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Relying on Sector experts is flawed

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Phil Bulman

Phil Bulman, Senior Consultant, Vendigital

Phil BulmanIn our current climate like never before, businesses cannot afford to stand still but must constantly adapt to the changing environment. Change however, involves risk, and the tendency is for business owners and investors to rely on leadership and experience from within the industry. The general perception is that a ‘safe pair of hands’ is needed to minimise risk, usually seeking expertise that is proven within the industry. The mantra is ‘sector is best’, based on the flawed belief that sector knowledge will lead to optimum performance.

A fresh mind
There is a however a strong case that fresh non-sector input, to drive change and create business growth, is much lower risk than is perceived. Expertise from outside the industry can be much more alert to external threats and opportunities.

Examples of this fresh approach and the success it brings litter corporate history, but before we look at this, let us examine some of the causes.

Spectacular failures
Whether it is the failure of high street businesses like HMV and Jessops, seemingly failing to adapt to new buying methods (downloading & streaming)or Nokia struggling to adapt to the smart phone phenomenon, new disruptive technologies have led to some of the biggest changes in how businesses operate.

Globalisation has also caused challenges for many businesses, with recent examples in Renault and Peugeot Citroen both reporting big losses, largely attributed to their reliance on a stagnant and highly competitive European market and falling behind in the critical new growth markets of China, Brazil and the US.

It is challenges like these and the ability to identify and adapt or even lead the inevitable change that is critical to a business’ success.

Tough decisions
Outside expertise has the advantage of not being wedded to the culture of the industry and ‘the way we do things’. They can review operations objectively, without being blinkered or emotionally attached to anything.
This enables them to take tough decisions that are often needed in business. For instance, Lou Gerstner was recruited to turn around IBM, after senior roles in very different companies, (McKinsey & Co, American Express and RJR Nabisco). Gerstner took the tough decision to kill the OS/2 operating system, which IBM had been developing for ten years.

Similarly, Finnish mobile device hardware manufacturer Nokia had become complacent because of its market dominance. It had a corporate culture that lavished funds on research, but squandered opportunities to bring the innovations it produced to market. It appointed Canadian Steve Elop, from Microsoft, a software company, as its first non-Finnish chief executive. Elop quickly stopped development of its aged Symbian operating system, as well as MeGo, a replacement. He had a new range of handsets in the market to compete with the iPhone, using Microsoft Windows operating system within a year. This was faster than either of the competing axed software platforms could have achieved.

Fresh perspective
There are many examples where non-sector leadership has led to a fresh perspective on the sector and development of new direction and opportunities.

Sergio Marchionne, the current CEO of Chrysler and FIAT, who is credited with both companies turnaround was a lawyer, working at Deloitte and 18 years running laboratory testing and inspection companies before being given the top job at FIAT.

His fresh approach removed bureaucracy and focussed the ailing FIAT business on developing markets and profitability. His global approach, led to alliances with Chery Motors in China, TATA motors in India and turned FIAT from 17 quarters of reported losses to sustained profit.

The Power of success
A common theme that links the high performing individuals is success. Concerned about the risk that is inherent in making big change, investors and owners have been looking to proven sector experts to lead the business forward. Rather than focussing on sector knowledge to reduce risk when considering changes in a business, an emphasis on successful people whose perspectives and insights have been proven in other sectors, should give confidence.

Outside expertise are well placed to introduce new ways of working that are required to deliver competitive advantage and seize opportunities for new ways of growing the business.

High performing businesses will increasingly have high performing resources at all levels in a business, making use of non-sector experience and external insights to make the big changes.

Phil Bulman, Senior Consultant, Vendigital
Phil is responsible for the leadership of major client engagements. With 10 years’ experience in diverse roles within operations, design and development, supply chain and procurement, Phil is well placed to advise and lead major supply chain transformations, new product development programmes and cost reduction activities.

