Building canary in the coal mine business agility
There was a reason that coal miners brought caged canaries to work in the early 1900s, acting as early-warning systems to detect noxious gasses like carbon monoxide. If a canary keeled over, it was a sign that workers should immediately change course (i.e., drop their picks and run for the exits). The canary in the coal mine is an effective metaphor for business agility—the need to recognize and address problems (or opportunities) quickly.
The following situations are what a chief financial officer (CFO) needs to capitalize on to cultivate business agility in his or her company.
Defining business agility
Agility can be defined broadly as the ability to react quickly to internal and external forces, such as competitors, new market opportunities, a declining business climate or customer preferences. However, there are many shades of agility.
One company may identify itself as agile simply by being able to produce its financial statements on time. Another may have systems in place to drill down into every key productivity indicator. In either case, it’s critical for the CFO to define what it means to be agile for his or her firm and build an infrastructure around those tenets.
Going beyond the early-warning system
Once the canary in the coal mine flopped over onto its side, there wasn’t much discussion among miners about what to do next. However, in today’s business environment, the next steps aren’t always as clear.
Baseline indicators like a drop in sales volume or a slowdown in cash flow might be the first signs that something is awry, but CFOs need to be able to look beyond the early-warning signals. To move quickly in the right direction, they also need access to other metrics like customer satisfaction scores, open service tickets or inventory levels so they can diagnose the problem and determine a plan of action.
Systems for the self-service CFO
It’s the CFO’s job to consume information, make decisions and ask questions. CFOs aren’t typically software engineers or coders. They need to be able to access a software platform, filter information, look at different components of a data point or pivot and play with various scenarios without having to ask for information technology (IT) staff to help.
An agile business is one in which the business software is flexible and meets the needs of the CFO (as well as other executives) without customization, reconfiguration or even small requests to the IT department.
Choosing software with baked-in agility
When businesses enter new markets—local, regional or international—their business software systems often have to adapt to new currencies, languages, tax rates and regulations. Legacy software systems can make adaptation more challenging and time-consuming by requiring IT to manually add on capabilities.
In contrast, agile business software systems that treat currencies and languages as user preferences (much like colors or fonts) or address tax rates and compliance automatically help make the transition to new business environments much quicker.
Adopting an agile mindset
Building business agility requires a commitment across the entire enterprise to seek out opportunities, build an infrastructure that can reveal market opportunities, product problems or staffing issues efficiently, and move quickly to take advantage of the situation.
While it’s a goal that is easier to contemplate than it is to implement for many companies, the fact remains that most enterprises don’t have a choice. Business and technology are moving fast. Companies that cannot or will not react faster than the competition are vulnerable. And it won’t do them any good if the canary dies and nobody in the company does anything but watch.
For more information about business agility, read RSM’s white paper Why CFOs must lead the charge to modernize the business—now.