Partnering for performance. Part 4: the CFO and the chief marketing officer

Transcription

1 Partnering for performance Part 4: the CFO and the chief marketing officer

2 The CFO s role The CFO s role has undergone a transformation. We believe that the six segments on the right represent the breadth of the CFO s remit today. The leading CFOs we work with typically have some involvement in each of these segments either directly or through their team. While the weighting of that involvement will depend on the maturity and ambition of the individual, on the sector and scale of the finance function, and on economic conditions, each segment is critical to effective leadership. We are grateful to all the participants in this study. In particular, we would like to thank the following finance and marketing leaders who readily shared their insights in a series of interviews: Mohit Beotra Chief Brand Officer, Airtel Kurt Binder CFO, VIZIO Charlie Bracken Executive Vice President and Co-Chief Financial Officer, Liberty Global Teresa Finley Senior Vice President of Global Marketing, United Parcel Service Reeza Isaacs Finance Director, Woolworths Holdings Limited, South Africa Benjamin Karsch Executive Vice President, Chief Marketing Officer of Revlon Consumer Kurt Kuehn CFO (retired), United Parcel Service Joost Quist CFO, SHV Energy China Developing business strategy D E V E L O P M E N T marketplace Developing and defining the overall strategy for your organization Representing the organization s progress on strategic goals to external stakeholders Communicating to the external Funding, enabling and executing strategy set by the CEO Funding organizational strategy E N A B The CFO s role L Ensuring business decisions are grounded in sound financial criteria Leading key initiatives in finance that support overall strategic goals E M Trusting the numbers E N Providing insight and analysis to support the CEO and other senior managers Getting your house in order T E X E C U T Providing insight I O N

3 P a r t n e r i n g f o r p e r f o r m a n c e T h e Partnering for performance s e ri e s e x p l ore s w a ys i n w h i c h CF O s c a n g row, p rote c t a nd tra ns f orm th e i r org a ni z a ti on b y p a rtne ri ng w i th th e l e a d e rs of d i f f e re nt f unc ti ons. I n th i s re p ort O a O : a w i a m i a d i g i l w d F O O l a h i p s c e s s f a c F k e a c v i e s f O O c l a b S e s p e d e m p h i c s O e p l i c a i i s s e e s c CF nd CM nni ng te n ta orl 2 our CF - CM re ti ons uc tors 8 our y ti ti or CF - CM ol ora ti on urv y re ond nt og ra 31 th r ub ti ons n th ri 33 Conta ts 34 I n th i s th e f ourth p a rt of th e s e ri e s w e e x p l ore th e re l a ti ons h i p b e tw e e n th e CF O a nd th e c h i e f mar eting officer C O n particular, e focus on th e c ontri b uti on th a t CF O s a re m a k i ng to f our v i ta l m a rk e ti ng - re l a te d a c ti v i ti e s : Cus tom e r s e g m e nta ti on a nd i ns i g h t M a rk e ti ng re turn on i nv e s tm e nt O p ti m i z i ng th e p rod uc t p ortf ol i o D i g i ta l g ov e rna nc e Our findings are based on a global survey of 6 52 CF O s, c ond uc te d b y L ong i tud e R e s e a rc h on b e h a l f of E Y, a nd a s e ri e s of i n- d e p th i nte rv i e w s w i th CF O s, CM O s a nd E Y p rof e s s i ona l s. or more insights for C Os and future finance l e a d e rs, v i s i t e y. c om / c f o. 1

4 CF O a nd CM O : a w i nni ng te a m i n a d i g i ta l w orl d ey findings about the C O C O relationship the CMO has increased. fi cultural differences. F our CF O - CM O re l a ti ons h i p s uc c e s s f a c tors :

5 fi fi fi Success in a digital world relies on the CFO and the CMO dev eloping a S e t t i n g t h e f o u n d a t i o n s : t h e e v o l v i n g r o l e C M O a n d C F O More fi DNA of the CFO 3 fi fi 3 Competition, coexistence or symbiosis? The DNA of C-suite sales and marketing leaders, 3. The DNA of the CFO: a study of what makes a chief financial officer, The DNA of C-suite sales and marketing leaders, 3

