cfo vision 2015 - deloitte.com

CFO Lens

Relevant, CFO-centric content

November 11–13 | Washington, D.C.

CFO VISION 2015

CFO Lens

Relevant, CFO-centric content

Mike Armstrong, Director

Deloitte Consulting LLP

Sam Silvers, East Region Managing Director

Deloitte Consulting LLP

What is your orientation

for engaging in the

strategy process?

THE STRATEGIST CFO

Copyright © 2015 Deloitte Development LLC. All rights reserved.

Agenda

2

The “Strategist” is one of the four roles of the CFO

Breaking out of the box

Strategy can best be expressed as an integrated set of choices

The strategic choice cascade

Four orientations of the strategist CFO

The CFO as a pragmatic strategist

Appendix


The “Strategist” is one of the four roles of the CFO

3

StrategistProvide financial leadership in

determining strategic business

direction and align financial strategies

OperatorBalance capabilities, costs,

and service levels to fulfill the

finance organization's

responsibilities

StewardProtect and preserve the

assets of the

organization

CatalystStimulate behaviors across the

organization to achieve strategic and

financial objectives


Common misconceptions about the role of the CFO

Breaking out of the box

4

“The CFO is just a numbers guy.”

“CEOs define strategy, and CFOs figure out how to fund it.”

“The CFO is a financial gatekeeper, simply signing off on or rejecting

strategic investments, but not driving them.”

What are some of the misconceptions that you have heard?


Strategy can best be expressed as an integrated set of choices

How will we

win in chosen

markets?

Which

management

systems?

What are our

goals and

aspirations?

Which assets

& capabilities

do we need?

Where will we

play?

Customers

Products

Geography

Vertical stages

Value proposition

to customers

Sources of defensible

advantage

Profit model Skills and

capabilities

Physical assets

Organizational

system

Purpose

Financial

objectives

Non-financial

objectives

Business unit

strategy

Metrics and

incentives

Processes

Initiatives

Portfolio of

businesses

Relative weight of

investment

Method of increasing the

value and competitiveness

of individual businesses

– Vertical and horizontal

synergies

Corporate

strategy

5


• The most robust strategies are those in which how

to win reinforces where to play and vice versa

• The most satisfying strategies are those in which

the where to play and how to win choices have the

potential to meet the desired goals and aspirations

• The most sustainable strategies are those in

which the where to play and how to win choices are

buttressed by appropriate, distinct, and reinforcing

capabilities, organizational systems, and initiative

programs

The strategic choice cascade

6


Four orientations of the strategist CFO

7


• What are the dominant constraints on the growth of my company, and how

can we use finance to push back the constraints?

• What is the dominant uncertainty facing my company, and how can we help

our company structure and navigate the uncertainty?

• What are the areas of spend with greatest uncertainty on returns, and how

can we reduce uncertainty in value?

• What are our investments, and do they align with our shareholder value map?

• What could disrupt my company and how will we respond?

• If we double or halve the size of our company, will we rescale flexibly and

create more value for shareholders?

• What should we have on our kill list?

The CFO as a pragmatic strategist

8

Appendix


High-quality strategy processes involve, to varying degrees, a set of six problem-

solving steps, and CFOs have a role to play at each step.

The Process: StrategybyDesign

10

Express Assess Develop Choose Detail Act

OptionsCurrent strategy Emergent strategy

1. Get focused

3. Get creative

2. Get real

4. Get decisive

5. Get committed

6. Get going


Express and assess current strategy

11


OptionsCurrent Strategy Emergent Strategy

What is our

strategy, and to

what extent is it

being followed?

How can

we better

communicate

our strategy

to various

stakeholders?

What strategic

tensions exist,

and what can we

learn from them?

How well is

our strategy

performing

relative to our

expectations?

How well do we

think our strategy

positions us for

the future?

What are the big

opportunities and

threats to our

current strategy?

Key questions

What are the right metrics for our

business?

How high should we aim? What is our

risk tolerance?

Is the existing strategy meeting our

current goals? Can it? Are our goals

realistic?


Develop and choose options

12



How can we

creatively and

dramatically

expand the set

of alternative

strategies under

consideration?

How can we best

consider different

business models?

How can we build

the ability to deal

with uncertainty into

our strategy?

How do we frame choices

in a way that prevents

paralysis?

How can we drive to final

choices?

What are the key

assumptions underlying

our choices?

Develop Choose

Key questions

Given our target performance, what are the

right evaluation criteria for our options?

Which new options do or do not meet these

criteria?

What creative financing options do we have

to expand our universe of options?

How will the markets react to our new

strategy?

What future industry scenarios should we

consider, and how will our strategy hold up

in each?


