As businesses take advantage of new technologies and trends to transform their relationships with customers, companies are not just digitising today’s business. They are also looking for opportunities to invest in adjacent business models and opportunistic ventures to make sure they’ve got a footprint in innovation.
That requires the right set of skills to drive new venture strategies and decide how capital and revenue models are going to change. And, increasingly, it’s the CFO that is leading that discussion.
That was one of the key themes outlined at the CFO Summit conference in Auckland on 9 March 2016, which looked at managing digital disruption and innovating for growth.
“The strongest companies are the ones that cannibalise themselves” - Sara Clemens, Pandora
Sara Clemens, Chief Strategy Officer at Pandora, talked about how to be a market disruptor and shared her learnings from Silicon Valley on how to use different venture strategies for transforming your business.
Sara described a “three horizon” framework for businesses to manage current performance while maximising future opportunities for growth.
“During horizon one, focus on catch-up research and development to replicate features a competitor already has and defend your core business,” says Sara. “Look at what you do well today and decide how to invest to maintain that market position.”
Horizon two is sustaining innovation, which is investment to help you adapt the products you have today and add new features which competitors might not have.
“Here you’re not really disrupting the market. You’re not actually changing the nature of the way customers are engaging with you.”
Disruptive innovation is the third horizon where you transform a business for the long-term, and requires riskier timelines and resource allocation.
“This requires you to think about the opportunities over the three to five year timeframe,” Sara says. “What trends in your industry could potentially undermine your core business, or challenge your ability to execute on horizon two effectively, and decide what is needed to address them.”
“Entire new industries are emerging - where their only interaction with a customer is through a mobile phone” - Richard Suhr, EY
EY Partner, Richard Suhr, spoke on how keeping up with the digital economy is not just a technology problem but impacts all parts of the business. He said Chinese businesses are leading the world in their development of new business models and use of new technologies to effectively engage with customers.
“China is going to be a mobile-only economy very soon,” says Richard. “Rather than a slow shift from physical stores and websites to mobile and social, entire new industries are emerging in China where their only interaction with a customer is through a mobile phone.”
He says that thinking about what that means for a customer, and how they want to consume things, leads you to a very different business outcome.
“Rethinking and reimagining products based on what a modern digital consumer will want is what all companies now need to think through,” Richard says. “The challenge is blending that with your current business which generates shareholder return.”
“Intimacy is about getting up close and personal by listening to customers and responding” - Naomi Simson, RedBalloon
Naomi Simson, Founding Director of RedBalloon, talked about how the biggest trend in 2016 will be bringing back the intimacy in customer relations.
“Intimacy is about getting up close and personal by listening to customers and responding,” says Naomi. “It’s ensuring your people are fully empowered to make powerful choices for customers.”
She says that when it comes to prioritising your efforts, you should work on the one thing will determine your ultimate success.
“There is a theory about the ‘one thing’,” explains Naomi. “Successful people focus on one thing. Often the one thing is finding the one thing because once you sort that out, your to-do lists become success lists.”
"For me, it’s all about customer experience. I want to create intimacy with my customers even though I operate in a two-dimensional space. So what is that one thing that is going to make them feel as if I know them intimately, as if I was serving them directly in a regular store?”
“New Zealand companies have a great opportunity for entering the Chinese market through ecommerce” - Shaun Rein, CMR
Shaun Rein, Managing Director for market intelligence firm CMR, spoke on the changing Chinese economy and the opportunities for New Zealand companies wanting to take advantage of China’s economic shift.
He talked about how China's dangerous levels of air pollution are changing the spending patterns of Chinese consumers, and savvy New Zealand tourism operators and consumer goods companies can take advantage.
“Pollution is changing how people are thinking,” says Shaun. “Instead of buying physical items, they want to buy experiences. That’s why you’re seeing so many Chinese tourists coming to New Zealand; they love the clean air.
“That’s also why so many Chinese consumers are buying New Zealand and Australian products, whether Manuka honey, fruit or vitamin supplements, because they really want to make themselves healthier.”
Shaun says it is also changing where they buy their items, with Chinese consumers increasingly buying through ecommerce, rather than a bricks and mortar store, because they don’t want to go outside.
“Ecommerce volumes spike on days when pollution is high,” he says. “New Zealand companies have a great opportunity for entering the Chinese market through ecommerce.”
The CFO of the future will combine an understanding of balance sheets and compliance with shaping strategy and driving investments that defend and extend the core business, while transforming the business for the long term.
For many CFOs, these new responsibilities will require an expansion of skills and capabilities to keep pace with changing demands.
How well equipped are you to lead your business’ change and innovation efforts?