Fast growth, CFOs, and a graceful exit

Appearing in In The Black, May 2019

 

Blitzscaling: the Lightning-fast Path to Building Massively Valuable Companies

By Reid Hoffman and Chris Yeh

HarperCollins, $35, 288 pages

BlitzscalingHoffman is the co-founder of LinkedIn as well as the former COO of PayPal, and Yeh has written extensively about start-ups, so between them they bring a great deal of experience to bear on the issue of rapid growth. They see four essential components for exponential transformation: building networks that allow for easy entry of new customers; finding a niche which will allow for an eventual transition into the  mainstream marketplace; picking distribution channels which have an in-built capacity for scaling; and looking for high gross margins to provide funds for re-investment.

Hoffman and Yeh do not pretend that speedy growth is easy, and they provide plenty of examples of failure. They also note that many of the companies that achieved massive size changed their strategy several times, as the marketplace and the company evolved. At the same time, speed is crucial, even if it means sacrificing efficiency. Be willing to experiment, they say, and be equally willing to admit it when you make a mistake and a new course if needed.

All this is presented in a clear, balanced way, thankfully free of tech-hype. Whether you have big plans or are interested in how giants grew, there is fascinating material here.

 

The Traits of Today’s CFO: a Handbook for Excelling in an Evolving Role (2nd edition)

By AICPA and Ron Rael

Wiley, $79, 160 pages

The CFO job has always been a challenging one, straddling strategic management and financial functions. Rael, a leadership consultant who has studied the role from many different angles, believes that in the future it is only going to get harder, with the CFO needing to add technological expertise and coaching acumen to the toolkit. This book lays out how the various new skills can be integrated with the traditional demands, explaining how the role is changing. Rael covers a great deal of ground, punctuating the book with self-diagnostic tests as well as good illustrative examples. He believes there are ten critical skills for the CFO and the book systematically unpacks each one. Most chapters include a ‘best practice’ section which links theory with everyday problem-solving.9781119548232 cover.pdf

If anything, the CFO role is becoming less about finance (although a high level of number-crunching ability is still mandatory) and more about collaboration, communication and soft-skills leadership. One telling suggestion: the CFO should spend at least a quarter of their time out of the office, talking with investors, suppliers, peers and people in non-financial roles.

It adds up to a useful package, as well as an insightful commentary on the evolution of financial management.

 

Business Exit Strategies: Family-owned and Other Businesses

By Frederick Lipman

World Scientific, $90, 164 pages

Knowing how to make a graceful departure is difficult in any circumstances, and particularly tough when a business is involved. Lipman, an adviser and author, has provided an interesting guide to make the process easier, covering circumstances ranging from a small enterprise to a large corporation.

There are many pitfalls – in fact, Lipman devotes the first two chapters to common mistakes – but most can be overcome with careful planning and an eye to market conditions. If the business is being sold then there must be comprehensive, audited financial accounts available, and any outstanding legal disputes should be settled. If the business is to be passed on to family members then the procedures should be clear, and the role of the founder, if any, codified and agreed.

Lipman devotes a long section to the tricky issue of valuation, noting that the right time to sell a business is when it is on a growth path, not when decline has set in. Another exit option is to take the business public, which can work well but is a much larger project than a direct sale.

The book also looks at letters of sale and non-disclosure agreements. Useful advice, when it comes time to leave the stage.

Business Exit Strategies

 

Downloadable research

 

Value add

Even those companies that have already embraced business analytics often have difficulty understanding how they are adding value to the company’s activities. In a collaborative project, the Melbourne Business School and A.T.Kearney have published the ‘Analytics Impact Index: Understanding the value of analytics and how you can improve performance’ to provide benchmarking and guidance. Building on comprehensive survey data, it includes the Value Index, a tool for assessing the contribution of analytics to total profit; and the Maturity Index, which offers a framework for the comprehensive assessment of a company’s analytics practices and processes to help achieve value.

Download from:

https://analyticsimpactindex.mbs.edu/

 

Disruption

‘Navigating a World of Disruption’ is a briefing note prepared by McKinsey for the 2019 World Economic Forum in Davos, focusing on both the value-creating opportunities and the intense competitive challenges of the digital era. It provides data showing that those organisations that have been quick to utilise AI and analytics technology are doing well, while the performance gap between these organisations and others is growing quickly.

At the global level, China and India continue to dominate growth figures but a number of new players, mainly in the Central Asian and South-east Asian regions, are poised for breakthrough levels of growth.

Download from:

https://www.mckinsey.com/Featured-Insights/Innovation-and-Growth/Navigating-a-world-of-disruption

 

Banking on it

Singapore-based research firm J.D. Power has released a summary of its Australia Retail Banking Satisfaction Study, providing a ranking of financial institutions and pointing towards areas which need to improve. It revealed that 42 per cent of Australian customers of major banks, and 24 per cent of customers with other financial institutions, do not trust their bank.

The study was based on responses from 4,730 customers. Westpac ranked highest among the major banks, performing well in the account information and account activities factors. In the non-major banks category, ING performed best.

The study also identified strong growth in mobile app usage for personal banking.

Download the summary at:

https://www.jdpower.com/business/press-releases/2018-australia-retail-banking-satisfaction-study

 

Visual aids

The Reserve Bank provides a wealth of information, and material from its monthly pack of charts is particularly useful for inclusion in reports and presentations, as well as for general at-a-glance background. The charts include information on the global economy, growth in Australia, housing credit growth and credit growth by sector, interest rates, trends in the business sector, consumer sentiment, the outlook for inflation, and key banking indicators.

The pack is updated monthly and is released on the first business day of each month. Supplementary information can be obtained from other parts of the RBA site.

Download from:

https://www.rba.gov.au/chart-pack/

 

Looking ahead

In a thought-provoking TED Talk Gunjan Bhardwaj, described here as a “complexity specialist”, examines how artificial intelligence and blockchain have been used in the German health system to gather and analyse unprecedented amounts of data. The information ranges from drug test results to patent applications to patient treatment records, with AI being used to integrate disparate information into useful material. Blockchain technology has been utilised to capture the results of lab tests and in-progress research while allowing for the protection of intellectual property. Even for those not in the health sector, the address underlines the variety of applications that these technologies are finding.
Watch at:

https://www.ted.com/talks/gunjan_bhardwaj_how_blockchain_and_ai_can_help_us_decipher_medicine_s_big_data/

 

 

 

 

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