Strategy Overview
The CEO is the person ultimately responsible for the strategy that a company
follows. The CEO may drive a business to take advantage of a perceived change in
the marketplace, a new technology, a new market, or some other factor that the CEO
believes will give the company a competitive advantage in maximizing its market
share or profitability. The CEO can be very good at spotting these future changes,
but is perhaps less skilled in determining how to get from here to there.
The CFO is much more knowledgeable about the finances, processes, and risk
mitigation needed to achieve the CEO’s strategic vision. With this knowledge, the
CFO can perform the valuable role of filling in the details in the strategic plan, as
well as testing the plan to see if it is viable. In some cases, the CFO may suggest
alternative paths that can form the basis for an entirely new strategy. In the latter
case, the CFO is the person driving strategy.
There are many books whose sole focus is the development of strategy, headed
by Michael Porter’s superb Competitive Strategy. We do not attempt to repeat or
even summarize these books. Instead, we make note in passing of the general
concept of strategy, and then move on in the following sections to the areas in which
the CFO can most effectively participate in the formulation of strategy.
The process of developing a strategy can be grossly summarized into three steps,
which are:
1. Define the strategic goal. This can involve a study of the competitive
structure of the industry, the entrance of new competitors, regulatory changes,
how the company earns a profit, and many other factors that lead the
CEO to target a particular strategic direction. This step also includes consideration
of the expected strategies that will be followed by competitors.
2. Document the current capabilities of the company. This is an inwardfocused
examination of the strengths and weaknesses of the business, from a
competitive perspective. This analysis can throw out many issues that have