Few of today’s CFOs have faced a business environment as disturbing as what they’re encountering now, with woes falling directly in their laps ranging from raging inflation to higher interest rates, from constrictions on capital availability to new uncertainties in the supply chain, from recession fears to the stock market’s flirtation with bear territory.
But “this is the time for CFOs to shine,” Ram Charan exhorted attendees at the CFO Leadership Council’s 12th Annual CFO Leadership Conference. Charan, one of the great sages of modern business and a trusted advisor to C-suites, said even if there is a U.S. “recession that moves into stagflation, at the same time people who do good things and have good judgment can create new opportunities.”
The annual conference of Chief Executive Group’s CFO Leadership Council brought together in Boston, physically and virtually, hundreds of CFOs and other finance executives from across the country at a time of tremendous challenges for many in those roles.
Ranga Bodla crystallized the convictions of many CFOs in saying, “The notion of growth at any cost is gone.” The vice president of field engagement and marketing for Oracle NetSuite led a panel on balancing growth and efficiency and noted that CFOs now “need to model for zero or even less-than ‘growth.’ We’re all planning for growth, but growth at what margin?”
Beginning with Covid, continuing through the transition out of the pandemic, and now confronting an economic backdrop that has begun to strain many industries, CFOs have mounted the front lines in today’s business battles as their decisions have become crucial fulcrums for the future of their companies. “Each of you is a leader for your company,” Charan said. “Each of you is a leader in the finance function. And the finance function is crucial today.”
Charan opened the event with a stirring exhortation to CFOs to navigate today’s generational inflation by hewing to a handful of principles. Among them: “Cash is king,” he said. “Manage your business on the basis of cash, not on the basis of accounting.” At the same time, Charan urged CFOs to avoid “cash traps” in areas such as accounts receivable and inventories, instructing them to pursue cash aggressively wherever it might be held up or lying idle.
CFOs also should lead a re-examination of products and services to determine “which ones you shouldn’t have anymore” because they comprise the long tail of a company’s offerings and aren’t worth preserving. And he urged finance executives to question planned capital allocations in the new atmosphere of reduced growth prospects, though Charan said that projects aimed at digitization of operations should be maintained.
“If you’re not connected to your customer digitally and not using that data for decision-making, you’re falling behind,” he said.
Data analytics are one discipline whose utility is becoming more apparent in a more difficult economy. Jessica Gelman, CEO of Kraft Analytics Group, a data-crunching outfit started by New England Patriots owner Robert Kraft, shared at the conference how the NFL team has plumbed information about its fan base to optimize everything from ticket sales to in-stadium amenities.
“When things are going great, [sports teams] can be just a ticket taker,” Gelman said. “But you need to make continuous investments in your organizations to be able to weather downturns.”
Moderna CFO David Meline distilled lessons from the breathtaking rise of the pharma startup, which scaled up quickly over the last two years from a pre-commercial firm to one that the world counted upon for its new and unproven mRNA-based vaccine. Moderna’s product proved efficacious and life-saving, and now the company has more than 3,000 employees and logged $5.9 billion in Covid vaccine sales in the first quarter.
“It was a really good example of a positive case study of public-private collaboration,” Meline said about Moderna’s dramatic efforts to finalize and scale up production of the vaccine while government officials worked to clear the regulation runway of unnecessary obstacles. “We worked very closely with not only the U.S. government but governments around the world to bring the product to market as quickly as possible without cutting any corners on science, which we insisted on.
“At the end of the day,” Meline said, “we were able to do this in a safe manner, with the right level of scientific oversight, and doing it in cooperation with governments where we were working literally 24×7 and side-by-side, which probably has never happened before in a non-war context. It was very successful.”
When it comes to business transformations, Navneet Govil believes that no force will prove more powerful than artificial intelligence. “Technology and AI are disrupting and transforming every facet of life and business,” the CFO of Softbank Investment Advisers told the conference.
AI is at the core of fintech automation that Govil believes will comprise increasingly important tools for CFOs. “Try to automate as much as you can” with such aids, he said, including reporting functions and accounting closes.” And “it’s always better to outsource functions that can be outsourced,” such as accounts receivable and accounts payable, he added. Where CFOs should invest resources that may become slimmer, Govil advised, is “in the financial team that’s doing decision support for the analytical work.”
’Softbank has been pressing the possibilities from AI through its Vision and Latam funds, which tend to invest in startups with an expected payback of 12 to 14 years rather than the five to seven years targeted by most venture capitalists. “For entrepreneurs and founders, that means they don’t feel the pressure from us that [Softbank has] made this investment and we need to exit,” Govil said.
The conference keynotes closed with a discussion of the various paths for growth companies to go public: the traditional route; a direct listing; or via SPAC.
Nerdwallet, for example, the personal-finance web site, went public in November via a traditional route that involved a marketing campaign for the brand and massaging of Wall Street. “We had a nice consumer brand and solid fundamentals and a strong narrative and a story, so we felt a traditional IPO would be the best way to go,” said Lauren StClair, Nerdwallet’s CFO.
On the other hand, Squarespace considered a traditional IPO but settled on a direct listing instead for its move onto the New York Stock Exchange in spring of 2021. “We had strong financial discipline,” said Marcela Martin, CFO of Squarespace. “We wanted investors and employees to enjoy liquidity from day one, which was the main driver of why we chanted to a direct listing.”