Strategy has always been a term that¿s quietly unsettled me. The term ¿strategy¿ usually has connotations with higher, governance, executive management, and cut-throat corporates out to overcome the competition (Kim & Mauborgne, 2002). Magretta (2002) articulated this term superbly with the distinction that business models outline how aspects internal to the business interrelate with one another, whereas strategies outline how to overcome external competition. To craft a strategy, then, the governing body needs to utilize data, values, figures and instincts to make long-term strategy; any proposal limiting itself to only one or two years ahead is doomed to collapse from its short-sight. In other words, crafting a strategy is much like running an experiment: a theory is made about the current market climate, a hypothesis is made about where this market will head next, an experiment is run in terms of what decisions would best succeed in this climate, data is collected and analysed, the theory about the current climate is evaluated, and a new hypothesis is generated for next year. The difficulty for me here is two-fold. Firstly, how might one create a strategy by predicting the strategies of others? Secondly, how might I apply this to my role as CFO?
Regarding the first of these queries, one needs to be aware that the strategy of others is almost entirely unknowable and subject to huge, human, live variation. A competitor¿s strategy can change at any time or take a new turn to throw the market in a new direction – it¿s all up to the individuals behind their decisions. It¿s also worth noting here that, this week, all bike firms were set at exactly the same values, figures and balances – when you have seven blank canvases, it is unlikely that you¿ll get the same seven portraits. During this scramble, firms may often cling to anything to try and figure out their competitor¿s angle. For instance, one firm in our world is called ¿Peter¿s Bike Company¿. The difficulty in determining the angle of this firm lies in its name alone: is this company run by our lecturer or a clever team intending to unsettle their competition? More practically, what on earth would this ¿Peter¿ invest in? Unfortunately, these questions cannot be answered until about two, three or even more years after the first roll-over. The full effects of most decisions actualise far beyond the first roll-over, so any strategy that plans to be reactive year-to-year is doomed to play a perpetual game of catch-up – though this does not mean that a good strategy is a rigid strategy. A long-term plan with flexible direction may be key to success.
Regarding my second more personal concern, the CFO role both heavily influences and is heavily influenced by the strategies of its own company and those of other companies. With no background in accounting, economic or finance, this role has proven an unsettlingly personal challenge for me. The difficulties here lie with allocating funds, predicting our future revenues, and figuring out where our profits and losses are coming from. In this sense, Finance must have knowledge of the Development, Operations, Marketing, and HR expenditures even though, as mentioned above, the year-to-year outcome of a firm¿s decisions is based entirely on the strategies and successes of every firm in the market. While there is a requirement for variation, there is also an insatiable desire for accuracy which Finance can offer only so much of. In this sense, Finance does not factor into the why of strategy, but the how. Even with confidence intervals, there is a limit to how accurate Finance predictions can be. Often, Finance can only go off the performance of their other team members in terms of distributing finite funds to their team¿s projects. Before the final approval of any team member¿s decision by their CEO, then, may first need to take into account the comments of the CFO, establishing a balanced but necessary personal-pragmatic relationship with their team.
Looking ahead, a strategy cannot afford to be rigid – flexibility, like in virtually every aspect of business, is key. A clear direction is needed at the beginning, there is no doubt about that, but this direction must be broad as it is uncertain where other firms will be walking through the market. It would be unreasonable to establish an innovative area of business from the outset of a blank slate. Innovative success for Mike¿s Bikes may likely come from an untapped market, so knowledge of where other companies are headed may be key in determining where there is no competition. In this way, it sounds as though firms also need an awareness of their own processes and functions, their directions and motives. Thus, executive managers need to develop a sense of organizational-awareness as well as self-awareness to get the most out of their firm to, in turn, get the most out of their strategy (Kim & Mauborgne, 2002, 2004). A visualisation of the firm¿s internal dynamic may facilitate the decision-making process and promote team-work amidst their competitive climates.
An integrative approach is needed for a business model to understand how different areas of the business are going to work together to actualise their goals. Note that these within-organisation dynamics require a business model, not a business strategy. A model outlines the relations between the departments of a particular firm, whereas strategy would denote a more competitive within-organisation design which may prove ultimately detrimental to the firm¿s final outcome. Integrative approaches are key to foster the relationships within the team, promote the efficiency of the firm¿s management and enhance the actualisation of the organisation¿s overall strategy. By combining a flexible strategy, an integrative team, and a developed sense of organisational-awareness, an organisation¿s strategy can act very much like these learning journals in the sense that observations from previous years are made, the resulting data is analysed, predictions are made about the next year, action is made, and the process begins again.
To apply these for the weeks ahead, I will keep working on financial tools that will help my teammates see where our money is going, how our finances are allocated within the firm and where else our finances could be invested. From this, the rest of the team may get a better understanding of the Finance role and also pick up on the many holes and flaws in my understanding of the role. My aim is to make Finances a more inclusive aspect within the organisation so, as much as I would like to teach others about my role, I would also like to have a better understanding of the other roles in my team so that I might understand their views, perspectives, and the importance of their roles in the upcoming and ever-changing contexts of Mike¿s Bikes.
Finance, to me, is a facilitation role. I trust and respect the research and proposals of my teammates so I will endeavour to allocate our funds with thought and fairness. Incorporating this with our firm¿s overall strategy, I would like to keep discovering the various aspects of the Finance role and learn from the inputs of my teammates as they will certainly picked up on flaws that I have missed. By doing so, I hope to actualise the success of my teammates to support the success of our firm overall.
Kim, W. C. & Mauborgne, R. (2004). Blue Ocean Strategy. Harvard Business Review, 82(10), 75--84
Kim, W. C. & Mauborgne, R. (2002). Charting Your Company's Future. Harvard Business Review, 80(6), 76--83
Magretta, J. (2002). Why Business Models Matter. Harvard Business Review, 80(5), 86--9