6 W % % Col l a b ora ti on i s g row i ng, b ut not q ui c k l y e noug h C h a r t O1 v : e r th e p a s t th re e ye a rs, w h a t c h a ng e h a s th e re b e e n to th e e x te nt you c ol l a b ora te w i th th e CM O? C h a r t W2 h : a t a re th e m a i n re a s ons you a re c ol l a b ora ti ng m ore c l os e l y w i th th e CM O? ( P l e a s e s e l e c t up to th re e ) Changes in marketing strategy New products and serv ices To a much greater extent 14 Change/ plans for change in the operating model or organizational structure of the business 28 To a slightly greater extent 40 Need for a better understanding of the return from marketing activ ities 28 No change 34 Need for better understanding of performance of product/ serv ice portfolio 26 To a slightly lesser extent 9 Shift to digital within the business 25 To a much lesser extent 3 Need for a more rigorous understanding of customer segments and driv ers of customer behav ior Change/ plans for change in geographical footprint of the business V olatile customer demand L aunch/ relaunch of brand hile the CFO and CMO hav e not traditionally fi fi fi

7 fi fi fi Airtel: global telco s investment agenda unites finance a n d m a r k e t i n g 4 fi fi fi 4. Financial Times, 5

8 % 6 A c l o s e r c o n n e c t i o n t o t h e C M B a rri e rs th a t th re a te n th e p e rf orm O, b u t n o t c l o s e e n o u g h CF O - CM O p a rtne rs h i p a nc e of th e In the last three years: T o p t w o driv ers of collaboration: 1 Changes in marketing strategy D espite the strong rationale for a closer CFO - CMO union, our surv ey shows fi fi C h a r t W3 h : a t d o you c ons i d e r to b e th e m a i n b a rri e rs p re v e nti ng a c l os e r re l a ti ons h i p w i th th e CM O? ( S e l e c t up to th re e ) 54% report greater collaboration with the CMO New products and serv ices Three barriers to a more effectiv e collaboration CF O s s a y 1 2 L ack of common tools and processes fi the marketing agenda fi The need for CFO s to maintain obj ectiv ity Absence of clear KPIs fi and the marketing agenda fi to the marketing agenda fi I do not perceiv e any barriers 10 Cultural differences

9 % 7 fi fi fi C h a r t I4 n : w h i c h of th e f ol l ow i ng a re a s d o you c ons i d e r your c ontri b uti on to a rk e ti ng to b e m os t v a l ua b l e? ( S e l e c t up to th re e ) fi Setting budgets Measuring performance fi fi fi Financing Ensuring v alue realization Building the business case for new initiativ es D etermining the lev el of ambition and risk appetite for new initiativ es Resourcing and human capital 21 Setting the agenda for change 19 Change management

10 F our CF O - CM O re l a ti ons h i p s uc c e s s f a c tors hat can finance and mar eting leaders do to develop a m ore e f f e c ti v e a nd c ol l a b ora ti v e re l a ti ons h i p? W e i d e nti f y f our re l a ti ons h i p s uc c e s s f a c tors. 1. A g re e on th e m e tri c s th a t m a tte r f or e nte rp ri s e v a l ue fi fi fi V i e w i n g m a r k e t i n g t h r o u g h t w o m e a s u r e m e n fi 8

11 Four CFO - CMO relationship success factors fi fi 2. B ri d g e th e c ul tura l d i v i d e b e tw e e n th e tw o f unc ti ons fi C o n n e c t f o u r f o r a f r u i t f u l C F O - C M P e r f C u l t u r e Agree on the performance metrics that driv e and measure success Connection Bridge the cultural div ide Connection O c o risk tolerance. fi S t r a t e g y Connection corporate priorities and changes in strategic direction Connection A n a l y t i c s analytics transformation business strategy fi fi fi K u r t K u, e CFO h n at UPS 9

