Friday, September 25, 2015

The Attack CFO

Lately the role of the distributor CFO has been on my mind. I see a need for the fundamental role of the CFO to change from staff accounting and backward-focused record keeping to something more powerful. For one thing, the importance of forward looking analytics grows in importance. Caught off-guard by the last recession, many distributors faced financial stress from systems not geared for a 20-30 percent drop in business. Aside from internal analytics, I see need for customer interaction from the financial side of the business. As an example, many of the services distributors provide create massive financial gains for their customers. Few current customer contacts understand the monetary impact of our services. Distributor CFOs must work hand in glove with their counterparts at the customer to lead the charge in establishing reliable financial metrics. I call the position the Attack CFO.

I have a couple of articles scheduled to be published on the topic in trade publications; more on these when they come out. However, I have a couple of thoughts I hoped to share right now.

Based on information presented in Dixon and Adamson’s The Challenger Sale, W.W. Grainger developed a financially based sales pitch around MRO business back in the 90s which impacted the whole of our industry. Many of your probably experienced attacks on your customer-base as a result of this push. (If you have the book re-read Commercial Teaching Case Study #1: W.W. Grainger and the power of planning the unplanned. Page 83)

Grainger has continued this financially focused attack and appears again in an addendum to the NAW Institute’s “Facing the Forces of Change” published by IBM. Here is an excerpt:

In a recent video by Manufacturing Business Technology titled: “How Much Money Is Tied Up In Your Inventory?,” Brian Norris and Kevin Hartler of W.W. Grainger, Inc. reveal that the cost to buy a $10 item actually approaches $75, with the additional expense created by people and time. Additionally, the estimate that about half the items in a customer’s maintenance, repair and operation (MRO) inventory never get used or are inactive, and that 40 percent of resource time is taken up in the “shopping” exercise. They liken the cost of MRO inventory to an iceberg. The price of the item is what you see above water; the cost of acquisition is what is below the waterline.

Experience shows, very few Knowledge-based Distributors use the tool of customer-centric analysis to expand their case with customers. I believe an Attack CFO will work hand in glove with their sales people to better understand the customer’s issues and develop an estimated value to the customer. At some of your most strategic accounts, the CFO will interact with their counterpart at the customer.

Here are a few thoughts:
• What are some of the points of financial analysis important to running your business or growing your sales territory?

• Are there instances where you believe you provide strong non-product advantage to your customers? Has your CFO helped you determine the monetary value of the services to the customer?

• Is your CFO willing to step out of the office to connect with a few well-chosen customers?

• Does your CFO know their counterparts through professional associations or previous jobs?

• Has your CFO talked about how to better understand your own costs?

Finally, if you are not the CFO of your company, forward this article to them.

1 comment:

Rslaug said...

You said CFO and customer interaction in the same sentence. Odd.