Disruptive Financial Innovation is the Result of Courageous Ingenuity
It takes a great degree of courage to move away from legacy conventions, whether they are processes, technologies, performance expectations, or role definitions. As human beings, we are hard wired to be apprehensive about change. Combine us into large groups – like a modern enterprise for instance – and it only seems to increase the strength with which we cling to ‘safe’ traditional approaches.
Unfortunately, the instincts that have preserved our species to the current age are the same ones that threaten the longevity and relevance of companies all over the globe every single day.
We are taught today that the right way to overcome this challenge is to innovate, trying new methods, products, ideas, etc. “Change is change! We need change!” your team may say. “We are doing something different! Mission accomplished!” The problem with this is that so much of the company’s energy goes into escaping the inertia of their preservation instincts that we don’t allocate enough brainpower to studying the changes we intend to implement.
Are we driving the right change? What do we need to accomplish? Are we thinking big enough? Answering these questions requires more than just change; it requires courage and ingenuity.
In Finance Unleashed, we focus on driving strategic change from the least likely place in the enterprise: finance. Few other functions – or C-level executives for that matter – are less entrenched in the ways of the past than finance and the CFO. Unnecessary delays in the financial supply chain (the movement of capital, cash, risk, and credit back and forth between parties) present a huge opportunity for those prepared to seize them. The resulting change will be a broad strategic issue, naturally affecting the CFO, but including the CEO and the board.
The financial supply chain is ripe for disruption, unlike the physical supply chain, where the majority of the waste has already been managed or innovated out. It would seem that this moment has selected finance as its leader. Ready or not…
Assuming a strategically expanded role will require great courage on finance’s part. Few CFOs accepted their position because they hoped to break free from spreadsheets and drive customer value. Little in their past experience has prepared them to be a disruptive force, and even less about the typical finance organization is optimized to enable them. This is no time for incremental improvements. The competitive landscape, increased risk, and cost pressures in most industries demand boldness. It is the entrepreneurial CFO that will emerge triumphant, and he or she must act without concern for what their role will look like once the change is complete.
This leaves us with the question of what the CFO is supposed to do. What form will courageous financial ingenuity take?
There is no one-size fits all answer to this question, but the commonality to all responses is that they minimize friction. The CFO must identify friction for customers, friction in the payment process, friction for suppliers, friction for suppliers’ suppliers, etc… and they must eradicate it. Friction is not to be tolerated because it steals time, energy, and resources. Customer friction in the payment process slows and jeopardizes the rate and size of purchases, hampering enterprise growth. Friction for suppliers (and their suppliers) needlessly stifles innovation by limiting their access to reinvestment capital. Finance holds the key to the elimination of all this friction – whether they realize it or not.
The central challenge facing all management teams is how to capitalize on opportunities such that they create dominant, sustainable value. The path forward is not clearly marked, but there is no question that we can’t go back. Unleashing finance’s courage and ingenuity NOW, with no reservation about departing from the ways of the past, will stimulate customer potential and leverage the full capabilities of suppliers – resulting in sustainable staying power and competitive advantage for the company.
Magnus Lind has moderated peer groups for senior finance executives from large corporations across the globe for over a decade, focusing on the transformation of finance in nonfinancial corporations from a ‘command and control’ function to a business leading role.
Kelly Barner has built a career on her unceasing desire to learn, ability to apply critical thought, and her writing skills – all of which have proven essential for building a diverse, global professional network.