15. CIMA's Latest Research On Building Business Resilience with Dr Ian Selby, Vice President Research & Development, AICPA & CIMA

Join Hannah Munro, Managing Director of ITAS, a financial transformation consultancy, as she interviews key experts to give you real-world advice and guidance on how to transform your processes, people, and data. Welcome to CFO 4.0, the future of finance.

So welcome, Ian. It's fantastic to have you on the show.

And our job effectively is to research management, accounting and finance and business issues as they're interweaved together and to promote best practice, to push out the boundaries of knowledge on how to undertake management accounting and how to push management accounting forward in the face of things like new technologies, such as digital technology, data analytics, factors

such as that. We have a very big program of work. It's not unusual for us to produce about 18 pieces of research every year. And many of those are hefty pieces of work.

And we leverage that across the organization, being the association now, we have impact not only in the management accounting space but also in the public accounting space and in that sense we brought together a certain amount of public accounting into the management accounting side of our research so that's kind of what we do the topics range from everything from cost

cost management treasury and cash management through to things like data analytics cyber security etc so it's quite a broad church reflecting the broad church membership that we have

relegate and promote topics within that, depending upon what's happening in the marketplace, what's happening in business at the time, the topics that are bubbling through and the concerns and issues bubbling through. And so we're now looking at producing and are producing a whole stream of work in the sustainability area.

We're also producing a stream of work on strategy and strategic thinking and skills and toolkits We're also looking at obviously corporate reporting because there's an awful lot happening in the corporate reporting space now, particularly in relation to sustainability. So those are the core areas at the moment. We have a very strong public sector research area as well.

So I think I can say on this podcast that we're going to launch a piece of work next year on gender responsive budgeting. And we're also going to look at finance for a fairer world. And I think that fits in with the socio-political and economic expectations of the next 12 to 18 months.

They're going to coagulate together at some point and the consumers are going to make a decision as to, okay, is it a Betamax or is it a VHS? And so we're just waiting for that VHS moment to come along.

We had loads of different versions and all of a sudden one took over and became the main one that we worked in.

There's lots of different factors and players in this, but eventually, rather like the molten rock that formed the planets, there'll be a gravitational force that brings this forward.

together it could be government i suspect it will be a mixture of government government consumers and also regulators rationalizing and coming around one set of standards that actually does what it says on the tin and produces what people want in terms of sustainability reporting meeting the different challenges that we face in order to bring that together climate change,

environmental degradation, et cetera.

There's more to come in the next few weeks. And you've got the emphasis of the United Nations slogan, which is build back better. You're going to see that emphasized more and more. And it's part of a greater value proposition. that people in business are now identifying with very firmly because it makes good business sense, particularly in the consumer world.

You think of companies like EDF Energy. There was an advert in the Evening Standard last night for the value that they put in to achieving a carbon reduction target and being zero carbon emissions by a certain date. I think in their case, it was maybe 2050 or something like that. But it's very big.

linkage between those value add propositions and also their consumer engagement. And you'll see that more and more.

And it's about enabling business to work better with finance to create a better value proposition.

Finance has all the information at its fingertips and it's enabling finance to connect across the business to be the value enabler by using that information, communicating that information, analyzing that information to make better decisions that enable any business or any organization to meet the aspirations contained in its business model contained in its mission statement and to

develop value for all of its different stakeholders

The business model is something that you would never have talked about on the streets or to quote Lord Denning on the Clapham Omnibus in the 1970s and 80s. Nowadays, you hear people generally talking about business models. There's a wider understanding of business models. It's part of the lexicon of natural life these days to a much greater extent.

And I guess with more disruptive technologies coming through as well that are helping to drive the ability to do that, that's having an impact on what people are talking about, but also doing.

And therefore that self-employed movement, and you've seen a Part of that has impacted us in terms of the COVID crisis because that self-employed community, that small-scale business community, has very much been hit by the pandemic and the resultant lockdowns and the economic impacts of it. But prior to this, it was an aspiration for many people to become self-employed.

And in order to become self-employed, they had to create a business model.

Is there, have you done, is there been any recent research around how, you know, the finance teams are coping with the COVID situation as it were, or maybe the shifts, I should say, that are being triggered by COVID?

Businesses have, particularly now as we go forwards, businesses are really working their scenarios and in fact, more scenarios than perhaps ever before being undertaken by key businesses that we've talked to.

Yesterday I was on a call and the businesses on that call were drawn from across the United Kingdom and each and every one of the people on that call talked about scenarios going into 2021 and they weren't talking about one or two scenarios, they were talking about three or four multiple scenarios that their finance team and the SLT were working together on in order

to provide that business with resilience options, depending upon the outcome of public health decisions going into 2021.