12 Four CFO - CMO relationship success factors 3. Col l a b ora te on m a rk e ti ng s a na l yti c s tra ns f orm a ti on fi fi CFO s play a leading gov ernance role in analytics, ensuring that the structures 4. T e a m on th e m a rk e ti ng p l a nni ng p roc e s s fi fi fi fi fi 10

13 I m p rov i ng c us tom e r s e g m e nta ti on a nd i ns i g h t ey findings about the C O s role in improving customer s e g m e nta ti on a nd i ns i g h t: and insight a priority. fi this activ ity. fi fi F c e s e g m e a i i g h p e s f e O a O : our us tom r nta ti on nd ns t ri ori ti or th CF nd CM

14 7 % fi fi fi fi fi to opportunity. ey findings about the C O role in customer s e g m e nta ti on a nd i ns i g h t fi C h a r t 5 O : v e r th e ne x t th re e ye a rs, h ow m uc h of a p ri ori ty w i l l m p rov i ng c us tom e r s e g m e nta ti on a nd i ns i g h t b e f or your org a ni z a ti on? V ery high priority High priority Medium priority L ow priority V ery low priority fi You c a n h a v e th e b e s t d a ta a nd i ns i g h ts i n th e w orl d a nd th e b e s t te c h nol og y a nd tool s, b ut w h a t you ne e d i s f or s om e one to d o s om e th i ng d i f f e re ntl y a s a re s ul t of th os e i ns i g h ts. S o i t s a b out b e h a v i ora l a nd p roc e s s c h a ng e a s w e l l a s te c h nol og y. C h r i s M a, z lobal z e i Chief nalytics Officer, E 12

15 6 % fi fi fi fi fi fi C h a r t H6 ow : m uc h of a c ontri b uti on d o you m a k e to i m p rov i ng c us tom e r e g m e nta ti on a nd i ns i g h t? fi fi Av erage contribution Small contribution No contribution at all fi F our c us tom e r s e g m e nta ti on a nd i ns i g h t p ri ori ti e s f or th e CF O a nd th e CM O 1. L e a d a rob us t ri s k m a na g e m e nt a p p roa c h to c us tom e r d a ta fi C F O s a n d C M O s n e e d t o w o r k t o g e t h e r t o m a k e s u r e h a v e t h e r i g h t d a t a p r i v a c y m e a s u r e s i n p l a c e. T h e t h e m s e l v e s t h e f o l l o w i n g q u e s t i o n s : fi 3. How do our processes and controls stand in relation to international 4. fi Financial Times 13

16 2. I nv e s t i n th e s k i l l s ne e d e d to turn c us tom e r d a ta i nto i ns i g h t us t re y und rs ta nd our nd us tom rs n ord r to ui th ri t rod uc ts nd ol uti ons th t fi re th r ne. or, n th t nni ons um onte nt ore re ue ntl y fi th roug ob, th ng th th t th y tc row ng ye r ov r ye r t us t ros ore tf orm th n oth r nts of th op ul ti on. y ons um ore tre ng onte nt on th r 3. ta ov rna nc ri nc or us tom ow n ul, nd th y re ore ng ros na yti ty ul ti re ns, of te n ul ta ne ous y. o rom th t r ta nd oi nt, t orta nt or not onl y th rod uc t te to und rs ta nd nd tor th or nto th r roa, ut t o ts nd th finance organization in ho e bring these products to rk t nd th to th ons um r. fi K u r t B i n, d CF e r, 14

17 M od e rn a na l yti c s m e a ns th a t w e k now m ore tod a y, b ut th e re s s ti l l a g a p. Y ou ne e d l e f t- b ra i n a nd right brain people, suit and tie and ip op people, to c ol l a b ora te. A c c e p ti ng ri s k a nd unc e rta i nty i s part of the innovation evolution that the finance f unc ti on h a s to und e rg o too. S o w e ne e d th os e s k i l l s a nd p e rs p e c ti v e s th a t m a rk e ti ng b ri ng s a s ell as analytics and ualification K u r t K u, e hcf n O, U P S are in place to exploit it. This increases the likelihood of turning data into help ensure central analytics serv ices are tailored to the needs of different 4. E ns ure your c us tom e r i ns i g h t a p p roa c h i s d ri v e n b y b us i ne s s s tra te g y C u s t o m e r a n a l y t i c s : m a r r y i n g d e c e n t r a l i z a c r o s s - o r g a n i z a t i o n a l c o l l a b o r a t i o n fi 15

