FP&A Innovation, Issue 4

ISSUE 4 | FINANCE

FP&A

INNOVATION

INSIDE: ANALYZING THE FINANCE FUNCTION AT SIEMENS

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LETTER FROM THE EDITOR Welcome to this issue of FP&A Innovation.

As we are now firmly in Q4, companies are looking at their finance departments to present their results accurately.

As we have seen with Tesco in the UK, the importance of accuracy when presenting results cannot be understated.

It is not only about saving yourself from embarrassment, but from additional damage that the negative press can bring. If Tesco had given an accurate reading of their profit drop, it would have had a minor effect compared to what they are experiencing now.

It shows how important finance departments are to the world’s top companies. They need to make sure that they are not simply trusting complex software. It only takes a missed decimal point in one cell of a 500 page excel spreadsheet to spell disaster.

In this issue we are talking to finance executives from some of the most important and innovative companies in the world. This includes Siemens, Unilever and Upptalk, three companies who have shown

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that accuracy in forecasting whilst to innovating the finance function can bring sustained success.

In addition to this, we also discuss finance in the leisure industry, and the 7 most important traits of any successful CFO. As always, if you are interested in contributing or have any feedback on the magazine, please contact me at ghill@theiegroup.com

George Hill Managing Editor Are you are looking to put your products in front of key decision makers?

For Advertising contact Giles at ggb@theiegroup.com

Managing Editor: George Hill Assistant Editors Simon Barton Art Director: Joe Sanderson Advertising: Giles Godwin-Brown ggb@theiegroup.com

Contributors: Daniel Miller Harriet Connolly William Tubbs Aaron Fraser General Enquiries: ghill@theiegroup.com

2014

CONTENTS

4 ANALYZING THE FINANCE FUNCTION AT SIEMENS How are Siemens revolutionizing their finance function? We talk to Kairav Modi, VP Finance

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FINANCE WITHIN THE LEISURE INDUSTRY

AN INTERVIEW WITH XAVIER SANSO, CFO AT UPPTALK

Simon Barton takes us through how finance within the leisure industry is changing

We talk to Xavier Sanso, CFO at Upptalk, a communications company looking to melt the industy mold

20 7 TRAITS OF THE SUCCESFUL CFO What are the 7 most important traits that successful CFOs must have? We investigate

14 SEARCHING FOR FINANCE INNOVATION AT UNILEVER How is Andy Donner, Director at Unilever ventures, helping to find new innovations at the company?

ANALYZING THE FINANCE FUNCTION AT SIEMENS Aaron Fraser | Director, FP&A Innovation, San Diego

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ANALYZING THE FINANCE FUNCTION AT SIEMENS

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In the same month that we heard that Siemens has planned to grow its Energy Portfolio, I caught up with Kairav Modi, VP Finance at Siemens AG. We spoke at the CFO Rising Europe Conference in London about how Siemens’ finance function is being affected by data and technology.

their insights to develop IT and technology initiatives.

Kairav says, ‘CFOs must in the future be in a position to not only understand the various technology offerings, but also be in a position to translate them into effective revenue models for the benefit of the customer and their respective organisation’.

With 19 years of experience and 10 years at Siemens, Kairav has a vast amount of knowledge of Siemens’ finance department. Kairav says, ‘Siemens is a company that has a strong focus on Digitization, Electrification and Automation and Technology is a critical element of this vision.

We believe that technology will actually not only change the way we internally do our analysis, accounting and controlling, but also the way we externally serve our customers in the future’.

This means that when a customer wants to get their business data analysed, it doesn’t just mean the data within the customer’s organisation, but also the data within the customer’s business eco-system, such as suppliers and distributors. This comprehensive data analysis should lead to meaningful end results which is important because whatever you’re offering, it has to be correctly reflected in the financial statement.

