On July 26th at the AICPA Engage 21 Conference in Las Vegas we convened a ‘thinktank’ of major corporate finance chiefs to discuss the ‘future of finance’ in this world of accelerating change and disruption. This was the third meeting of this group who’s purpose is “To transform the profession in its broadest context and re-imagine the finance function of the future” .
They identified Value Partnering and Value Creation for a special working ‘deep dive’ session which was led by Advisory Group member, Darren Snellgrove, Chief Finance and Operations officer at Janssen Global R&D (Johnson & Johnson) and our own, Ash Noah, VP Managing Director Learning Education & Development at AICPA-CIMA.
Ash began with an overview of the dimensions of Value Partnering based on the familiar Osterwalder’s Business Model Canvas with the addition of three elements – 1) Strategy; 2) Structure, Scale and Culture; and 3) Digital Ecosystem. Darren joined in to provide examples from his work at Janssen (yes the vaccine research arm of J&J) and how they have evolved their role in finance to support the business in long term value creation.
He started with a simple, yet profound definition of’ value creation’ as two steps: 1. understand how your organization creates value and 2. then, maximize it! The profound part was how do you determine value with a very long-term project like developing a vaccine with very low probabilities of success against alternative investments? And does your finance team really understand how value is created in your company?
The conversation quickly went to a slide that showed 90% of S&P 500 Market Value is from Intangible Assets up from 68% in 1995! That means the major sources of company value are NOT on the balance sheet or income statement and the risk is more likely to be out of the expertise of the finance team. Darren gave an example of the R&D Finance role at Janssen where only a few of the 10 core metrics and guidelines for evaluating investments were financially oriented. The conversation quickly went to a sense of urgency about how we can elevate and accelerate our work toward value creation and the requisite toolsets and skillsets we will need.
Here are some insights from the group:
- Accounting, reporting, controlling becoming automated; finance needs to learn new competence to remain relevant and create value!
- Business leaders with financial acumen
- We must equip Finance to deal with intangibles
- We are here to GROW the business — do we have the right skills?
- Value creation is truly an imperative and a differentiator
- Transforming the finance function
- Many feel we are further behind in insights as opposed to other functions in a corporation
I was reminded of a quote by global futurist, Daniel Burrus (Author of the Anticipatory Organization: Accounting and Finance Edition) who said, “If it can be done it will be done, and if you don’t do it someone else will.”
The Future of Finance Leadership Advisory Group committed to continue working on the transformation of the finance and accounting profession to be even more relevant to organizations in the future. The group is planning a gathering of the Top 100 CFOs and Finance Pros on Dec 8-10, 2021 in Nashville, TN to create the future of finance. Stay tuned for more tools, skills, and thought leadership and follow us on this blog and LinkedIn Hashtag #FutureofFinance.