18 M e a s uri ng R O I f rom m a rk e ti ng a c ti v i ti e s A s org a ni z a ti ons re s p ond to c h a ng i ng c us tom e r d e m a nd s a nd c h a nne l p rol i f e ra ti on i n a d i g i ta l w orl d, m a rk e ti ng s p e nd i s g row i ng. T h i s p uts a n i nc re a s i ng s p otl i g h t on CM O s a nd CF O s to j us ti f y th i s e x p e nd i ture th roug h e f f e c ti v e R O I m e a s ure m e nt. B ut, w h i l e a d v a nc e s i n d a ta a na l yti c s h a v e made this ambition possible, mar eting and finance too often shy a ay from c ol l a b ora ti ng to d e v e l op a n R O I a p p roa c h th a t s up p orts th e b us i ne s s s tra te g y. ey findings about the C O s role in measuring RO from m a rk e ti ng a c ti v i ti e s : Twenty percent class it as a v ery high priority. fi 4 F our m a rk e ti ng R O I p ri ori ti e s f or th e CF O : fi 4 16

19 % 7 Accurate fi Howev er, the rev olution that was so anticipated has not fully occurred. fi fi fi ey findings about the C O s role in measuring m a rk e ti ng R O I fi high priority. O v e e x e a h m h a p w i l l m e a s m a O I b e f a a C h a r t 7 : r th ne t th re ye rs, ow uc of ri ori ty uri ng r or your org ni z ti on? V ery high priority High priority Medium priority L ow priority V ery low priority fi fi to this activ ity

20 fi fi fi to a closer relationship. fi fi on this activ ity. I w h i c h e f l i a a s d i e d m a k e a b i g g e b c h a s h s a v e g e i a l e b e m e a i w a s e d h i g h l C h a r t n 8 : of th ol ow ng re o you th nk you ne to ontri uti on? ( rt ow ra ra nk ng ow r num r ns t ra nk ore y) Measuring return on inv estment from marketing activ ities Improv ing customer insight/ segmentation O ptimizing the product portfolio D igital gov ernance Rank ( lower is better) F our m a rk e ti ng R O I p ri ori ti e s f or th e CF O 1. K e e p a k e e n e ye on th e f ul l p i c ture, a nd th e d e ta i l s 2. M e e t i n th e m i d d l e on v a l ue v e rs us v ol um e ov erly focused on the extent to which their initiativ es driv e sales and rev enues, fi top- line rev enue. 18

21 fi fi ring mar eting and finance together to develop l e a d i ng p ra c ti c e s in order to achiev e its goals. S H V E n e r g y : m o b i l e d i g i t a l s o l u t i o n s d e m o n s t r a t e c u s t o m e r v a l u e fi fi fi fi fi fi the local sales force at the end of the year. Howev er, he does counsel fi new product innov ations. W e train our people on how to pull those lev ers; fi Q u e s t i o n s f o r C F O s i n m e a s u r i n g m a r k e t i n g R O I:

22 4. A c c e p t th a t not a l l re turns a re s o e a s y to m e a s ure fi fi experts, Isaacs says. fi fi fi fi fi fi 20

23 O p ti m i z i ng th e p rod uc t p ortf ol i o ey findings about the C O s role in optimizing the p rod uc t p ortf ol i o: fi F our p rod uc t p ortf ol i o op ti m i z a ti on p ri ori ti e s f or th e CF O : fi 21