Phil’s background in design and manufacture means that he is often included in product development and value engineering programmes, as well as new supplier assessment and implementation programmes. Phil heads up Vendigital’s activities in private equity, and has experience in client engagements across the UK, Europe, USA and Asia.
www.vendigital.com

 

 

Business

Effective financial planning will secure businesses a certain future

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Effective financial planning will secure businesses a certain future 1

By Simon Bittlestone, CEO of financial analytics company Metapraxis

2020 has been an unpredictable year, bringing further volatility to already uncertain markets and exacerbating difficulties that businesses were already facing. Many businesses are feeling the strain on their cashflow and are hastily trying to organise their finances effectively to ensure survival and the ability to deal with any future challenges. Yet, with more uncertainty still to come, it’s key that business leaders know how to deal effectively with the challenges that lie ahead in order to remain profitable.

Recognising the challenges

Accurate financial planning, and particularly the management of cashflow, is essential to futureproofing and planning. The logical place to start when defining a longer-term plan is by setting realistic targets that align with the overall business strategy. In order to ensure targets are achievable, which is critical, historical and market performance data should be used to build a model of the current business.

Building a model that allows the board to see the performance trends across products and services in the context of the market performance allows businesses to determine their starting point for the year ahead and set realistic expectations. It also gives a better understanding of the nuances of the business, including how changes in things such as supplier and customer payments affect cash flow and how products and services vary across different regions, giving the business an understanding of how to optimise their assets.

The next challenge involves putting a plan in place that delivers on the business objectives. This means that businesses need to reconcile the goals being set from the top and the plan of action being implemented from the bottom. However, a lack of collaboration often means that a business’ strategy has to go through several iterations before it matches management’s goals. Communication and clarity on desired outcomes are essential, especially in larger businesses that stretch across multiple departments and sometimes have a global reach.

In addition to communication challenges, it is also important that the planning process is not a drain on time and resources, which can often be the case when using the wrong tools. Excel, while a worthy tool, is not sophisticated enough for the type of analysis and information needed to inform complex decisions. Businesses must take advantage of the technology at their disposal, running ‘what if’ top-down scenarios to understand the impacts and outcomes of various factors.

Securing your future

The colossal impact of the Covid-19 crisis, alongside political and socio-economic factors, and the speed of today’s digitally enabled world, makes markets uncertain and difficult to predict. But CFOs don’t have to resign themselves to being unable to plan for them. By adapting an agile approach to financial planning, they can help to safeguard business performance.

It’s no longer sensible to run a one-off annual planning process; the ability to successfully achieve goals in today’s

Simon Bittlestone

Simon Bittlestone

landscape increasingly depends on the ability to identify future uncertainties, risks and changes, and react to them. Doing so means implementing a rolling budget and flexible plan.

Fortunately, financial analytics technology can make this a reality. It allows all the key drivers of business performance to be mapped out over time, so that the finance teams can see how each of these drivers were affected by internal or external past events. In turn, this allows the board to analyse how various future scenarios might pan out and the impact these may have on the business. Management can then use this information to make better strategic decisions.

Having this technology in place also consolidates data from across the business, making it easily accessible and improving communication between management and financial accounting ensuring all areas of the business are streamlined. Should there be any changes in leadership, trends and insights can be easily accessed, limiting the impact on performance. Keeping these models updated is vital to ensure the company can act on the most relevant information.

Taking it one step further

There are other practical steps management teams can follow to help safeguard the business. Optimisation strategies, for example, whereby businesses determine how best to split their capital across different strategies, projects, products or services across various regions, are a key area of focus especially right now.

Choosing to back the most profitable service lines in a time of financial uncertainty is clearly beneficial, however it is not always easy to get right. This comes back to businesses needing to utilise financial analytics technology to assess all factors and situations and determine the best options in the long-term for the business.

CFOs and leadership teams should always keep the cash flow at the heart of any decision. Having full transparency means they can increase the emphasis on products and services with more positive cash flows, making the business more profitable and able to deal with fluctuations.