Finance leaders at Siemens play a critical role in the decision making process, using

Finance leaders at Siemens play a critical role in the decision making process, using thier insights to develop IT and Technology initiatives

According to Kairav, part of this development, where the CFO plays an imperative role in both technology and strategy, was borne out of the recession. This is consistent with a number of interviews that I have undertaken for FP&A Innovation and it’s clear to see that the migration from ‘the bean counter’ role to the ‘strategic influencer’ is not something that is happening, it is something that has happened.

the migration from ‘the bean counter’ role to the ‘strategic influencer’ is not something that is in the process of happening, it has happened

With the CFO being such an important cog in company strategy, the working relationship that they now enjoy with the CEO is much closer than in the past. Kairav says, ‘I have seen a huge change where the CFO is clearly seen as an elbow to the CEO. He is part of the top management team, responsible for not only the Financial Stewardship of the organisation but also responsible for making sure that the performance of the company goes to the next level, thereby also protecting Shareholder Value’. Considering that there are a number of new C-level executives emerging in large companies, the fact that the CFO seems to be deemed the CEO’s close strategic partner demonstrates how important the role has become.

There are a number of responsibilities that the CFO is expected to undertake that perhaps weren’t expected 5 to 10 years ago. Compliance, for instance, is an important

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topic, which should be critical to the cenrtral value system of any organisation. Kairav says, ‘Siemens Worldwide has had very effective, robust and stringent compliance program.

All our employees live by this program and are strongly committed to it. We do only clean business.’

Other important elements include overseeing the authenticity, veracity and transparency of information across the organisation.

Kairav says, ‘Organisations must ensure that there is data transparency worldwide, which allows for discussions and business reviews between headquarters and the regions that are absolutely transparent, effective and result oriented. Siemens places a lot of importance on data and information transparency and accuracy of information.

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ANALYZING THE FINANCE FUNCTION AT SIEMENS

When asked about the importance of data, Kairav answers, ‘Data is king, we always talk about customer as king, but now data is king.

With the power of data we can provide a lot of meaningful information to the customer to aid his business. This is a paradigm shift and we all have to cope with this in the future’.

For the CFO this means that they’re going to have to work towards getting the best out of technology and leveraging resources from both internal and external sources to maximize results.

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Data is king, we always talk about customer is king, now data is king

FINANCE WITHIN THE LEISURE INDUSTRY George Hill | Managing Editor

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TUI Travels is one of the largest leisure tourism companies in the world, operating in 180 countries and serving 30 million customers. We spoke with their Head of Commercial Finance and New Markets, Marco Torrente.

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Despite having a global presence, TUI Travel is still looking to expand and develop certain geographical areas where its presence isn’t so strong. In line with this, Marco states, ‘We’re looking for new opportunities in markets like India, South America and China’.

In terms of a technological life cycle the leisure indistry is pretty mature In terms of a technological life cycle, the leisure industry is relatively mature. The bricks and mortar travel agent has been taken over by companies like Expedia and Last Minute who create affordable packages for a range of demographics.

Only 1 in 10 Britons purchase their holidays through a physical travel agent and this is a trend seen throughout much of the developed world.

Unlike Expedia however, TUI is a multifaceted brand, with a number of different profit centers. In July 2014, its leisure charter airline was voted the best in the world at The World Airline Awards, underlining the continued success of this part of the business.

They also work across online accommodation, a segment that is rapidly expanding due to demand from emerging countries.

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Their finance function has been affected by technology, meaning that Marco’s role at TUI has developed significantly.

The ‘bean counter’ role, which once blighted the reputation of finance professionals is now a distant memory. Marco, who works closely with senior mangement says, ‘I help directors in terms of understanding what are the new opportunities in the new markets by preparing all the business cases and assessing all the competition’.

When identifying new markets it’s imperative that Marco understands data and can recognize trends before communicating them to the rest of the company.

Marco wanted to make it clear that nothing has been more important to the finance

function than the inclusion of data. He says, ‘Becoming a custodian of the data is being a key role in the strategic direction of the company, it’s not only to understand the past but actually to predict the future, that’s the key point’.

Only 1 in 10 Britons purchase their holidays through a physical travel agent and this is a trend seen throughout much of the developed world This is a development that has accelerated post-recession, with the CEO putting more emphasis on cutting overheads and identifying projects that are low cost and high in reward.