Detail and act upon future or emergent strategy

13



How can we

translate our new

strategy into a

discrete set of

high-impact,

actionable

initiatives?

How prepared is

the organization

to effectively

move toward the

new strategy?

How do we best

galvanize the

organization?

How quickly

can we move

toward the

new strategy?

How will we

know whether

our strategy

implementation

in on track?

Key questions

What is the right set of initiatives? Who should run them?

How do we best allocate resources across the various

initiatives?

How do we use metrics to ensure the organization is

tracking against plan?

How do we communicate our strategy internally and

externally to ensure effective activation?


StrategybyDesign can be tailored to different contexts by “dialing up or down” the

emphasis on each step to meet specific needs.

The strategy design process has to be flexible

14

EXP

RES

S

ASS

ESS

DEV

ELO

P

CH

OO

SE

DET

AIL

AC

T

Archetype 3: Drive to Choice

Archetype 2: Option Exploration

Archetype 5: Strategy Redesign

Archetype 1: Strategy Diagnostic

Archetype 4: Transformation Agenda

Example context

What is the current and expected performance of my strategy

relative to our expectations?

What are some new and creative strategic options that we should be

thinking about? How can we inspire different business models?

How can we choose between two (relatively well-defined) options?

How do we get more traction on the strategy we have developed?

How should we tackle a broad-based strategic review and redesign?


CFO Signals survey: CFO role and focus

15

The strategist CFO How do CFOs contribute to the development of corporate strategy?

Note: In Q2 2015, the CFO Signals survey results indicated that, among their four

CFO roles (steward, operator, catalyst, and strategist), CFOs were spending an

average of 27% of their time as strategists. In Q3 2015, we asked CFOs about their

contributions in their strategist role.

Transformer/Architects and Responder/Challengers are the most common

contribution archetypes:

• Aggregate time allocations suggest CFOs contribute equally across the

roles—but only about 10% actually do so: Contributions in the Challenger and

Architect roles vary much less than those in the Responder and Transformer

roles. CFOs tend to contribute through their Challenger and Architect roles, then

contribute either through their Responder or Transformer role—but not both (only

6% say both roles are in their top two).

• Most CFOs focus on one or two roles: About 60% of CFOs place one role

ahead of all others (most often Responder or Transformer), and about 25% say

two roles equally dominate their contributions (most likely a combination of

Responder with either Challenger or Architect).

• Few cite a very high contribution in a single role: Only about half say that 40%

or more of their contribution comes from any particular role. If a CFO does claim a

50% or higher contribution, it is most likely to be in the Transformer role; if a CFO

claims less than a 20% contribution, it is most likely to be in the Responder role.

• Some dominant patterns more likely than others: With respect to CFOs’ top

two time contributions, Transformer/Architect and Responder/Challenger (order

agnostic) are considerably more common than the other combinations.

Transformer/Responder is uncommon, and Transformer/Challenger is very rare.

• Industry differences: Financial Services is highest for Responders (31%),

while T/M/E is highest for Transformers (31%), and Retail/Wholesale is highest

for Architects (29%). Healthcare/Pharma is by far the lowest for Responders at

just 18%.

• Country differences: As a group, US CFOs report roughly equal contributions

through all four roles. Canadian CFOs tend to report slightly higher contributions

as Responders, and Mexican CFOs report considerably higher contributions as

Transformers.

10%

15%

20%

25%

30%

35%

Responder(24.5%)

Architect(25.4%)

How do you personally contribute to your

company’s strategy development process?

(Please distribute 100% of your contribution across the following roles.)

Percent of contribution CFOs report for each role (n=114)

Please see appendix for industry-specific findings.

(25.6%)

Challenger

(24.5%)

Transformer

Mexico

• Responder – CFO/finance helps key business leaders quantitatively analyze the

financial implications of different strategy choices.

• Challenger – CFO/finance acts as steward of future value by critically examining the

risks to, and expected returns on, different strategy alternatives.

• Architect – CFO/finance helps business leaders shape strategy choices and apply

finance strategies to maximize the value of particular strategies (working to find “paths to

yes” on key business investments).

• Transformer – CFO/finance is a key leader in shaping and executing future strategy,

working to find operational/financial options for shifting the market mix, delivering value,

and creating distinctive capabilities.

CanadaUSTotal

About Deloitte’s CFO Program

The CFO Program brings together a multidisciplinary team of Deloitte leaders and subject matter specialists to help CFOs stay

ahead in the face of growing challenges and demands. The Program harnesses our organization’s broad capabilities to deliver

forward thinking and fresh insights for every stage of a CFO’s career – helping CFOs manage the complexities of their roles, tackle

their company’s most compelling challenges, and adapt to strategic shifts in the market.

DisclaimerThis publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

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