There’s a concept in Japanese business called Kaizen. It can broadly be encapsulated by the words “continuous improvement” although it more specifically represents a broader philosophy of incremental advances across all aspects of the enterprise to steadily improve operational efficiency.
Properly implemented, Kaizen applies to all employees from the intern to the CEO, and to all departments. It is an approach observed by companies worldwide and that has bred respected business approaches like “lean manufacturing” and “just-in-time” production.
We know that financial planning is central to a business’ looks future strategies and success, both in the long and short term. But CFOs are also under increasing pressure from external forces.
As a concept Kaizen has a lot going for it. What company doesn’t want its full team of staff to feel ‘at home’ with their organisation and that approach each day with an ethos of continuous improvement. Not only does this lead to improved productivity, it also helps drive overall profitability.
Implementing a “continuous improvement approach” requires a more in depth view of the business, one that provides decision-makers with insight into every process that can be improved. For me, the CFO is best-placed to have and make the most of this visibility across the organisation.
We know that financial planning is central to a business’ looks future strategies and success, both in the long and short term. But CFOs are also under increasing pressure from external forces. For example I read with interest the Financial Reporting Council’s (FRC) recent advice on market volatility and the new factors audit committees must now consider before issuing their financial reports and accounts.
Only the CFO can ensure that all continuous improvement initiatives are both effective and strategic in light of the external risks and challenges their company faces.
While assessing external risk and managing the creation of value within the company may seem mismatched, they are in fact highly attuned. Just as there’s no point improving a business process if it hits a bottleneck further along the chain, there is little to be gained from implementing streamlining or enhancement strategies if they may fall foul of volatile oil prices or fluctuations on financial markets, for instance.
CFOs are unique in their ability to fully interpret the interactions of both internal and external forces on the business, and so only the CFO can ensure that all continuous improvement initiatives are both effective and strategic in light of the external risks and challenges their company faces.
It also falls to the CFO to ensure the data the business collects on its business processes can inform its drive towards efficiency. Companies sit on a wealth of relevant information but don’t always use it to its full advantage. For instance, different departments often plan, execute and report results on their activities in different ways which makes the extraction of insight from the company’s finance and performance data an operational nightmare. Setting consistent target KPIs and reporting practices for every department is a crucial first step in streamlining this process and making it easier to pinpoint areas for improvement.
I have worked with organisations across a number of industries that were keen to apply their analytics to develop a more efficient way of working and simplify enterprise planning.
For example, Lending Club, the world’s biggest online marketplace connecting borrowers and investors, has embedded data analytics into its back-office software. This means every transaction Lending Club processes can be stored and analysed, giving it a better understanding of market trends so it can tailor its processes to match.
Another business in the food and beverage industry understands it needs a constant pipeline of new products to keep growing its profit margins, particularly because its rival release copies of its wares as they are typically not protected by patent. Our applications allow the organisation to “map” its products – essentially working out which are the most successful and why – so it can commercialise them more quickly. I like to think of it as a form of “innovation management”.
It is this kind of multifaceted approach to analytics and data driven execution, along with cloud based tools for data sharing, analysis and interpretation that allows the business to identify its strengths weaknesses and intelligently recognise where to focus its efforts towards continuous improvement.
The concept of Kaizen is simple on the surface, but with so many pressures placed on businesses today it has become increasingly difficult to implement. Continuous improvement requires meticulous planning and a strategic approach, not to mention buy-in from everyone in the business. As the department with the most complete view of performance across the organisation the finance team is an ideal position to keep the organisation on course, with the CFO at the helm.
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