The purpose of financial planning is to set out the business goals for the year ahead in order to work towards achieving the overall strategic objectives. This used to be a very insular process – there was no need for management to take anything other than its own internal factors into account – and planning according to the business’ own financial year was very much the ‘norm’.

Now, with the landscape more uncertain than ever before, the ability to adapt to fluctuations is hugely important when it comes to successful financial planning. Scenario modelling and financial analytics allow for rolling plans and CFOs to be more agile in their approach. This, along with more prudent base planning assumptions, will allow the board to prepare the business to weather most storms.

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Adoption of tech in private markets lags behind industry trends

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Adoption of tech in private markets lags behind industry trends 2
  • Nine out of ten financial institutions have accelerated their digitisation strategy as a result of Covid-19.
  • Yet just 26% of financial institutions say that technology currently plays a core role in delivering private markets services.
  • Firms say that private markets technology will have the greatest impact on operational efficiency, regulatory governance and client experience. 

Wealth managers must urgently increase their use of technology in offering private market investments or they risk being left behind by their competitors in less than five years.

The latest research report, ‘Digitising Private Markets’, from leading fintech firm Delio, shows that financial institutions’ adoption of digital tools across their operations has increased substantially as a result of Covid-19 this year. But many firms have been slow to accelerate their use of technology to deliver private markets services,  despite recognising the improvements it could make to back-office organisation and regulatory compliance, not to mention enhancing client services. Delaying adoption of a digital strategy could leave firms trailing behind competitors within five years, according to Delio CEO and co-founder Gareth Lewis.

Gareth Lewis said: “Any firm that is serious about providing a complete wealth management service to their clients, needs to deliver a holistic private markets solution. Technology will be fundamental to the delivery of these services and needs to be implemented across the board sooner rather than later. Firms that fail to act quickly face losing ground and potential new clients to more tech-savvy competitors.

“While I understand that client relationships are still vital in this area, companies can’t become complacent. We live in a more instantly-connected world and customers – especially new clients who are more likely to have been entrepreneurial as they generated their wealth – want more digital access to their finances than ever before. It’s time to take an omnichannel approach that combines the best elements of technology and personal advice; this will deliver a market-leading approach.”

Providing clients with access to private markets has been a challenge for many financial institutions, due to the difficulties in scaling a part of their business that is operationally complex to deliver, requires strict regulatory governance and has traditionally been driven by personal relationships between client and adviser. It is one of the reasons many institutions only started to develop a private markets solution in the last 12-18 months.

However, better use of technology can help firms to deal with each of these hurdles more efficiently, providing access to a market that has consistently outperformed publicly listed investments over the last decade. McKinsey’s most recent Private Markets Review highlighted that the value of private assets under management had grown by $4tn or 170% in the last ten years, compared to 100% growth in global public assets over the same period. 

The difficulties presented by the international lockdowns associated with Covid-19 has meant that 86% of firms report that they have accelerated their digital adoption this year, with 70% making quicker decisions on technology projects specifically.

Yet, a significant minority of organisations believe that digitisation will not necessarily play a prominent role as we begin to adapt to the ‘next normal’. More than a third of firms (35%) believe that they will still rely on traditional client engagement strategies in the short to medium term.

Having developed private markets solutions for more than 70 international institutions over the last five years, Delio firmly believes that technology can add significant value at both an organisational and client level.

Gareth Lewis added: “Client relationships will still be at the forefront of any wealth management proposition, there is no question about that. However, I also believe that technology can enhance how advisers build relationships with their clients. If I had an investment opportunity that I wanted to pitch to 50 clients, why wouldn’t I want to share that information digitally beforehand to gauge their appetite? Failing to accept that busy clients want to be able to access data at any time, no matter where they are, is a potentially damaging mistake that could cost slow-moving companies dearly.”

