Hey awesome you, welcome back to yet another powerful inflation article series:
Inflation is hitting an all-time high.
Do you want to know, “What as a CFO, can you be doing about it within your organization?”
It helped me to drill down to evaluate Consumer’s Balance Sheets and Financial Conditions to determine which ones are most likely to falter and to troubleshoot the same in my business, my client’s businesses, and their clients or consumers.
Here you can discover “How the Business Model needs to change” and “What are the essentials to be considered?“
“An ultimate learning from my envisioner Sir Dr. Ram Charan, who is the only CEO consultant and advisor to boards and C-Suites” and how you can apply these in your business.
It helps you understand the gaps and connect the dots with a holistic approach on a real-time basis to any significant deviations from financial expectations.
Results:
After started implementing a few essentials that I am about to share, I started seeing so much scope to 10-16X the business month on month which itself is like seeing the light on the other side of the tunnel in this everyday growing inflation.
I will be sharing with you “The Essentials as a CFO you should be considering as the inflation is back and looks to be settling in“.
If you as a CFO understand what can you be doing about it within your firm, These can help you troubleshoot a lot before the business is dead as it’s helping me and my businesses and a few of my client’s businesses too.
✅ CFOs should be rethinking their roles and priorities.
✅ CFO along with CEO has to layout various scenarios for “How the business might operate at various levels of inflation“.
When you do, look deeply at the assumptions, because assumptions and realities will be too contrast.
✅ You should see “How consumer behavior is changing“.
As you’re aware and witnessed that no matter what, many didn’t like to shop online before covid’19, They’re doing now due to covid’19 and its impact.
👉 The online boom was there earlier too before the pandemic, but now consumer behavior is completely changed and accordingly, the technology and the way of doing business are completely transforming, not just changing.
Next,
How will the end-to-end value chain need to change based on the changes?
I.e,
✅ 1. The business organization’s infrastructure.
✅ 2. The hiring of new talent and upskilling existing talent and giving them the market price.
✅ 3. The technological developments to cope with the external context and the potential possibility and threats.
✅ 4. The procurement process helps in the supportive activity in the value chain and receiving, storing, and distributing the supplies.
✅ 5. The operational side support is needed for resources, transfers, and customers.
6. The Marketing, Branding, Advertising, and Social Engagement and the needed services to do any changes in the end-to-end value chain with immediate effect to avoid future suspense and blaming the external context.
👉 Keeping those in mind what would you recommend the company needs to do?
The CFO and CEO got to lead the development of different scenarios, different remedies, and what options might be in different situations, you got to have clarity with complete scenario analysis, and again what to be noted here is not going into analysis paralysis mode, the objective is building discipline in execution excellence.
The CFO and his team should also have strong control over daily cash inflow with clear reports on what’s happening and “managing the balance sheet not to occur too much debt“.
Because during this period of rising inflation, debt is a killer.
At the closest level CFO has to show “How the business model needs to change” and a few essentials to consider are
✅ 1. The CFO must work closely with marketing and sales on pricing policy to understand how pricing will affect the entire value chain.
The organization has to work on creative disruption as one’s profit to any company should never come at the loss of another, let that be an associate in anyways and the consumers.
Just think as a consumer when you walk in to buy something, what reflects there, and don’t you think that policy needs to be corrected in the entire value chain?
It is on a high priority level or else any born-digital company with less CAPEX and OPEX (not much issue) can itself be a threat as the pricing is based on different factors keeping different factors in mind that which increases net profit.
So it’s important to understand how pricing is affecting the entire value chain.
✅ 2. The CFO must drill down to evaluate “Consumer Balance Sheets” and “Financial conditions” to determine which ones are most likely to falter.
The “Consumer Balance Sheet” is most important as the relationship between the organization and its consumer base is just that “a relationship”.
This is known and followed by a very few top companies in the world.
For your better knowledge and for a better outcome, here is what you got to consider what drives and what are the drivers in “Consumers Balance Sheet”.
There are two core drivers of the “Consumer Balance Sheet”.
👉 1. The driver of “Trust” and
👉 2. The drivers of “Service”
Which both go hand in hand
The drivers of trust are:
👉 1. Stability
👉 2. Innovation
👉 3. Relationship
👉 4. Practical Values
👉 5. Vision and
👉 6. Competence
and on the other hand the drivers of service are
👉 1. Loyalty over time,
👉 2. Early adoption of products
👉 3. Access Engagement
👉 4. Share of wallet
👉 5. Feedback and
👉 6. Advocacy
When you line up both with certain roles and responsibilities in place on both sides to make it work, you get the balance sheet.
For example:
1. Stability and Loyalty over time:
Now as a business, If you provide a stable presence and certain delivery over time, in return you look for loyalty over the time, If this differs then the balance will be lost. Similar way the consumer or associate too think, “If I am a frequent buyer and maintain my consistency with the trust that I have upon you, in return I also expect the loyalty over time from you”, isn’t it? It’s a win win win game.
2. Innovation and Early adoption of products
As a business, if you innovate, in return you look into the market that it should test and buy the products.
On the other side as a business, If I innovate, in return I expect you to test and buy these products as early adopters.
