Big CFO or small CFO – what’s better?

6th June 2013

Scott Anthony, the author of The Little Black Book of Innovation, recently wrote in the Harvard Business Review that we’ve entered the fourth era of innovation, where start-ups and established companies alike compete for the same customers using the same low-cost online tools and global talent.  They also face the same competitive pressures from global capital markets, increasingly volatile supply chains, more informed customers, and more demanding regulators. So where would you rather put your CFO skills to work – asks Gary Simon, Financial Systems News’ (FSNs) managing editor.

 

 

 

The last few months has seen a raging debate, essentially confronting the issue of competitiveness.  Who has the upper hand?

Technology has fanned the flames.  Cloud computing, big data and social business have all been deployed to support arguments on both sides of the divide.   Take for example, cloud computing.  Early stage businesses benefit from the low cost of entry, access to well designed (and very often superior applications) and a growing ecosystem of apps and mobile potential.  Armed with a swanky web site, an e-commerce engine and the latest social tools, a startup can be mingling with the very best and competing with them on equal terms in a matter of months.

But do the same advantages accrue to larger enterprises? On the face of it they do but there are subtle differences. Large organizations are frequently encumbered with costly legacy systems and clunky processes that can act as a brake on business agility, innovation and decision making. On the other hand those businesses that have invested in honing their processes can erect serious barriers to entry for smaller competitors – as I argued in this white paper  However, large enterprises that embrace the Cloud benefit differently.

Tom Brennan, VP FinancialForce.com told FSN, “Large companies are finding ways to move to the cloud incrementally.   Most cannot rip and replace all their systems like a smaller company can, so they move in increments one app at a time. For instance, many large companies use SalesForce DotCom for CRM. Now they are looking to extend that platform rather than add on to an older ERP system that is past its prime.”

“We see this in the area of billing where we create the invoices, do the receivables and pass entries to an SAP or and Oracle applications.  In other situations, we will run the financials of smaller subsidiaries and feed into a consolidating system, some call it two tier ERP. There also pockets of under-automation in large companies in areas like professional services,” he adds.

Interestingly, cloud-based software vendors are the model flag bearers for mid-sized enterprises. Like FinancialForce.com, business analytics competitor Adaptive Planning has been on an impressive growth trajectory. Last month it announced that it has secured a major new round of $45 million in venture funding using the additional capital to scale its direct sales and partner channels in North America, expand into attractive new enterprise and international markets, and drive new product innovation.

John Herr, CEO of Adaptive Planning says, “We grew new software bookings by 90 percent last year with high capital efficiency.  As such, we didn’t need to raise more capital, but did so to take advantage of a huge opportunity in front of us to build a dominant global presence in a rapidly growing market.”

So it could be argued that Cloud computing is a market leveler. However, the opposite is likely to be true of ‘Big Data’. The crux of the matter is that there is a global shortage of analytical skills to take advantage of big data and it is here that larger enterprises with well-honed processes for attracting and nurturing the best of the available talent could win through.  But it is not all a one-way street.

Tom Davenport, Independent Senior Advisor to Deloitte Analytics, commenting on Deloitte’s “Business Trends 2013” says, “It’s true that in the past large organizations have had the advantage in building and exploiting analytical capabilities,” but he also highlights where smaller entities may have an advantage. 

“The factor in SME’s favour is the fact that – at least in my research – many data scientists are not interested in working for large, bureaucratic organizations. When I researched them in 2012, data scientists wanted timely impact, close relationships with specific decision makers and the freedom to experiment and fail – all characteristics that are often more difficult to find in large firms,” he added.

On the other hand SME’s are not renowned for their analytical capability. And in addition there would surely be question marks over whether they can afford to collect, manage and analyse data on a massive scale.

Controversy is rife around whether bigger or smaller enterprises are better able to leverage social business capability.  It’s an area that is changing very rapidly. Presaging the findings of the second annual survey from the MIT and Deloitte Social Business Global Executive Study and Research Project, due out in July, MIT Sloan says, “In all industries, social business gained in importance — but in some, use of social media more than quadrupled within just one year. The energy and utilities sector had the biggest year over year increase. In 2011, only 7% of respondents in that industry ranked social business as “important” — a number that jumped to 29.1% in the 2012 survey.”

But the thorny question of having the resources to analyse it raised its ugly head again in this survey as well.  MIT Sloan say, “While companies in most industries are generating social data from their initiatives, few businesses in any industry were analysing the data or integrating it into their organization’s systems and processes.”

So where is the grass greener? Where can a CFO make the greatest impact? It seems that the CFO’s analytical skills are going to be in great demand whatever the size of organization. The common thread is that technology (cloud, big data and social) in most industries is more central to competitiveness than ever before and it’s the organizations that recognise this change that are going to appreciate tech-savvy CFOs the most.

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