5 reasons why CFOs need to watch disruptive competition

Posted by  Noelia Gomez Rivero

35% of CFOs believe they will get involved in M&As in the next 12 months to ensure their company will survive disruptive competition (The new CFO growth agenda, Accenture, 2017), 90% believe it is critical to harness the power of digital technology (The changing role of the CFO, EY, 2017) and more than 50% believe they don’t have the right skillset within their teams to respond to strategic priorities (CFO DNA, EY 2016). What is going on?

We have all heard the term ‘disruptive innovation’. We have all witnessed the changes in the travel industry due to low-cost entrants. We have all seen how online shopping has changed our habits and opened up a completely new world of products we couldn’t have access to before. We have all enjoyed new ways to find the best deal from car insurers via comparison websites. And as consumers we love it!

Why then should CFOs be concerned about disruptive competition? 
Disruptive competition is changing the competitive landscape not only in travel, retail and retail insurance but in almost every single industry you can think of: transport (Uber), manufacturing (3D printing), banking (P2P lending), pharma (nanotechnology)…  

Most of the changes are coming from the implementation of disruptive technology resulting on overall lower costs for customer, higher pricing visibility, better service for each segment, lower entry barriers and quicker changes to the marketplace.

In order to keep up, companies have been forced to adapt quickly developing new products, readjusting operations, redefining the overall strategy and the IT strategy. Some industries have been doing this for years already while others have only just been hit by the reality of disruptive competition.

The role of CFO has become all-encompassing covering the market,  customer requirements and the competitive environment. Expectations on today’s CFO are huge as organisations battle the ever growing speed of change and expect them to lead or at least play a major role in responding to disruptive competition. A CFO’s contribution to changing strategy is therefore critical for a company: 

  • They need to not only assess the options financially but, as part of the board, come up with creative strategies.
  • They should have the in-depth market and competitive knowledge  required to to model accurately potential scenarios and provide the best advice possible to the board.
  • CFOs’ are critical in M&A decision making and the best acquisition can only be determined with best in class market knowledge.
  • Data analytics only goes so far in providing the root causes for unexpected changes in the financial figures. Without the right market insights, it is difficult to identify early in the process the impact of a new disruptive competitor and time is critical for long term survival.
  • Disruptive competitors’ running costs may help setting the bar for the rest of the marketplace, helping CFOs focus on specific and realistic cost and revenue goals.

Only CFOs that manage to adjust to this new landscape, where their duties go beyond financial stewardship, will be able to support their organisations to respond quickly to disruptive competition. They will harness the power of digital technology to their advantage and their company’s survival, and will be in a position to evaluate the new skill requirements that disruptive competition is creating, not only within operations but also within the finance department.

If you want to learn more about how disruptive innovation is shaping the role of the CFO, please view our on-demand webinar.

Noelia Gomez Rivero

Head of Office of the CFO Centre of Excellence