With this, both will have a fast-mover advantage and an early adapter advantage.
Now
3. Relationship & Access Engagement
Now as a business, If I set up a relationship model to serve you, in return I expect reasonable access from you to conduct that relationship.
Now as a business when you set up a relationship model to serve the markets, in return you expect to have reasonable access with the customers to conduct that relationship, otherwise, how will you serve the markets and how will markets engage when access is weak, poor or no access at all.
There should be reasonable access from both sides to have a healthy relationship. This got to be measured
4. Practical value and Share of Wallet
Now you as a business delivered something that meets a need, and in return you expect money to be invested in it, how much that money depends on how good you’re at the things you delivered in the list of needs, that much “share of wallet” from consumers you get.
Consumers expect a practical value to their share of wallets. Isn’t it?
On the other side, if you have invested in something that fulfills the need with a practical value as per your and your consumer’s perspective with enough research, don’t you expect a fair share of money to be spent by the buyer?
You do it right. It’s the same calculation and expectation from another side too.
Here money is just content, understand the context, and change the content accordingly.
5. Vision and Feedback
Now you have set a vision where you will be taking the business and how it will benefit the consumer, in return you expect feedback, how it is, what they want, and what should be better, that is the relationship you got to talk to take feedback so that you feed-forward for betterment to build a better relationship.
If I explain where I will take this business in the nearby future and how this will benefit you, in return I want you to tell me what you want, how it’s going, and what should be better. In that relationship if I talk, reaching the vision set with milestones, and crossing those with the right feedback helps to validate before something falters and this helps this approach takes much faster and closer to the vision.
6. Competence and Advocacy
If the organization is good at what it offers in the entire market, In return the organization expects consumers that they tell to other people to spread the word faster to increase brand advocacy with its competence.
To sum up in short the consumer balance sheet suggest that what an organization wants from its market is “trust” and what consumers want is “service”.
These can be argued about forever. The point is to move on and see if this works and how the organization is validating these and seeing in a dashboard like financial balance to determine which ones are going to falter and how those can be troubleshot to avoid loss in the entire value chain.
Let’s shift gears back to the essentials
✅ 3. The CFO should act as a mediator between manufacturing and purchasing on one side and marketing and sales on the other side. Help them guard the company against shortages or delays in delivery of supplies while resisting the urge to build inventory, and sinkholes for cash.
✅ 4. The CFO should help ensure that the entire senior management understands the changing priorities when budgets are being set.
✅ 5. The CFO must keep the board and CEO informed on a real-time basis of any significant deviations from financial expectations, including such events as consumer or supplier defaults.
For the CFO it is also essential that other C-suites are communicating constantly, taking the initiative to show, persuade and get everyone educated on inflation—including the board—especially how different rates of inflation in the sector may change the conditions of the company.
This is the time when the CFO cannot communicate enough:
👉 What are the facts?
👉 What are the numbers?
👉 Where are we advancing?
👉 Where are we stumbling?
Chances of increasing unseen faults will be maximum.
CFO and CEO should be measuring how well people throughout the organization with other C-suites—and the board—understands all of these wells in advance to mitigate the risk.
Ok.
Just to recap once:
1.CFOs should be rethinking their roles and priorities.
2. CFO and the CEO has to layout various scenarios for “How the business might operate at various levels of inflation”,
3. How will the end-to-end value chain need to change based on the changes?
like: Organizations infrastructure, Hiring of new talent and up-skilling existing talent and giving them the market price, The technological developments to cope up with the external,
The procurement, The operational side support
Keeping those in mind what would you recommend the company needs to do?
4. The CFO and his team should also have strong control on daily cash inflow with clear reports, because, during this period of rising inflation, debt is a killer.
5. How business model needs to change”
and a few essentials to consider are
1. The CFO must work closely with marketing and sales on pricing policy to understand how pricing will affect the entire value chain.
2. The CFO must drill down to evaluate “Consumer Balance Sheets” and “Financial conditions” to determine which ones are most likely to falter.
3. The CFO should act as a mediator between manufacturing and purchasing and marketing and sales to help them guard the company
4. The CFO should help ensure that the entire senior management understands the changing priorities when budgets are being set.
5. The CFO must keep the board and CEO informed on a real-time basis of any significant deviations from financial expectations.
6. For the CFO it is also essential that other C-suites are communicating constantly.
7. The CFO has to have consistent communication to measure, “how well people throughout the organization—and the board—understand all of this.
Ok.
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Thank you so much for your time, keep watching the space for my future articles, and I just want to thank you once more for reading so far.
✅ If you really want to build, grow and scale your business then do book a “Discovery Call” by just sending a private message. I will be very happy to help you discover your roadblocks strategically so that you can troubleshoot and create a clear dashboard to accelerate your business.
If you want a Podcast version of this article then you can listen here with this link https://anchor.fm/harshzad/episodes/How-To-Lead-Through-Inflation–A-Guide-For-CFOs-e1f7ktn
or you can tune into any leading podcast channel like Apple Podcast, Spotify, or Anchor to name a few.
Cheers and God bless you and have a phenomenal day. More power to you, and may you lead your life and business strategically.
Thank you,
For your wealth
Harsshad
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