Navigating the Financial Landscape: Breaking Through Business Models for a New Era

In today's rapidly evolving business landscape, finance professionals and CFOs find themselves at the forefront of the strategic decisions that shape the future of their organizations. The need to move beyond Business as Usual (BAU) and exploring new models of doing business has become imperative. In this article, the author, Paula Kensington (connect here) will delve into key questions that CFOs and finance professionals must address to lead their organizations into a new era of sustainable and impactful business models.

1. Transitioning from BAU to New Business Models:

As financial stewards, it's essential to question the status quo and explore innovative ways of conducting business. Moving from BAU requires a strategic mindset, openness to change, and a commitment to embracing emerging trends. This shift often involves adopting technologies, redefining processes, and fostering a culture of continuous improvement. When was the last time that we really took a ‘start again’ approach to our fundamental business models.

2. Understanding Natural Systems:

Successful businesses recognize their interdependence with natural systems. CFO’s must identify the environmental impact of their operations and incorporate sustainable practices into their business models. This not only helps mitigate risks associated with climate change but also positions the company as a responsible corporate citizen. Depending on our financial education and the timing of such, some finance professionals would not have been exposed to learning about operating within whole systems as part of their professional education.

3. Incorporating Impact into Business Models:

Integrating impact considerations into business models involves assessing the social, environmental, and economic consequences of business activities. This can include measuring the company's carbon footprint, social responsibility initiatives, and ethical sourcing practices. By aligning business operations with positive societal impact, organizations can build brand reputation and customer loyalty. Equally the opposite would be true, without considering the impact of business the cost of doing business could escalate to the point where it can become isolated and unfeasible.

4. Differentiating Business Models and Business Cases:

While business models outline the fundamental ways a company creates, delivers, and captures value, business cases provide detailed justifications for specific initiatives or projects. CFOs play a pivotal role in ensuring alignment between the overall business model and individual business cases, balancing long-term sustainability with short-term financial goals. Depending on the size and complexity of organisations, this work is managed  by different teams such as FP&A, group treasury and investment committees. Therefore these teams will need to engage with the strategic drive towards a better business outcome for all stakeholders.

5. Aligning Profit and Purpose:

The integration of profit and purpose is a modern business imperative. CFOs must lead efforts to align financial goals with the organization's broader purpose, ensuring that profitability does not come at the expense of social and environmental responsibilities. Have we explored all the KPI’s across the business including the executive leadership to understand where short term profit and ego focused rewards are still driving behaviours that may not align with the real purpose of the organisation.

6. Disrupting Business Models:

Disruption is an inherent part of innovation. CFOs need to embrace disruptive thinking, encouraging experimentation, and exploring new revenue streams. This may involve challenging traditional industry norms, adopting emerging technologies, and fostering a culture of adaptability. There are many different types of innovation, we might be familiar with fundamental and incremental innovation, have we thought about what might it take to radically innovate and potentially frugally innovate watch here. What is your organisations strategy and appetite regarding innovation?

7. Capital and Reserves for Sustainable Planning:

CFOs must play a pivotal role in shaping how a company organizes its capital and reserves for sustainable planning. This involves earmarking funds for long-term sustainability initiatives, assessing the financial implications of such investments, and communicating the value of sustainability to stakeholders. Projects subject to long lifetimes with long lead times, also with political vagaries, are difficult to disrupt. Can we look for durability and innovation to see where change is working elsewhere, across industries or countries?

8. Exploring Innovative Business Models:

Seeking inspiration from diverse industries and staying attuned to market trends is crucial for discovering innovative business models. Finance professionals should actively engage in industry forums, collaborate with external partners, and encourage cross-functional teams to bring fresh perspectives. Getting involved with initiatives such as CFO Conversations follow here,  Future Finance Thinkers Lab register here and also Project Breakthrough papers are all great places to start in your exploration and support with like-minded peers http://breakthrough.unglobalcompact.org/ - business-models

9. Thinking About Value:

CFOs must redefine how they perceive value. It's not simply financial returns that drives value, value can be unlocked in assets, materials, opportunities where it is unseen. Value is about recognising the inputs, outputs and all activities along the way of producing the product or service. Value can be tangible and intangible across the supply web (chain) of the organisation. Value for all stakeholders including customers, employees, investors, nature and the broader community.

10. Value Accounting and Impact Accounting:

Value accounting extends beyond financial metrics to incorporate non-financial indicators such as environmental and social impact. Impact accounting quantifies the positive and negative externalities of business operations, providing a comprehensive picture of the company's overall contribution to society. There is a whole global impact accounting ecosystem which has not yet reached mainstream accounting, but it’s coming and will be interesting to see its impact on the way risk is priced into our financial accounts and how it will be instrumental in decision making read more here.

11. Leading Conversations on Sustainability:

Leading conversations about sustainability requires effective communication skills. CFOs should articulate the business case for sustainability, demonstrating how it aligns with the organization's long-term financial viability and enhances its reputation. Being able to lead will require knowledge, curiosity and a serious passion for change. With many avenues to expand our understanding, through all of the global accounting professions, short online courses at leading universities and plenty of material including in this article we need to be ready, as time is one thing we do not have in abundance.

In conclusion, breaking through business models for a new era requires a strategic and forward-thinking approach from CFOs and finance professionals. By embracing innovation, aligning profit with purpose, and integrating sustainable practices into business models, financial leaders can navigate the complexities of the modern business landscape and drive their organizations toward a more prosperous and sustainable future.

Join our Future Finance Thinkers LAB – next discussion Tuesday 20th February

Reach out directly for a discussion, the author is working with business, teams  and individuals to be future fit, to consider impact and to provide training and support to finance teams so that they are ready to lead the business into sustainability and beyond.