24 % their strategic planning. This activ ity is core to sav ing costs, and identifying fi centric approach often leads to a proliferation of products as CMO s seek to declining ones. A p a r t i c u l a r c h a l l e n g e f o r t h e i n s u r a n c e s e to technology. But in our research, it is the insurance industry that a higher percentage of insurance CFO s say that product portfolio fi insurance products has further increased the pressure to dev elop new product and serv ice offshoots. C h a r t P 9 e rc : e nta g e of CF O s p e r s e c tor th a t p ut a v e ry h i g h p ri ori ty on op ti m i z i ng th e p rod uc t p ortf ol i o Insurance 34 health and encourage new growth. fi Technology Consumer products Banking and capital markets L ife sciences O il and gas Power and utilities

25 % % ey findings about the C O role in optimizing the p rod uc t p ortf ol i o O v e e x e a h m h a p w i l l m i i p i b e f a a C h a r t 1 0 : r th ne t th re ye rs, ow uc of ri ori ty op ti z ng th rod uc t ortf ol o or your org ni z ti on? V ery high priority High priority Medium priority L ow priority V ery low priority fi M a k i n g c r e a t i v i t y p a r t o f p r o d u c t p o r t f o l i o fi fi within the portfolio. fi fi fi C h a r t 1 P 1 e rc : e nta g e of CF O s w h os e c ol l a b ora ti on w i th th e CM th e l a s t th re e ye a rs O h a s i nc re a s e d CFO s who make product portfolio optimization a v ery high priority 81 O thers

26 F our p rod uc t p ortf ol i o op ti m i z a ti on p ri ori ti e s f or th e CF O 1. E s ta b l i s h a n ob j e c ti v e und e rs ta nd i ng of p rod uc t v a l ue fi fi fi fi product or serv ice. 2. T urn d a ta i nto b us i ne s s i nte l l i g e nc e of an issue than what you do with the data once you hav e it, he explains. fi fi fi 24

27 lend the financial perspective ith the customer perspective Q u e s t i o n s f o r C F O s i n o p t i m i z i n g p r o d u c t p o r t f o l i o s : fi How freq uently do we undertake portfolio rev iews to assess fi 3. Com m uni c a te th e s tra te g i c ob j e c ti v e s of th e p ortf ol i o op ti m i z a ti on and is a tactical, rather than strategic, initiativ e. Instead, the CFO should fi fi 25

28 D i g i ta l g ov e rna nc e ey findings about the C O s role in digital governance or v ery high priority on digital gov ernance. fi F our d i g i ta l g ov e rna nc e p ri ori ti e s f or th e CF O :

29 % % D igital gov ernance ey findings about th e CF O s rol e i n d i g i ta l g ov e rna nc e C h a r t 1 O 2 v e: r th e ne x t th re e ye a rs, h ow m e f or your org a ni z a ti on? uc h of a p ri ori ty w i l l d i g i ta l g ov e rn fi V ery high priority High priority fi Medium priority L ow priority V ery low priority C h a r t 1 P 3 e rc : e nta g e of c om p a ni e s w h o h a v e s e e n a n E B I T D A i nc re a s e of ov 10% i n th e p a s t th re e ye a rs Those who gav e digital gov ernance a v ery high priority O thers

30 D igital gov ernance fi spending is often operating expenditure rather than Capex, and therefore fi fi of CFO s say they are 2 5 % collaborating more closely with CMO s because of the shift to digital within the business. The second reason for CFO s to focus on effectiv e digital gov ernance lies in fi fi that protect sensitiv e data. F our d i g i ta l g ov e rna nc e p ri ori ti e s f or th e CF O 1. B ui l d a h ol i s ti c p i c ture of th e org a ni z a ti on s d i g i ta l p ortf ol i o L ess than half of CFO s feel they 4 7 % fi fi 28

31 D igital gov ernance 2. E ns ure d i g i ta l ri s k m a na g e m e nt i s p a rt of th e g ov e rna nc e f ra m e w ork fi fi fi fi fi ales and finance must develop mutual a areness, s o th a t s a l e s und e rs ta nd s w h y th e c om p a ny d oe s n t ant to ta e certain ris s hile finance understands th a t c e rta i n ri s k - ta k i ng i s p a rt of d oi ng b us i ne s s. J o o s t Q u, icf s to, S H V E ne rg y Ch i na Q u e s t i o n s f o r C F O s c o n c e r n i n g r i s k m a n a g e m e n t o f a c t i v i t y : fi fi 3. D e s i g n a g ov e rna nc e f ra m e w ork th a t p rov i d e s f re e d om w i th i n a f ra m e w ork 29