Although on first impression it would seem that this would put more strain on the finance function, Marco undoubtedly revels in this new role and his references ‘a finance revolution’ underpinning this. As with most large finance companies, it’s more a question of planning than analysis, as it’s essential to cultivate a function that is a pro-active winnter rather than a reactive loser .

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Like with most companies we have spoken to at FP+A Innovation, data is the thread that weaves their operations together With innovation becoming more important in the leisure industry, it was interesting to see how the finance function at a major leisure company is developing. Like with most companies we have spoken to at FP&A Innovation, data is the thread that weaves their operations together.

Finance leaders have to paint pictures with data and increase the competitiveness of the company. This takes an added importance in the leisure industry as it’s so technology driven. With Marco’s role to establish which developing countries have the potential to be the most profitable, he will be sure to have both eyes fixated on data, allowing TUI to guarantee its long-term future in an environment that demands pro-active thinking.

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AN INTERVIEW WITH XAVIER SANSO, CFO AT UPPTALK Harriet Connolly | Director, CFO Rising Europe

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At the CFO Rising EU summit this September I spoke with the Xavier Sanso, Chief Finance Officer at Upptalk, a young global communications brand looking to disrupt established telecommunications companies by providing free, international calls.

Xavier sees the emergence of disruptive engines like Upptalk as the antithesis of the traditional telecommunications companies and a force for change within the industry.

Xavier says, ‘It’s a disruptive type of operation, upsetting telecommunications giants by just using a small proportion of the network they’ve invested in’.

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UppTalk’s motto is ‘your phone in the cloud’ and it differentiates itself from similar VOIP calling applications like Skype by operating as a fully fledged operator, with numbering services and full interconnectivity. It’s also completely operator­ independent, which keeps calling costs low.

UppTalk’s motto is your phone in the cloud’

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It’s not just their approach to calls that differentiates UppTalk from its larger telco cousins.

They’re a start-up and naturally abide by a different set of principles to larger companies.

Xavier says, ‘at a small company there really is no alternative to embracing change, at the bigger companies sometimes you can hide in your ostrich hole’.

As with every start-up, it’s not that they employ people who love to continually shake things up, it’s that their departments don’t have the vested interests of major corporations, whether it be guidelines that need to be strictly adhered to or a culture that is set in stone.

where the strategy is decided and you can have a key input towards the shareholder and towards the board’. This encapsulates the change that CFOs have experienced throughout their careers.

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For Xavier, this is particularly exciting because he’s seen his role in the company move from a ‘number cruncher’ to a critical component in every realm of his company’s processes.

Xavier says, ‘as a CFO there’s no real way to avoid multitasking and being functionally involved in commercial and legal aspects, normally bigger companies are in much more in silos’.

I really got the sense that Xavier was excited about the changing role of the CFO, he says, ‘it’s a privileged opportunity to really have a say in how the company is managed in the real arena

It’s not just their approach to calls that differentiates UppTalk from its larger telco cousins; they’re a start-up and naturally abide by a different set of principals

Data and finance go hand in hand and that’s why in the last 10 years Xavier has seen two main trends affecting the CFOs role and they both revolve around data. Xavier states, ‘Data has had a hundred fold increase in terms of costs systems are a lot cheaper and performance is the same’. The second trend is connected and refers to the fact that data is now democratically owned and circulated by both internal and external stakeholders. Due to price, even small companies can take advantage of state of the art systems, Xavier backs this up by saying, ‘Having an expensive system is becoming history because they’re now publicly available’.

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The best finance heads continually question their role in the function, persistently debating with themselves if they’re adding value to the business But what do analytics actually bring to the table in terms of competitive advantages and how can they help the finance function get its point across? Using analytics can be the only way to make top-line decisions. Heated lines of debate frequently occur between departments, but with analytics, they don’t have to rely on qualitative-based decisions, they can prove that their forecasts are correct and that their plans are viable.

Xavier states, ‘[analytics are] the only way you can successfully mediate and make your point but you have to present it in an impeccable way’.

