
• Competitive price
• Error free, reliable
• Fast (on demand)
• Simple
• Responsive
• Consistent information for all
• Transactional
• 'Once and Done'
Operational Excellence
• Competitive price
• Error free, reliable
• Fast (on demand)
• Simple
• Responsive
• Consistent information for all
• Transactional
• 'Once and Done'
Customer Intimacy
• Management by Fact
• Easy to do business with
• Have it your way (customization)
• Market segments of one
• Proactive, flexible
• Relationship and consultative selling
• Cross selling
Customer Intimacy
• Management by Fact
• Easy to do business with
• Have it your way (customization)
• Market segments of one
• Proactive, flexible
• Relationship and consultative selling
• Cross selling
Product Leadership
• New, state of the art products or services
• Risk takers
• Meet volatile customer needs
• Fast concept-to- counter
• Never satisfied - obsolete own and competitors' products
• Learning organization
Product Leadership
• New, state of the art products or services
• Risk takers
• Meet volatile customer needs
• Fast concept-to- counter
• Never satisfied - obsolete own and competitors' products
• Learning organization
Strategy: Disciplines, Priorities, and KPIs
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• Operational Excellence• Move know-how from top performing
units to others• Benchmark against best in class• Ensure operations training for all
employees• Use disciplines like TQM for continuous
learning to reduce costs and improve quality
Strategy: Value Disciplines
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Strategy: Value Disciplines
• Customer Intimacy• Capture knowledge about customers• Understand customer needs• Empower front line employees• Ensure that everyone knows the
customer• Make company knowledge available to
customers
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• Product Leadership• Reduce time to market• Commercialize new products fast• Ensure that ideas flow• Reuse what other parts of the company
have already learned• Ensure there are multiple sources of
funding
Strategy: Value Disciplines
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Revenue
Base Retention
Share Gain Positioning Adjacent Market
New Business
Financial
Learning & Growth
Internal Process
Customers
Cost Margin
Strategy + BSC
Cash Flow Asset
Operational Excellence
Product Leadership
Customer Intimacy
Investment Strategy
Satisfaction
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Before we start…
Which comes first?
1. Strategies -> KPI?
2. KPI -> Strategies?
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Before we start…
Which comes first?
1. Strategies -> KPI?
2. KPI -> Strategies?
•already know our priorities, aware of all strategy options available
•creating something UNIQUE, INNOVATIVE and DISRUPTIVE e.g. Air Asia
•conducting a business Turnaround e.g. MAS
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Before we start…
Which comes first?
1. Strategies -> KPI?
2. KPI -> Strategies?
•want to find out possible strategies,
•determine our priorities first thru selection of important KPIs;
•growing through ‘normal’ business, not a Turnaround.
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Example: Selection of KPIs for BSC
•Customer satisfactionCustomer loyaltyMarket shareCustomer complaintsComplaints resolved on first contactReturn ratesResponse time per customer requestPrice relative to competitionTotal cost to customerAverage duration of customer relationshipCustomers lostCustomer retentionCustomer acquisition ratesPercentage of revenue form new customersNumber of customersAnnual sales per turnover
•Win rate (sales closed/sales contact)•Customer visits to the companyHours spent with customersMarketing cost as a percentage of salesNumber of ads placedNumber of proposals madeBrand recognitionResponse rateNumber of trade shows attendedSales volumeShare of target customer spendingSales per channelAverage customer sizeCustomers per employeeCustomer service expense per customerCustomer profitabilityFrequency (number of sales transactions)
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Wrong KPIs
“What is the moral of the story?”
