To avoid contributing to strategic stagnation, finance professionals must be careful not to become overly fixated on numbers and demand guarantees of returns before committing resources to new initiatives.
CFOs and finance teams aspiring to serve as strategic advisors and business partners should embrace the wisdom of “everything in moderation.” While data and analysis are essential, effective strategic work requires a mindset that balances precision with flexibility in decision-making.
Roger Martin, a renowned strategist and author of Playing To Win, recently offered insights on how CFOs can become more strategic. He emphasizes that while strong quantitative and analytical skills are vital, they can actually impede strategic progress if not managed carefully.
Being a strategic advisor isn’t about insisting on guaranteed outcomes. When planning for the future, finance professionals must resist the urge to demand proof of return before investing in new ideas. Insisting on certainty can stifle innovation and prevent the allocation of resources to opportunities that could be game-changers.
If the demand for proof dominates, it creates an environment where only existing projects with proven track records receive funding. The problem with that, as Martin points out, is that although historical data provides some guidance, it is often a poor predictor of future events and outcomes.
Consider these historical examples where reliance on the status quo led to disastrous results.
The first cautionary tale is Nokia. The company went from dominating the mobile phone market with nearly 50% market share in 2007 to holding a single-digit share by 2013—a decline from which it has never recovered. Today, Nokia’s market share hovers around just one percent.
The primary cause of this collapse was a flawed business strategy and internal resistance to change. Many within Nokia clung to outdated models of success, resisting new technologies and business approaches. This reluctance to innovate created a toxic culture of indecision, leading to missed opportunities and leaving the company vulnerable to emerging competitors like Google, Apple, and Samsung.
Kodak offers another striking example. At its peak in 1996, Kodak controlled over two-thirds of the global photography market, with revenues nearing $16 billion.
However, Kodak’s failure to adapt to the digital camera revolution allowed competitors like Sony, Canon, and Nikon to overtake it. By 2012, Kodak was forced to file for bankruptcy protection under Chapter 11.
The tragedy in Kodak’s story is that the company actually invented the world’s first digital camera in 1975 but chose not to commercialize the technology, fearing it would cannibalize their existing products.
Nokia and Kodak serve as cautionary tales that even industry giants must challenge their own success models and continually invest in the future to stay competitive. This doesn’t mean disregarding past data and insights; rather, it’s about recognizing that these provide only partial guidance. Relying solely on the past can stifle strategy, innovation, and growth, ultimately weakening the organization and leaving it vulnerable to disruption.
At Profitbase, our philosophy has always been that true mastery of financial planning and business management lies in harmonizing the past, present, and future. When a company’s leadership achieves this balance, its chances of long-term success increase significantly.
However, many companies struggle to maintain this balance, often due to weaknesses in forward-looking and strategic efforts.
The challenge with future-oriented work is that the future is an unknown destination—one that must be reached without clear maps, predefined paths, or guarantees. To navigate this, companies must accept that new challenges and opportunities will arise that aren’t reflected in the past. Therefore, an open mind is essential, along with the ability to anticipate and prepare for various scenarios, allowing for course corrections when necessary.
Finance can and should play a crucial role in strategy. For the finance department to contribute effectively, it must be integrated into a broader strategic vision, recognizing that finance is just one of several perspectives that must be considered.
While the need for hard numbers and facts is important, it must be balanced with a willingness to take calculated risks when working strategically and looking forward. This prevents financial analysis from becoming a barrier to seizing opportunities that could drive future success.
To realize their potential as strategic partners, CFOs and finance teams must balance quantitative analysis with creativity and flexibility, remaining open to what the future may bring. This involves collaboration, thinking outside the box, and a willingness to take risks.
In essence, it’s about finding the right balance between caution and innovation. Finance professionals who achieve this can unlock significant value, where their financial expertise synergizes with other critical business functions like consumer behavior, production, and distribution.
Together, this approach elevates business management to a team effort, enhancing the quality of decision-making and paving the way for a successful future.
Read Roger Martin’s full article: How to Become a Strategic Chief Financial Officer
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