32 D igital gov ernance D i g i t a l f r e e d o m : u s i n g c o r p o r a t e v e n t u r i n g t o f o s t e r i n n o v a t i o n a t s p e e d fi winners of the whole trend W ork m ore c l os e l y tog e th e r to re a l i z e th e org a ni z a ti on s d i g i ta l p ote nti a l fi fi W h i l e th e CF O - CM O p a rtne rs h i p h a s not tra d i ti ona l l y b e e n th e c l os e s t one on th e C- s ui te, i n a n i nc re a s i ng l y d i g i ta l b us i ne s s c onte x t, i t w i l l b e p i v ota l to org a ni z a ti ona l s us ta i na b i l i ty a nd s uc c e s s. B y w ork i ng tog e th e r to ta c k l e c us tom e r s e g m e nta ti on a nd i ns i g h t, m a rk e Rti ng O I, p rod uc t p ortf ol i o op ti m i z a ti on a nd d i g i ta l g ov e rna nc e, CF O s CM a nd O s w i l l h e l p th e i r org a ni z a ti on a d a p t to a ne w re a l i ty, a nd b ui l d th e f ound a ti ons f or a s trong a nd p rod uc ti v e p a rtne rs h i p f or th e f uture

33 Survey respondent demographics Industry Consumer products 67 Banking and capital markets Technology Life sciences Insurance Oil and gas Power and utilities Diversified industrial products (including aerospace and defense and chemicals) Mining and metals Automotive and transportation Cleantech (including energy, water, transportation, agriculture and manufacturing) Asset management Real estate Telecommunications Media and entertainment Private equity Construction Import/export/wholesaling Professional services Other Transportation Health care Partnering for performance Part 4: the CFO and the chief marketing officer 31

34 Survey respondent demographics Country US China Finance roles Brazil 42 Group CFO or finance director 329 United Kingdom 40 Divisional CFO or finance director 159 Mexico 31 Regional CFO or finance director 164 India 30 Canada 30 Australia Germany Annual revenue in US$ Singapore Russia France Hong Kong, China Argentina South Africa Indonesia Philippines Greater than $20b Between $10b and $20b Between $5b and $10b Between $1b and $5b Between $500m and $1b Between $250m and $500m Between $100m and $250m Colombia 11 United Arab Emirates 10 Turkey 10 Spain 10 South Korea 10 Saudi Arabia 10 Italy 10 Nigeria Sweden Netherlands Norway Belgium Portugal Partnering for performance Part 4: the CFO and the chief marketing officer 32

35 O th e r p ub l i c a ti ons i n th i s s e ri e s Prev ious studies in the Partnering for performance series are: E Y i s th e e x c l us i v e s p ons or of th e CN B C G l ob a l CF O Counc i l. P a r t n e r i n g f o r p e r f o r m a n cp ea r t n e r i n g f o r p e r f o r m a n c e Com i ng s oon P a r t n e r i n g f o r p e r f o r m Part 3 : the CFO and the CIO a n cp ea r t n e r i n g f o r p e r f o r m a n c e e y. c o m /. c f o 33

36 W Conta c ts C F O a g e n d a R ob e rt B ra nd D i g i t a l L a ure nc e B uc h a na n F i n a n c e p e r f i m p r o v e m e n t a d v i s o r y T ony K l i m a s C u s t o m e r a d v i s o r y ood y D ri g g s H a nno L ore nz l Transportation Center D a t a a n a l y t i c s Ch ri s M a z z e i fi R ob H ol s ton 34

37 E Y Assurance Tax Transactions Adv isory A b out E Y All Rights Reserv ed. BMC Agency specific adv ice. e y. c om / c f o