And also in terms of how they keep their business moving forwards in terms of supply chains and availability of resources and materials.

Because with everything that's going on, obviously, they need to be a lot more on top of things and be able to respond a lot quicker.

And therefore they know the material that they need to gather in order to plot a scenario outwards. So they know the information they need to access. They know the data they need to bring into that conversation. And then they ultimately know the people they need in the room.

And what's interesting, one of the comments that we had yesterday was that more and more younger professionals are being brought into these conversations by virtue of the technology that we're using in order to engage with each other.

So by using Zoom and Microsoft Teams, there's a greater involvement of younger professionals in some of these conversations than would have been the case in a traditional office setting. So that's quite an interesting innovation.

And if we've got a takeaway here, people talk about things will never be the same again. Okay, let's accept that.

Well, one of the ways things might never be the same again is that you've changed the dynamic of how an organization traditionally might work and some of the hierarchical structures that prevent certain lines of communication it's possible an awful lot of work has to be done but it's possible that those lines of communication have completely transformed by virtue of

everybody sitting in their lounge bedroom kitchen and having to communicate with each other and work with each other through zoom and through other platforms such as teams

And I think certainly the flexibility of working from home is something that has been talked about a lot. Yeah. particularly in finance and also across the wider organisation. So coming back to what you were talking about earlier about the horizon scanning, talk to us about that concept.

And I understand that you've done a bit of research and put out some tools around that.

And we decided that we were in the shock stage in April and May of this year. What we had to do as an organization to protect our members, to take our members forward, to enable our members was to move people in a very mental way to endurance and towards recovery.

One of the things my research team does is we do an incredible amount of work in terms of creating practical tools. A tool could be just a list of questions that you ask yourself. And we may have conceived those lists of questions, and it may be a list of questions that you really don't have time to think about.

But if they're put in front of you, they open up a door. They give you that magical moment, that inspirational moment. And so there's a whole variety of different tools on our website, et cetera, that we've developed.

And some of them are kind of, if you open the cupboard, you might discover that you've got a tin of big beans and you've got a tin of chili and you've got tin fruit and so on that you didn't know you had, or you thought it was there, but it was somewhere.

And one of the things about the COVID crisis is that people have realized the resources that they have in their cupboards. And it's the same for organizations. Organizations have tremendous resources in their cupboards. It's just a question of opening the cupboards and actually looking because we're too busy doing other things out front.

So we looked in our cupboard and thought, well, we've got a scenario planning tool. We've got a horizon scanner tool. We've got a business model tool. Let's bring those together as a pack.

and top and tail them, repurpose them to some extent, put them in the context of the now, which was May, June of this year, and say, in the middle of all this franticness, in the middle of all this turbulence, and in the middle of all this stress and heat, there are three things that you could do that can help you plot where the business can go and how the

business can go and what the business can do. And so you have the horizon scanner, you've got the scenario planner, and you've got the business tool together. And that's what we aim to do. And that's kind of what we did. We published that in late May, early June of this year. Last count, it's had somewhere in the region of about 7,000 or 8,000 downloads.

So it's had a massive impact in that way. And it kind of takes inspiration from, you know, I'm sure if you were out walking during lockdown, you discovered that the restaurant that was closed was now doing takeaways. And they'd suddenly got their act together and said, okay, how do we get through this? Let's do takeaways.

Let's open four days a week and do fish and chips and faggots and peas or whatever it was. And in the same way, taking that as an example, I walked away from that shop thinking, what do we need to do to keep our people going? You know, if this small business person has gone, right, this is what we're gonna do.

How do we source the natural resources that we need? So the fish, the potatoes, et cetera, et cetera. We need to think a more grander scale of enabling our members to do something similar. But that business has effectively found resilience.

They can keep their business going during, you know, the height of the COVID crisis, what do we need to do to enable our members to take that vision and to encapsulate it and to grab it and move it forwards? And that's what we sought to do with these three tools effectively. So which one do you want me to talk about? The horizon scanner first?

So in a sense, it enables people, members, business people, to build a series of scenarios out, effectively by asking themselves a set of questions, but looking at different scenarios over a series of different timeframes. So what if we have a supply chain problem in terms of, shall we say, sourcing steel? What do we do in that scenario?

How do we work that scenario through? So it enables you, it gives you a foundation or toolkit that can work through the problems, but also look at what are the opportunities. So for example, a very good example of horizon scanning is the Automobile Association. So the Automobile Association, how do they exist?

Their value proposition is we will fix your car when your car breaks down. During lockdown, nobody was in their cars. So the problem for the Automobile Association in terms of their horizon would be what happens when lockdown ends? Will people get back into their cars?

How do we encourage people to get back into their cars for our value proposition to be there to put their hands around you when your car breaks down and help you to get back home?

