Actionable Ideas

Financial management has become increasingly challenging for CFOs, Finance VPs, Treasurers, and Controllers in all types of enterprises. This article will describe several characteristics of today's business environment that make financial management challenging and will provide you with seven actionable ideas for successfully handling the challenges you face.

Why is Financial Management So Challenging Today?

Most financial managers will agree that they are challenged by three specific characteristics of today's business environment:

- Change is occurring at an accelerating rate.

- Business opportunities are increasingly heterogeneous and increasingly brief.

- Competition to provide value to customers is intensifying.

Additionally, most financial managers must contend with too much useless data and too little useful information. On top of that, the limited useful information that is available to them is often delivered too late to prevent the destruction of value or too late to exploit opportunities to create it.

In short, financial managers find themselves struggling to take advantage of diverse, fleeting business opportunities in the absence of timely, useful information. But there are many ideas employed by successful financial managers that ease this growing burden. Here are seven of the best.

Idea 1: Work at understanding your targeted customers better than anyone else does.

Managers of successful enterprises invariably possess a deep understanding of their customers, and this understanding is a key competitive advantage. Companies who understand their customers better than their competitors do have an inherently better understanding of what those customers value, and a superior understanding of what customers value translates into a superior ability to recognize opportunities to provide that value. But you still have to pay attention...

Idea 2: Be alert for opportunities to create value for your targeted customers.

You really can't control the timing of business opportunities that come your way. Based on your understanding of what your targeted customers value (see Idea 1), you should be able to recognize opportunities to provide that value as long as you make a point of always looking out for them.

Keep in mind that opportunities to create value for customers often involve doing difficult things; the difficulty will dissuade many of your competitors. It is in precisely these sorts of opportunities that you will experience the least competition, so don't automatically discount them.

Idea 3: Be prepared to learn new things -- and unlearn old things -- when taking advantage of opportunities to create value for targeted customers.

In today's business environment, whoever learns the most the fastest -- and quickly translates knowledge into value-creating action -- wins. The same goes for recognizing and ceasing value-destroying action as well.

As windows of business opportunity shrink, your company simply can't afford the time and money it takes to be completely certain about each new venture before proceeding with it. And so, by treating each venture as a learning experience as well as a business opportunity, you'll be less inhibited by your lack of knowledge going in. You'll also be alert to signs that the opportunity shouldn't be pursued further, which is why you should...

Idea 4: Have an exit strategy for each new venture.

By having a well-defined exit strategy that covers many contingencies, you'll waste no time wrapping things up when you're "done" with a venture. This is absolutely essential to rapidly ceasing business activities that are no longer effective at meeting the objectives of the enterprise. And the way you know when you're ready to exercise your exit strategy is to...

Idea 5: "Instrument" your ventures.

Don't undertake a new venture without having first established data collection and information delivery systems that will tell you what's happening on a real-time basis. Waiting for the monthly close is too late.

When employed in conjunction with Ideas 3 and 4, you will maximize your learning/unlearning and ensure that the signals to trigger execution of your exit strategy are not delivered later than they should be.

Idea 6: Make friends before you need them; part on good terms.

Many business opportunities will require your enterprise to form external partnerships or alliances. But if you wait until you need to establish such relationships, you'll find yourself pressed for time and in a less favorable bargaining position. It is much better to develop relationships with potential partners well before they're essential to a particular opportunity.

Because opportunities can be short-lived, so too can partner relationships. Both partners need to recognize this going in and understand that there will be circumstances under which the partnership no longer meets the needs of both parties. By agreeing up front on "terms of separation", you leave the door open for future collaboration, which can be far less expensive and time consuming than acquiring a new partner.

Idea 7: Capitalize on luck without relying on it.

Most financial managers would rather be smart than lucky. That's unfortunate because luck, if exploited correctly, can convey far greater competitive advantage than "smarts." The trick, of course, is being able to recognize luck for what it is in order to take full advantage of it.

Conclusion

These ideas are just a sampling of the ways in which financial managers function successfully in today's challenging business environment. By adapting them to your situation, you can enjoy greater success -- with less stress.

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