Ask Your Developer!
That’s what Finance teams should be doing. In this bite-sized episode I share some three thoughts on how Finance teams and professionals can harness the power of software developers to win in the 21st century.
Link to book: www.amazon.com/dp/0063018292
Transcript
Andrew: [00:00:00] Hi everyone. And welcome to this week’s Monday memo,
[00:00:02]and I’d like to talk about a topic. A lot of us are impacted by it, digital revolution, and as we’ve been hurtling through this. The rule book on business, is being rewritten as we’re living through it. For example, software, it’s a key element in and not revolution and it’s lowering transaction costs.
[00:00:24] It’s reducing barriers to entry. It’s accelerating the pace of change. And companies who can’t live with that pace and an institution who’s who can keep up, will cease to be relevant, just like our accounting and finance profession.
[00:00:39]and today’s Monday memo is going to focus a bit more on this sort of software and software development angle. Because if you look at the likes of Uber, Airbnb, Netflix, yeah. That, that they’re essentially companies with not too much in the way of tangible assets, but this intangible software that allows them to connect customers with their services.
[00:01:03]And even if you think about Amazon, a lot of people want to hear Amazon. 15 plus years ago would have thought that they were retailer of books and CDs, but in a town hall in 2004 Jeff basis, when someone queried, whether they are retail or not, he said, no, we’re not a retailer, but we’re a software company.
[00:01:24] He understood the importance of software delivering value to customers even all those years ago. So I was gifted this book from Jeff Lawson. He’s the CEO of Twilio. Some of you might’ve heard of him before he’s he co-founded and is, has led a billion dollar business and.
[00:01:44] His book was called Oscar developer. It was actually taken from a billboard. They put up to advertise a company in Silicon Valley a number of years ago. And I don’t know about how many other teams in finance, but in my team we have a small group of developers and data scientists, that developed software applications as, and when we need them for our team to go access insights.
[00:02:06]To help our business partners make better decisions
[00:02:09]and having read it through. Now, I have to say there’s quite a few parallels between finance and accounting. Five or six come to mind. The first one is the importance of collaboration organizations. Need their developers to build software. Right. But even though that’s the case for them to do that, it’s all about collaboration with other functions.
[00:02:33] I think the expression goes, it takes a village to build a competitive advantage. So similarly in finance given our assets of Of where we sit in the organization, we’re essentially a support service. We have a broad view across silos, across functions. We have access to decision-makers access to Dasia and a very competent training in terms of turning the transactions of a business into insights, financials.
[00:03:04] Talk in the language of business and also that perceived objectivity and independence to help any help through any moments of friction.
[00:03:12]So collaboration is key for our success. If we’re going to fully maximize our assets and value that we could perhaps add to our organizations that we also share in common misleading stereotypes. If you think about a software developers just as this consideration of was nerds, I not say I agree, but if you think about the picture painted abdomen in the popular media or movies, you’ve got Sheldon Cooper from big bang theory.
[00:03:40] You’ve got Q in James Bond. Who’s an awesome coder. And you’ve got, even if you think even further back Ben Jhaveri for those of you remember the short circuit series, one of my favorite as a kid growing up They had these nerdy software developers and in accounting and finance, we just have this hashtag boring accountant who are chained to their desk, crunching numbers all day, counting beans as some people call us.
[00:04:04]So if we live up to our stereotypes, we’re not probably going to make the best impacts or influence in our careers. So to get the best results we need to share our problems with developers need to share them with finance professionals, asking for each other’s thoughts and not necessarily presenting solutions or ideas for solutions.
[00:04:23] Just go get the thoughts.
[00:04:24]So I can find that it might be I, not like I’d like you to close your book and five days, it doesn’t matter about over time. Just go do it, but imagine what you could achieve. If you could say it, right. I’d like you to close your books in four to five days, how do you think could make it happen?
[00:04:42] What would it take to make it three days and then looking to people to go solve problems and defining the right problems? It was a good example. I think some of you might’ve heard of it before about the NASA space program. I didn’t, I don’t know if it’s true or legend, but essentially they were struggling to find a pen that would work in zero gravity.
[00:05:00] And what the problem they were solving is trying to get a band to work in zero gravity. I spending thousands and thousands of dollars to go solve it. When the problem they should have been solving is how to write in zero gravity, how to write in space because the Russians just use a pencil. So very simple solution, how they framed the problem properly.
[00:05:22]Another parallel we draw from the book, I think within finance is value comes from cross people. Many businesses, many organizations, there are people that was in finance and accounting, software development are feeling disconnected from the business problems are meant to be solving as well as the customers they’re meant to be serving.
[00:05:44] And this could be a personal choice or could be that the management systems that don’t treat them in the way they need to be realizing their potential. Whereas if they were treated like craftspeople, the thinking is you could then on the Eastern or full technical talent and just talking with a guest mentor in an interview recently, we agree technical foundation is very important, but once you’ve got that, then the value is crafted on top of those technical foundations.