The best finance leaders continually question their role in the function, persistently debating with themselves if they’re adding value to the business. The best CFOs should never feel like they are stagnating or a commodity, they should make things happen and be pushing to improve the way

their finance functions operate.

This involves people, but Xavier feels that relentlessly discussing everything with everyone can bring its own problems, ‘Organizations also need to make things happen and this can’t happen if it discusses things too much’ At the same time, transparency and honesty have to be present. In the words of Xavier, ‘I think people more than ever want transparency and honesty, honesty is an absolute concept, transparency you decide who gets what information, but if you decide that certain people are getting information up to this level, they need to feel that this is the adequate level and that the level is not changing depending on circumstance, so you need to give them the feeling of continuity and that they’re onboard with the change and explain that they have an input to this’.

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start-ups, have to be quick and concise.

As an outsider, it’s hard to see Telco giants submitting to the pressure applied by companies like UppTalk, but their presence will undoubtedly act as a wake up call for the big players who assume that their consumers will be happy to continue to pay for calls and texts when there are alternatives. As the CFO, Xavier clearly plays an imperative role in their success, and his ability to multitask will surely put him in a great position to counteract the hurdles borne out by the telecommunication giants.

As an outsider, it’s hard to see telco giants submitting to the pressure applied by companies like UppTalk

It’s fair to say that most companies can’t consult each of their employees on every issue and this is very much mirrored in finance departments, the CFO is the CFO for a reason and should be the leader. Consulting employees is vital and is a big advantage of the flatter organisational structures that many companies now employ, but decisions, especially in

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SEARCHING FOR FINANCE INNOVATION AT UNILEVER Simon Barton | Assistant Editor

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Unilever operates out of 180 countries and employs over 167,000 people – its aim is to provide consumers with products that are environmentally friendly and positive for society.

Another arm of its business, Unilever Ventures, concentrates on the acquirement of early stage companies that fit in with Unilever’s objectives. They work across four sectors – personal care, digital marketing, refreshments and sustainable technology, to help Unilever. By scouring the market for these innovative start-ups, Unilever hopes to develop companies and teams that will help them from a strategic standpoint.

Andy also includes venture capital as, ‘one of the key tiles in the innovation mosaic I spoke to Andy Donner, Director at Unilever Ventures, about his role in guaranteeing that Unilever has the best partners going forward. Andy says, ‘I lead our digital practice in North America focussing on digital marketing, ad-tech and e-commerce sectors and we invest in companies that are of strategic relevance to

Unilever’ Andy also states that ‘Unilever Ventures exists to be a component of Unilever and to drive its innovation efforts’. Andy’s team at UV utilise a number of different strategies to inspire innovation at Unilever including open innovation, mergers & acquisitions and business development. He also includes venture capital as ‘one of the key tiles in the innovation mosaic’

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Unilever Ventures has three main tasks to undertake - the first is to scout the business landscape for new technological innovations.

The second is to help identify companies that would be suitable for a partnership with Unilever, which in itself demonstrates the importance of business development acumen at the company.

They also pay strict attention to companies that are demonstrating an innovative approach to strategy and technology. With Unilever’s considerable financial clout and strategic know-how, they want to act as if they are one of the ‘dragons’ – offering guidance in exchange for a say in how these innovative new companies’ are going to develop in the future. ‘When there’s a great opportunity to

be collaborative, we will invest across the four sectors that I have mentioned’

As a company they do have a facet within their organizational structure called, ‘The Foundry’, which closely resembles an incubator but Andy states unequivocally that, ‘Unilever is not an incubator and Unilever Ventures is definitely not an incubator’.

Business Incubators have been picking up a lot of steam recently, with their implementation being seen as a way of stimulating company growth. Andy is keen to accentuate that Unilever Ventures is not an incubator, ‘we’re not an incubator in any way, in fact, we are focusing on companies that have a product that is on the market in early growth’. As a company they have a division within their organisational structure called ‘The Foundry’ which is somewhere close to being an incubator, but Andy states unequivocally that ‘unilever is not an incubator and unilever ventures is definitely not an incubator’

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There has been a lot of press around large corporations investing in smaller companies in order to leverage competitive advantages through IP real estate and patents – this has been something that Google and Apple have done successfully in the past.

