In a revealing interview, Nasdaq OMX Group Inc. CFO Lee Shavel said that the “biggest obstacle” to company success and profit is the complexity of the United States stock-market system. Aside from the system itself, it’s the connection between the largest players as well as technological considerations that have made such as complex marketplace. Whether it’s technology or the competition between participants, Shavel says there are many uncertainties in modern markets.
Just as Nasdaq CFO Lee Shavel sees stock market complexity as a major obstacle to company success, many CFOs are grappling with the complexities in their own industries. For many, taming product complexity by creating better supply chain management is the key to creating strong savings potential. The reality is that regardless of industry, technology has forever changed our workflow processes and the complexity of the world around us. If complexity is the biggest challenge to business success, then CFOs must work harder to understand the market around them and wittingly measure speed, efficiency, and flexibility.
How CFOs Can Reduce Complexity to Fuel Growth
As CFOs continue taking on more prominent roles in company strategy, they have the opportunity to lay the groundwork for a complexity reduction initiative, which not only creates growth, but also creates a more sustainable business. So how can CFOs approach this complexity reduction initiative?
- Establish a reason why. In any business model, the reality is that approximately 20 percent of the products are going to drive up to 80 percent of the profit. So instead of simply trying to boost the bottom line, CFOs should focus on improving the margins among top line products and explain the reason why. As in any company-wide initiative, communication is key to success.
- Create financial expectations. The more clearly you can express your financial expectations, the more likely that the team in your company will fulfill them. While hard savings like net profit are easy to pursue, don’t be afraid to champion “soft savings” such as a strengthened brand or greater portfolio transparency as well.
- Generate discussion. By initiating the building of a simplified project, CFOs can generate discussion to reduce costs and the impact on margin. Once the ball is rolling, the new state of the company will embrace complexity reduction in every workflow process.