Roger L. Martin wrote a Medium post titled How to Become a Strategic Chief Financial Officer (1 April 2024).
« CFOs play an outsized role in crushing innovation. »
« CFOs can eliminate the biggest detriment of the finance function to the development of strategy by simple recognizing that rigorous analysis of the past is not a good or even useful predictor of the future and that there will never be proof in advance of an innovative new idea. »
« Ensuring Logical Rigor. The first way CFOs can contribute positively to strategy development is to ensure that strategy decisions are consistent with the strategic economics of the company. By strategic economics, I mean the dynamics of revenues and of costs and how they interact to produce profits (or lack thereof). For example, to what degree costs vary with scale, or product line breadth, or geography, or all of them combined; and to what degree revenues vary with pricing approaches/structures? »
« The strongest tool of the CFO on this front is the What Would Have to be True (WWHTBT) question. »
« I remember fondly Sara Mathew who would go on to be the highly successful CEO of Dun & Bradstreet and Chair of Freddie Mac, as the CFO of the Tissue and Towel (think Charmin and Bounty) business of P&G tearing apart the implicit strategic economic assumptions behind the attempted globalization of what was clearly a North American business — and save billions in what would have been wasted investments. At the time, globalization seemed like a solid strategy to the powers that be. But it was anything but! »
« And much later at Ford Motor Company, I worked with the Treasurer to fundamentally question the strategic economics of vehicle life cycle planning and production to dramatically improve the way the company thought about it. As a result, many vehicles that were designed to fail economically we no longer initiated or launched. »
« Creating Strategic Possibilities. CFOs can do more than ensure the rigor of other peoples’ strategy ideas. They can use their understanding of the strategic economics of their company’s business to generate strategy possibilities — possibilities that others without the deep understanding of the strategic economics cannot see. »
« Think of your job as raising the quality of the argumentation on the choice of alternative futures. You should see your job as helping to drive choice toward the most logically compelling possibility. Others will bring their particular skills to bear — customer understanding, knowledge of the distribution channel, production dynamics, etc. You need to bring your mastery of the strategic economics. It isn’t the only thing. It is one of a set of perspectives that need to be integrated into a strategic whole. And you can play a key role in doing that. »
« But also spend thinking cycles on creativity. What are possibilities that those who understand the strategic economics of the business less well than you would never imagine. Go to the folks that understand customers better than you to test your ideas. And the ones that know production, sales, and distribution dynamics better. But don’t be shy. Strategic insights can come from any direction — including yours but only if you give it a chance. »
Roger L. Martin is the co-author of Playing to Win: How Strategy Really Works, author of When More Is Not Better: Overcoming America’s Obsession with Economic Efficiency and author of A New Way to Think: Your Guide to Superior Management Effectiveness.
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