Both Unilever and Unilever Ventures do not see this as a way forward for their strategic

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partnering – Andy says; ‘this is something which is far removed from the way Unilever and Unilever Ventures looks at the business world’. They only look at companies that have an innovative product and management team in place, he says, ‘they have growth, they have market share – IP acquisition is pretty far afield from what Unilever is interested

in’. I get the impression that Unilever are quite traditional in that regard, but for them, it guarantees that they are investing in the best, most innovative companies. That’s not to say that Andy doesn’t see this trend continuing – ‘it’s a trend I definitely see continuing in certain industries – if you look at the tech giants, they’re all competing for talent

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For every Google and Facebook there are countless others that fall short of the required standard and data scientists – so the acquisition of IP real-estate is something they’d look for’ .

Unilever’s portfolio, and their ability to innovate within that, requires making high capital risk investments. For every Google and Facebook there are countless others that fall short of the required standard.

But for Andy it’s about giving these high-risk companies the best chance to grow, especially when there’s a chance that a company’s growth will bring competitive advantages to Unilever going forward. Another interesting aspect to this is that through the acquirement

of new portfolio companies, Unilever can run test pilots, giving Andy and his team the opportunity to see whether they have the potential to be scaled-up and incorporated into Unilever’s overall business.

Unilever continue to be one of the world’s most innovative companies, operating in numerous spaces throughout the globe. Andy’s team at Unilever Venture’s is without doubt an important arm in their operations and allows them to remain knowledgeable of technological innovations.

With this mindset, it’s clear that Unilever are investing in the best way and helping to nurture strong companies to help them in the future.

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TRAITS OF THE SUCCESSFUL CFO

Daniel Miller | Finance Evangelist

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The finance function is not what it used to be. It has changed considerably over the past five to ten years. Where finance professionals were once considered number crunchers, now, and regardless of their seniority, they’re important cogs in the business strategy.

In line with this, we take a look at the seven most important characteristics for finance leaders and CFOs.

COMMUNICATION Most jobs require you to be an excellent communicator, but it’s absolutely essential for finance leaders. Finance professionals aren’t just expected to communicate effectively within their department, they’re also expected to share the company’s financial performance and help mould the vision of the company.

This involves communicating with the company’s shareholders and keeping them enlightened to the financial state of the company.

RESULTS DRIVEN Finance leaders should be comfortable at both setting and meeting targets. Although the best finance leaders are results driven by nature, they understand the importance of targets being measurable and achievable. The board of directors expect targets to be met, so it’s imperative that the finance leader has enough drive to lead their team towards them.

VISION Today’s finance leader always has one eye on the future. They instil this vision into their workers and make sure they always work towards cementing the company’s long-term vision. The finance function is embedded within the strategic vision of a company so it’s vital that forecasts are accurate and planning is thorough.

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BUSINESS ACUMEN Finance leaders should be knowledgeable across the entire organization. They’re equally comfortable dealing with the sales department as they are with operations. They understand how each and every department fits in with finance and the company as a whole. This often means that the best financial leaders have to immerse themselves in every department within their company.

CONFIDENCE The best leaders are confident – they know how to address problems and can inspire self belief in their staff. Although finance leaders won’t want their staff to be taking unnecessary risks, they won’t want them to be risk adverse either. This will mean that they’ll have to instil a certain degree of confidence whilst also making sure they are questioning what they are doing. .

NUMERATE A lot has been said about the new finance leader and the role’s departure from number crunching. But finance leaders have to be comfortable with numbers and leverage important insights from them. It’s not so much a question of tallying up a sum of figures, but how they can look at data and pinpoint it to specific issues within the organization.

HONESTY Things go wrong – you could be off with your planning or interpret something in the wrong way. What’s important as a financial leader is that you try and rectify your problems in an honest manner. Integrity is imperative in the finance function and the finance leader should act as an example for the rest of the department. If they don’t, we have seen the consequences.

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