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KPIs and Behavior
Before: “Handle Time” Per Call• Motivated Call Centre staff to transfer callers,
getting rid of complainers, making them someone else’s problem
• Callers at 45% chance of being transferred• 7,000 customers each week suffered transfers 7
times or more
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KPIs and Behavior
After: “Minutes Per Resolution” of a problem
• Resolution in ONE CALL become the core goal• Reduced probability of call transfers from 45% to
18%
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Sample: Other 1st Level KPIs across industries…
Financial Services Retail Telecommunications
•Maximize ARPU•Minimize Churn•Mutichannel customer service
•Understand customer behavior related to customer conversion, acquisition, and retention•Single view of customer•Multichannel customer experience•Personalized customer experience
•Anticipate and prevent churn despite compensation•Increase number of products per customer•Turn call center information opportunity to up-sell and cross-sell•Increase customer satisfaction and loyalty
Hospitality Travel & Leisure Manufacturing
•Personalized customer experience•Maximize share of wallet•Player/customer loyalty•Multichannel customer service
•Increase customer loyalty and preference•Maximize customer revenue•Improve service quality and efficiency•Capture and close sales opportunities
•Single view of customers across supply chain•Zero-error order capture•Streamline opportunity to cash processes•Leverage investment in ERP and backoffice systems
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Sample KPIs for Each Discipline
Operational Excellence
• Price• Selection• Convenience• Zero Defects• Growth
Operational Excellence
• Price• Selection• Convenience• Zero Defects• Growth
Customer Intimacy
• Customer Knowledge
• Solutions Offered• Penetration• Customer Data• Customer-success
focus
Customer Intimacy
• Customer Knowledge
• Solutions Offered• Penetration• Customer Data• Customer-success
focus
Product Leadership
• Marketing• Functionality• # of Successes• # of Failures• Learn from key
users• Interdisciplinary
teams• Pipeline
Product Leadership
• Marketing• Functionality• # of Successes• # of Failures• Learn from key
users• Interdisciplinary
teams• Pipeline
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Finance Role and Resource Allocation and Alignment
Where did our money go?
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Budgeting: Some thoughts…
Two major roles of Budgeting:
1. Provide real-life CONSTRAINTS to strategic planning
2. Provide RESOURCES to realize strategic plans
Why Constraints?1. Over aggressive unrealistic planning, usually by
Marketing/Sales need to be grounded to real life2. Creative entrepreneurial thinking when resources are
limited3. Enforce the need for Accountability i.e. ‘ROI’ thinking for
all Managers
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E3 – Department BSC
Customer Perspective – Marketing Department
Goals Strategies Targets CAPEX OPEX
Base Retention
Share Gain
Budgeting
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Alignment: 4-Wheels Model
Culture
Business
ModelStrategic Planning
StructurePerson
Leadership
Resources
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Alignment: Framework
• Focus point• Alignment• Quality• Innovation & Differentiation• Risk taking• Performance Management• Corporate obsession• Decision making
Culture
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Alignment: Framework
• Org Structure• Job Design• C&B• Policies & procedures• Decision making• Job fit• Management Systems• BSC and KPIs• Decentralized & Empower
Structure
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Strategy: Framework
• Role modeling• Vision/Mission/Philosophy• Leadership Style• Delegation & Empowerment• C&B, Promotions• Sense of Urgency• Speak regularly about Performance
Leadership
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Strategy: Framework
• Recognition• Recruitment• Training• Profit sharing• Values• Motivation• Self Efficacy• Awareness• Useful Competencies• Career aspirations• Attribution (control)
Person
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Strategy: Framework
Enablers• Technology• Equipment• Materials• Human• Intellectual
Property• Partners• Property
Resources
Funding • CAPEX• OPEX
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Alignment: 4-Wheels Model
Culture
Business
ModelStrategic Planning
StructurePerson
Leadership
Resources
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Operational Excellence
Operational Excellence
Customer Intimacy
Customer Intimacy
Product Leadership
Product Leadership
Organization, jobs,skills
Management systems
Information and systems
Culture, values,norms
Each Discipline Requires Different Priorities & Resources
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Operational Excellence
•Central authority, low level of empowerment•High skills at the core of the organization
•Disciplined Teamwork•Process, product- driven•Conformance, 'one size fits all' mindset
• Integrated, low cost transaction systems•The system is the process
•Command and control•Quality management
Operational Excellence
•Central authority, low level of empowerment•High skills at the core of the organization
•Disciplined Teamwork•Process, product- driven•Conformance, 'one size fits all' mindset
• Integrated, low cost transaction systems•The system is the process
•Command and control•Quality management
Organization, jobs, skills
Management systems
Information and systems
Culture, values,norms
Each Discipline Requires Different Priorities & Resources
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Organization, jobs,skills
Management systems
Information and systems
Culture, values,norms
Product Leadership
•Ad hoc, organic and cellular•High skills abound in loose-knit structures