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Covid-19 disruption drives five new retail supply chain trends

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Covid-19 disruption drives five new retail supply chain trends 3

The business disruption caused by COVID-19 has resulted in four out of five (82%) retailers changing their approach to stock management and is driving five retail supply chain trends.

This is according to a new report from logistics company Advanced Supply Chain Group (ASCG), which shows how the pandemic has caused stock management issues for 92% of retailers. The impact of this is leading to an evolution of the long-practiced lean management process Just in Time (JIT) and 42% of retailers planning to grow sales by selling through more channels.

The report, Retail Supply Chains in the ‘New Normal’, is based on the findings from interviews with 200 senior retail professionals involved in buying, stock inventory management and supply chain management. It reveals five retail supply chain trends including:

1) Time for Change 

To address delays caused by COVID-19, retailers have adapted timings at the beginning and end of their supply chains. Of the retailers which have made changes to supply chain strategies, 41% have allowed longer leads times on stock ordered, while four in ten (40%) have extended delivery times provided to customers.

2) Localising Stock 

COVID-19 disruption led to two thirds (66%) of retailers receiving stock late, whilst a similar number (63%) experienced shortages in the availability of goods. This is seeing retailers prioritise investment in stock availability (57%), which includes building more localised levels of stock to minimise the risk of out of stock scenarios.

This shift in behaviour has the potential to completely change Just in Time (JIT). Only a quarter (25%) of retailers believe JIT has some form of feasibility while the pandemic remains ongoing.

Claire Webb, managing director at ASCG, has more than 13 years’ experience working in retail leadership roles. She comments: “Just in Time will have to change because it’s less able to cope with increasing unpredictability – it quickly becomes ‘just out of time’. Supply chains will evolve as retailers aim to better mobilise stock, keeping it more agile to sweat its value across multiple routes to market.”

3) Real Time Visibility

The research shows retailers rank balancing stock flow versus stock piling as the biggest supply chain challenge following the pandemic. They want to avoid not being able to satisfy customer demand because of unavailable stock, but equally don’t want to tie-up too much capital in stock at risk of depreciation.

To address this challenge, 40% of retailers are investing in improving the accuracy of inventory management, whilst a third (33%) pinpointed smart, connected technology that improves the accuracy and visibility of stock as the most effective method of strengthening supply chain resilience. Changing stock inventory management to make stock movement and levels more visible was also a high-ranking priority for 37% of retailers.

4) Stock Optimisation 

The ongoing economic uncertainty and unpredictable customer demand caused by COVID-19 are seeing retailers hone-in on the performance of the goods they’re selling. 41% of retailers are investing in auditing their stock to improve profitability. These pandemic-driven stock reviews have also resulted in a third (33%) of retailers diversifying the stock they sell, with the same amount also changing strategies to better focus on stocking and selling their highest margin goods.

5) Diligence Against Disruption 

In response to the impact of COVID-19, a third (33%) of retailers are developing contingencies to protect against supply chain disruption. This involves tactics such as increasing the number of suppliers they source goods from, working with a larger number of logistics providers to spread risk and also increasing overall stock levels.

Claire Webb concludes: “Each of the trends emerging from the impacts of COVID-19 share a common theme of tackling margin dilution. Retailers and logistics partners have spent years optimising supply chains to remove unnecessary costs that cannibalise margins. This is now being turbo-charged as retailers aim to extract maximum value from each hard-fought sale and to build loyalty in increasingly uncertain and price-sensitive markets.

“Smart, connected technologies and bespoke supply chain software systems will be critical for retailers adapting to COVID-19. This can prove the difference in effectively managing stock movement and levels to avoid availability issues and costly stock depreciation and obsolescence.”

Click here to read more about the five trends and download the full report ‘Retail Supply Chains in the ‘New Normal’; Evolving from Disruption to Delivering Excellence’.

Full link to the report; https://www.advancedsupplychain.com/latest/white-paper-retail-supply-chains-in-the-new-normal/

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