Because if people don't get back on the road, so the horizon scanning effectively that they did was they looked at that problem and they came up with an advertisement that would get you back on the road. Okay. And the advertisement, if you haven't seen it, contains a dog and the dog is in a living room. The dog breathes a heavy sigh.

So it's us human beings sitting in our living rooms during lockdown, heavy sigh. The dog goes over to a record player, an old fashioned record player. He puts a trendy piece of music on. He then goes to the sofa. If you haven't seen it, he then goes to the sofa. In front of the sofa is a fan. He switches on the fan.

He jumps on the sofa and the air is going through his fur. Yeah. If you just think of that situation, That plays the emotional card. What the dogs do when they get in cars and you roll the window down, the head goes out the window. Yeah. They love the feeling of the air going through. And so the AA worked out that they could play the emotional card.

They could play quite a trendy card as well with the music that they could bring that into life to say, you want to get back on the road. Just think of what it means to you. You know, you're driving along. The dog is in the back. He's he or she has got their head out the car.

Bam. That's the kind of horizon scanning that we want to encourage our people to do. And the tool is there to enable you to visualize that in a way. Now, I can't lay claim that the AA used our tool to do that, but it was forward thinking. And the horizon scanner is about thinking about how you remain viable, how you remain resilient.

And that's a very good example.

because it was one of those kind of sci-fi type. Green screen. Green screen, thanks. Green screen. They had that being done somewhere else. The whole thing was brought together on multiple different platforms in different countries. I think Germany and the UK, et cetera.

And they had the marketing challenge of actually bringing that together, getting it commissioned onto TV, et cetera, et cetera. So that was done in a very collaborative virtual way. It's a very, very good example, yeah? And the dog is called Tucker, T-U-K-K-E-R.

And the dog itself is made of particular fabric that would enable, and I can't do it because I've got no hair, but would enable his hair to flow in a particular way. So there was thermodynamics at play in the way the dog's hair would bring the dog to life, yeah?

And what you find there with the AA is a very at the heart of that will have been a finance team going this is this is how we can do this. This is how we can fund this. This is how we can finance this. So it's a mentality of saying yes, yeah. Again, I'm going to do an ad saying, the man from Del Monte, he say yes.

But it's that kind of mentality that a finance team needs to have. And there's multiple examples of that coming through in terms of the way that businesses have moved their platforms from a traditional platform of the high street, shall we say, to going online. Take IKEA.

IKEA transformed themselves in terms of moving to an online sales platform and emphasizing that to a much greater extent than they'd expected. And Ikea came up with a great concept. I've got to remember what it was called from a piece of research that we did with them.

They changed the way that they were looking at their business and they came up with the stay home concept. and the importance of home. So their new concept was based around the importance of home because home became a home, a school, a workplace. And they developed a whole marketing strategy. Again, finance would have been at the heart of this.

Finance would have been the enabler. So it's grabbing those enabling stories. And their sales have rocketed online because people needed kit to change their home from a home to a multidimensional home, school, and workplace.

And I think that in itself is a shift in that finance, and certainly in my experience, has been seen by the rest of the organization as the person that puts the barriers up and puts the stops on things.

And actually what you're saying is that part of the shift around horizon scanning, around strategic planning is how how how can they change things so that they can be the person that gets the business to where it needs to be rather than the person trying to stop them from doing what they need to do

And effectively, it focuses upon four main questions. What's your strategic position? What are the strategic options? So what are the opportunities, both positive and negative, for the business? What are the options, current projects and new possibilities? So what current projects need to be put on hold? What current projects need to go ahead?

What new opportunities might there be for you to grow your business in the face of an unprecedented crisis? And then finally, what are the risks?

And so it gives you these lenses through which you can see how your business might move forward and how you might redeploy your strategy and redesign your strategy to meet the new environment, to meet the new economic environment. And its questions are there to make you rethink your conventional thinking around your business model and around your strategy.

And the one thing that the future finance research that we did from 2017 to 2019, one of the key findings of that is that finance are not asking themselves the right questions.

They have a conventional approach and finance will go through and ask all the right questions, but they never will stand back and just look and think to themselves, what's the question we haven't asked? And the scorecard is about enabling those questions to be asked, for you to stand back and to say, what haven't we asked ourselves here?

What is something obvious that we've missed? And maybe there isn't something obvious you've missed, but it's about being able to draw breath, take a moment, and to see if there are any questions that you really haven't asked yourself.

to meeting to meeting so we're grazing between these meetings and not actually digesting what we've picked up in those meetings and thinking about it.

So it's having a moment to think about what you've encountered and what you've thought through during the day and what you've picked up during the day, what you've learned during the day, and then apply it to your business. And the scorecard is there to ask yourself, well, what is the new normal?