[00:06:15] And that’s prior to collaboration being key, eh, you can follow the value larger. We’ve talked about dash. In previous episodes if you put hashtag value ladder into our website, dot com, I’ll give you the relevant episodes that breaks that down for you. In ways we could go and craft more value, but values essentially crafted in finance as well as in software development.
[00:06:39]Also, I thought it was really cool point and it’s come up in conversation in a few panels before, is that software. Just like finance is hopefully moving from being a cost center to a profit center in the software world. And we’re familiar with this in finance as well. We’re used to looking at build versus buy decisions nowadays the expression is build versus, because it’s not equation question of buying in software anymore.
[00:07:11] It’s actually, you have to build the solutions that the software to implement the solutions your organizations need. And that’s bit of a one 80 from the process of continual outsourcing of activities within teams. If you think about how a lot of finance outsourced to low, lower cost locations, it’s not really about trying to drive costs down.
[00:07:33] Now it’s about trying to. To protect the value and have people contributing value and finance, as opposed to being seen as a cost center as well.
[00:07:43]And imagine if you had a finance team that had appropriate software to deliver insights at the speed of light instance or the speed of sound or whatever your, that could be a competitive advantage, but it just might mean that you might not have those finance people more closely situated to executives or management, which could be in a higher cost location.
[00:08:06] So it might mean that some of the outsourcing trends we’ve seen. That reversing the things become more insourced because that is the company’s secret sauce or competitive advantage. Yeah, finance needs to become a bit more of a profit center as well, track our results, not in terms of expense ratios to revenue or our financials, but perhaps, the number of softer benefits we did productivity improvements.
[00:08:29] We made utilization improved because of the decisions we help support or the insights we gave. Or if we did find a way of being able to identify how much we directly drove shareholder value, because we were able to rearrange some financing. Or do something cool like that, then that’s pretty, pretty cool to call out as well.
[00:08:48]Also I, there was another key point made in the book. Around the importance of experimentation running experiments to test assumptions about something. I don’t think we do that enough in finance. We’re always expecting our decisions to be perfect and on the ball. Cause we really zero in on things when they’re not on trend, but we also need to plant the seeds for tomorrow’s growth as well.
[00:09:12] It doesn’t make sense embarking on a three, four or five-year program. If we haven’t tested the assumptions in a low cost way.
[00:09:18]And I think that comes back to the work around real options. And again, that’s another advantage we can bring in finances to try and encourage our organizations to run more experiments. I’m bringing software developers to do that. And another cool concept that I really liked because it was actually Jeff Lawson recounting a story about where he asked his CFO to do something, which was whole-day blameless.
[00:09:40] Post-mortem what had actually happened was Uber was a very large customer of Twilio. Twilio’s has a software API that allows organizations to send out. Text messages and communications at scale. And as if you’re waiting for an Uber cab there’s a lot of communications backwards and forwards trucking where the taxi is at and so on.
[00:10:02]What had happened there because Uber was one of their main customers. An Uber became under a bit of cost pressure. They start to reduce their spend with Twilio and that’s Twilio was gearing up for an IPO. They had announced that to the market, that their biggest customer was spending less with them.
[00:10:18] And it knocked 30% off the value of the company because they were very heavily concentrated on a few key customers. Now that’s now the reason why they’re able to find that out is they held a blameless postmortem where they asked the question. Why did we have such a big investor, mishap misstep?
[00:10:36]Because it would’ve been easy to blame sales for not sowing enough to Duber account.
[00:10:41]But then essentially boiled down to a couple of root causes. Another one, one just being the concentration, another one being the pricing model. Was based off of usage. So the more Uber used the service, the more cost. So for them to reduce costs that would reduce usage, perhaps it was a better way of structuring the pricing for Uber, bigger customers, but also heavy users of Twilio to make sure that they could have increased.
[00:11:10] The lifetime value would have had such a disruptive withdrawal of using their business.
[00:11:16]So off the back of that finance then was involved in helping provide insights on scaling up to sales team, better quote or planning, better forward risk analysis, and trying to reduce the customer concentration. So really great example of where finance teams can add value. And likewise, that’s why we do to strengthen the numbers shows because.
[00:11:38] There’s a lot of value in sharing with other people, experiences of others for when they need them. And, we’re all progressing to our own careers of our hardware lessons, key learnings, frameworks. We’re doing things I’m one of the easiest ways. To make sure we’re doing the best ones and making the best impact and having the most influence is ask others how they’ve managed to get to the levels that we’re seeking to achieve.
[00:12:02] And that’s why we bring the guest mentors on to share with you their stories on how they did it, how they learn, what they’ve learned, what works, what doesn’t
[00:12:08]And also it’s quite interesting that there’s a lot more software developers working more closely with finance teams. It’s quite a key message that’s coming across from the mentors. So it always interesting is how close to you working with your developer now, are you asking them to help solve your problems?
[00:12:26]So look, hope you enjoyed this week’s episode. If you did, please remember to share with your friends and colleagues when all the major platforms, iTunes, Stitcher, SoundCloud, YouTube, Spotify, and Amazon music. And as always, we really appreciate you investing your time with us today. So until next time. Yeah, take care of yourselves and let’s keep on building our strength and the numbers.