•Concept, future-driven•Experimentation and 'out of the box' mindset
•Person-to-person communications systems•Technologies enabling cooperation
•Rewarding individuals' innovative capacity•Risk and exposure management•Product Life Cycle profitability
Product Leadership
•Ad hoc, organic and cellular•High skills abound in loose-knit structures
•Concept, future-driven•Experimentation and 'out of the box' mindset
•Person-to-person communications systems•Technologies enabling cooperation
•Rewarding individuals' innovative capacity•Risk and exposure management•Product Life Cycle profitability
Each Discipline Requires Different Priorities & Resources
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Organization, jobs,skills
Management systems
Information and systems
Culture, values,norms
Customer Intimacy
•Empowerment close to point of customer contact•High skills in the field and front-line
•Customer-driven•Variation and 'have it your way' mindset
•Strong customer databases, linking internal and external information
•Strong analytical tools
•Customer equity measures like life time value•Satisfaction and share management•Focus on ‘Share of Wallet’
Customer Intimacy
•Empowerment close to point of customer contact•High skills in the field and front-line
•Customer-driven•Variation and 'have it your way' mindset
•Strong customer databases, linking internal and external information
•Strong analytical tools
•Customer equity measures like life time value•Satisfaction and share management•Focus on ‘Share of Wallet’
Each Discipline Requires Different Priorities & Resources
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Revenue
Base Retention
Share Gain Positioning Adjacent Market
New Business
Financial
Learning & Growth
Internal Process
Customers
Cost Margin
Strategy + BSC
Cash Flow Asset
Operational Excellence
Product Leadership
Customer Intimacy
Investment Strategy
Competencies Information Systems
Motivation, empowerment,
alignment
Satisfaction
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Budgeting in a Downturn
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Budgeting in a Downturn
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Budgeting in a Downturn
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Budgeting in a Downturn
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Budgeting in a Downturn
1. StratEx
2. CoREx
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Linking the Finance Role with Sales & Marketing
Building relationships for the good of the company
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Typical Corporate Planning Scenario?
1. Budget ‘top down’ – no questions asked2. Only two budget goals – revenue, expenses3. The only planning we needed to do was “do better than
last year”4. Planning was ‘bottom up’ - compilation of plans within
set budget5. No one knew what the other was planning6. FAC’s role was only to compile budget for approval7. KPIs were not used8. Sales was resource priority, everything else not
important9. Assumed no major changes in market10. R&D was ‘bottom up’
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At the Table
Sales and Marketing
Finance and Accounts
1. Field Intelligence
2. CRM
3. Growth (organic)
4. Lagging KPIs
5. Adaptability
6. Channels
7. 1st Level Branding
8. Stakeholder Interest: Customers
9. Gut Feel/Instincts
1. External Intelligence
2. Ratios
3. Leading KPIs
4. Control/ Constraints
5. Resource Mgmt
6. Stability & Systems
7. Pyramid roles
8. Containment
9. Shareholder Interest: Shareholder
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Linking the Roles
Sales and Marketing
Finance and Accounts
Four Links:
1.Philosophy
2.Business Model
3.KPIs
4.Resource Allocation
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Philosophy
“In business after business, 60% to 80% of lost customers reported on a survey just prior to defecting that they were satisfied or very satisfied.”
HBR March/April 1996
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Business Model
USP
Market Discipline
Profit Model
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Sample KPIs for Each Discipline
Operational Excellence
• Price• Selection• Convenience• Zero Defects• Growth
Operational Excellence
• Price• Selection• Convenience• Zero Defects• Growth
Customer Intimacy
• Customer Knowledge
• Solutions Offered• Penetration• Customer Data• Customer-success
focus
Customer Intimacy
• Customer Knowledge
• Solutions Offered• Penetration• Customer Data• Customer-success
focus
Product Leadership
• Marketing• Functionality• # of Successes• # of Failures• Learn from key
users• Interdisciplinary
teams• Pipeline
Product Leadership
• Marketing• Functionality• # of Successes• # of Failures• Learn from key
users• Interdisciplinary
teams• Pipeline
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Budgeting & Resource
Culture
Business
ModelStrategic Planning
StructurePerson
Leadership
Resources
Funding • CAPEX• OPEX
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End Notes
Tying it all up
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Problems, problems and more problems…
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Alignment: 4-Wheels Model
Culture
Business
ModelStrategic Planning
StructurePerson
Leadership
Resources
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“…in the past 18 months, we have heard that profit is more important than revenue,
quality is more important that profit, people are more important than profit,
customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our
performance is inconsistent"CEO, Anonymous
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Don’t forget…
“The business of business is Business, not Sales, not Marketing, not Finance”
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Thank You.
soft copy of slides: www.totallyunrelatedrandomanddebatable.
blogspot.com