And we're going to debate that, I'm sure, for the next 12 months, if not beyond that. What is the new normal?

But to drill down in terms of your actual business model and your positioning of your business as to what that new normal means and not to be carried away by the hype, but really drill down and look at the finances, look at the figures, because the figures always tell a story. And it's about having the time to draw that story out.

I know of people who've told me that they might start at seven in the morning and at 12 midday, they go to the gym or they go for a run or they do some kind of physical exercise. And then they come back and do a few more hours work. And then they deal with the domestic situation, such as cooking dinner for the children or whatever it might be.

And then they pick up at the end of the day between seven and eight o'clock in the evening, and then they stop. So that flexibility, people have learned ways to actually manage their work-life balance in this new environment. And that's been beneficial. But people have done it differently. As you can see, I'm in the office.

That's a personal choice because I find the office more productive for me. I was able to deal with the initial part of lockdown, but to be back in the office with the light and the air and the vista of the city is hitting all the right points for me. But that's a personal view.

And there's more acceptance across businesses around that flexibility. So that's an interesting piece. So I'm very aware that we are rapidly running out of time And so I'm keen to sort of move on to the third part of the toolkit that you offer. So we've talked already about horizon scanning, about the strategic, sorry, the scenario planning tool.

What's the third piece of the kit?

And if you put it in terms of the pandemic, it's about looking at how the pandemic affects the brands in your business model, the reputation of your business in the marketplace, your customer loyalty value proposition, your sales points and the value propositions around your sales points.

your reputation in terms of building back better, because that's bound to be a theme that businesses will leverage going forwards, and also your creativity. It contains a set of questions that enables you to see not just the connectivity, but the core drivers and the emphasis, and to some extent, the vulnerabilities of your business model.

An awful lot of businesses actually could usefully do with a tool that enables them to rethink their business model. And that's what the purpose of this is.

So again, if you take account of COVID, the way that businesses have pivoted their business models from that small business selling fish and chips during lockdown takeaway, from being a full-star restaurant who never did takeaway before, but doing takeaway now, that's a pivot.

And in the same way, there are other businesses such as IKEA, Some businesses haven't had to pivot. They've been able to just flex slightly, such as Next, because their online sales have gone in the same direction as IKEA, upwards and increased. And so it's enabling those businesses to just think, what's our proposition? Take Pret a Manger.

Pret a Manger have now got a subscription system. That was on account of finance people and the management team coming together and thinking about how they preserve the value of their business. And one way of doing that is enabling people to have a barcode app that enables them to take out so many coffees a week. Five coffees a day. That's £20 a week.

That did not exist before COVID. That now exists. The issue for Pret-a-Manger is in terms of leveraging their business model is ensuring that when I go in, I don't just buy a coffee, I also buy a sandwich and so on and so forth. But that's a different proposition.

It's then about enabling the people on the front of your business to actually ask the questions and change in their mindsets.

So that it's not just about shareholder value on the one hand, it's about other forms of value that you create in a business and it's simply that finance can play a lead role and finance business partnering and the one thing about this crisis is it's brought finance business partnering very much to the fore and now we have a new phrase interesting enough we now

have a phrase of value partnering and that's gathering momentum in the marketplace as we speak that when you go and talk to businesses they're not talking about finance business partnering they're talking about value partnering so that's a a real seismic shift.

And if we skip forward 12 months, two years from now, I think you'll see that finance teams are talking about value partnering and understanding how the connectivity of different people's activity across a business creates value, both in terms of if you think of a supply chain bringing materials in, you use those materials to create something that you then sell, people

desire, people want. You put it onto multiple platforms whereby people can engage with you and participate in that value creation by buying your products.

So the finance team at PrEP must be feeling very proud of themselves for their new subscription model. I

The newest one is the no naughty list this year, the Tesco's advert, which is absolutely spot on to come out and say, We overindulge at Christmas, but this year, forget it. Just indulge as much as you want. And it's going to be very interesting. And where the research question is, is how that impacts the bottom line, how it impacts the sales.

And so the advert with the line of, you know, I've got it in front of me now, no naughty list this year. The creativity that's gone into that is tremendous. But the finance team will have been at the background of that, enabling that to happen. in terms of financing the design, the advertisement, et cetera, and then the deployment.

You know, putting it on primetime TV at eight o'clock in the evening, the finance team, they're in the background, they're saying yes to that. Or no, as the case may be, but generally

So you bring that back into the workplace and try and research that case study in order to deploy in a conversation such as this.

Well, thank you so much, Ian. That has been genuinely fascinating. And I think all of our listeners are rethinking their view on what they're doing. And if there's one thing that you could say to our listeners to say about coping and building business resilience What's your top takeaway that they should be picking up from this conversation?

So it's been really interesting. Thank you so much for coming on the show.