eCFO: Sustaining Value in the New Corporation - Hardcover

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CEDRIC READ, JACKY ROSS, JOHN DUNLEAVY, DONNIEL SCHULMAN and JAMES BRAMANTE are senior partners in the Financial Management Solutions division of the Management Consulting Services practice of PricewaterhouseCoopers.
This practice helps clients maximize their business performance by integrating strategic change, process improvements, and technology solutions.
Through a worldwide network of skills and resources, consultants manage complex projects with global capabilities and local knowledge, from strategy through implementation.
PricewaterhouseCoopers is the world's leading professional services organization. Drawing on the talents of more than 150,000 people in 150 countries, the organization provides a full range of business advisory services to leading global, national, and local companies - and to public institutions.

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"Finance will still exist in the future, but in a very different role... It will be a fascinating place to work because it will be... instrumental in creating whole new businesses..."--Stephen Hodge, Director of Finance, Royal Dutch/Shell Group
 
E-business is creating a powerful new finance role: the eCFO. Shaped by the huge impact of the Internet, the eCFO will act as an internal venture capitalist, opportunity seeker, and risk taker. Focused on the future, not the past, the eCFO will be a true strategic partner to the CEO -- anticipating industry trends, launching new enterprises, and managing investments as a portfolio of options.
 
Making the transition from CFO to eCFO promises to be exhilarating - and complex. It demands a host of new skills: Developing intangible assets. Valuing Internet businesses. Reinventing resource allocation. Building a "virtual" finance function. And more.
 
eCFO: Sustaining Value in the New Corporation - the sequel to CFO: Architect of the Corporation's Future - offers a practical, timely guide to mastering the enormous challenges facing today's corporate finance managers. Built around in-depth interviews with leading CFOs,case studies, best-practices, and independent research, eCFO is a road map to the future. In its pages, you'll find everything you need to add value and deliver results in today's e-business world.

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Soon every business will be Internet enabled and we'll all start dropping the "e" in "e-business." Everything we do is being affected: product creation, customer fulfillment, logistics, planning and, of course, finance. - Olli-Pekka Kallasvuo, CFO, Nokia
Among CFOs, there's a universal belief that either you can embrace the Internet, or be victimized by it. This is prompting finance functions to examine how they will transform themselves over time. CFOs have to address the short, intermediate, and longer term impact of the Internet on their companies. - Tom Meredith, Managing Director, Dell Ventures and former CFO, Dell Computer Corporation
Undoubtedly e-commerce will have a significant impact on the finance function. Increasing shareholder value in this market means growing the value of your intangibles; at Pthat includes Rmarketing and people. - Clayton Daley, CFO, Procter and Gamble
The Internet will not wait - it's a cultural, not geographical, phenomenon. It requires substantial investment up front to gain scale fast. The opportunity will not last forever. We have to be represented in as many places, with as many products, as quickly as possible... We think our biggest challenge is one of execution in the face of insurmountable opportunity. - Warren Jenson, CFO, Amazon.com
CFOs of leading-edge companies in every industry are transforming themselves into eCFOs -- harnessing the power of the Internet to move beyond ERP, "blow up" their budget processes, apply new valuation techniques, and build new businesses. As traditional accounting functions change or disappear, redefining finance's agenda in an e-business world takes on a new urgency. Each chapter of eCFO: Sustaining Value in the New Corporation is introduced by a leading CFO. They, and the authors at PricewaterhouseCoopers, provide an invaluable guide to leveraging e-businees, offering strategies, tools, action plans and insight.

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As a branded products company, our challenge is always to add value for our consumers. The core of that challenge at P&G lies in technology - developing and marketing products that are demonstrably better to the consumer than competitive offerings.

With P&G's market capitalization listed at about eight or nine times book value, it's pretty obvious that the greater part of our assets are not those that are on the balance sheet. That intangible value is a combination of the value of our brand names and of our franchises, supplemented by the R&D and the people in our organization.

Over the last decade we have used shareholder value as t7 unifying concept. We are trying to get everyone - people in finance, marketing, R&D, product supply, and those who deal with our customers - to understand that their activities should be directed toward improving value for the shareholder. When we introduce any forward-looking business plan, we ask ourselves, If the business successfully implements this strategy, is it a value-building strategy or not?

P&G has managed to sustain reasonably good financial performance overtime because we focus on the long term. That means having the discipline to invest in R&D and components of the marketing mix that keep our franchises strong. Last year we announced what I think is the most significant reorganization in our history, converting our company from a geographic product and profit model to a global product and profit model. We've moved to global product management because we view ourselves as a technology company, not just a marketing company. As such, our R&D dollars must create technologies that have broad applications across the world, in both developed and developing markets.

e-Commerce will have a significant impact on the finance function. We're going to be right in the middle of B2B, managing orders, receivables and payables.

This reorganization, which we call Organization 2005, has had a significant impact on the finance organization. Most of the accounting and transaction processing activities are now in the shared services organization, while our local infrastructure management is now handled in what we call the market development organization.

In addition, e-commerce is influencing our future. In finance, business-to-business (B2B) is the most ubiquitous. It will be in the interest of corporations to agree on standards for B2B commerce as quickly as possible. Much of the cost reduction and working capital improvements available through Web- based B2B commerce will depend on there being standard interfaces; managing different protocols for different suppliers would defeat the purpose.

We're implementing a business-to-employee (B2E) strategy that is part of our shared services vision, in which our employees will use our intranet essentially to manage their own human resources records.

But probably the area that gets the most media attention is business-to-consumer (B2C). We are going to participate in that space, but we're going to enter it carefully. Existing distribution channels are often the best means of getting our products to our consumers. It's more efficient for our consumers to buy Charmin toilet paper at a Wal-Mart store than to order it on a Web site. But there are certainly some product lines that are more suited to e-commerce. In fact, we have introduced a line of prestige, personalized skin and beauty care products distributed directly to consumers over a Web-based site.

Undoubtedly, e-commerce will have a significant impact on the finance function in general Finance is going to be right in the middle of B2B, managing orders, receivables and payables.

I think that most e-commerce investments will lend themselves to the kind of analysis that you would conduct with any investment where your goal is to create shareholder value. While the predictability of B2C profits and cash flows is likely to be much more volatile than traditional investments in the business, you still must bring financial discipline to that part of your portfolio.

Increasing shareholder value in this market also means growing the value of intangibles; at P&G, this includes R&D, marketing and people. It's always been a challenge for finance to add value in the R&D process-developing portfolio analysis techniques, using real options to get a better handle on the real value of R&D. Once we've developed those technologies and those options, what do we do with them? Can we license that technology? Can we sell it? Can we partner with somebody? How do we derive maximum value out of the R&D portfolio?

We also become involved as e-commerce impacts marketing. How do we evaluate the effectiveness and the efficiency of our various marketing programs? Are we getting good value for those dollar.5? e-Commerce advertising has not been very cost-effective or efficient, but that will change over time. A forward-thinking finance organization is going to figure out how to get in front of this evolving industry, rather than being pulled along by it.

The final component is people. I think their value is sometimes understated; in this company we really believe that people drive results. As we move into the next century, we certainly believe that good people management skills are essential to maintaining value for the shareholder.

Technology is definitely changing the playing field in finance competencies. The challenge lies in determining what techniques to use and keeping valuation techniques relevant. I believe that ERP systems are enablers, but not solutions in and of themselves. Investments in materials management systems and business planning systems pay off, but they're not sufficient. You con have the best systems in the world, but if you have an inherently inefficient forecasting and planning process, they aren't going to do much more for you.

Over time the role of finance will evolve.