Transformation: the financial executive's role in influencing business.

• Author: Hill, Steven
• Position: Cover Story

In conversations in boardroom and business meetings, certain words and concepts are appearing with greater regularity. Words such as "dynamic," "complex" and "disruptive" are used to describe the current state of flux of the economy. Concepts like "market shifts," "regulatory and tax burden," "innovative capacity" and "risk optimization" capture some of the many uncertainties that are influencing key decisions about near- and long-term strategies.

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This conversation has been shaped by years of global economic change--both good and bad. Five years after a global economic downturn, recovery is inconsistent from nation to nation and quarter to quarter.

Emerging markets around the world--though representing significant opportunities for companies from a market, production and supply perspective--are presenting new challenges, with an uncertain future for what had been consistent off-shoring and growth stories in places like China and India. The downturn has also caused many governments around the globe to refocus and expand their regulatory stance on business oversight and taxation. In addition, political divisions have also influenced regulatory and policy changes, affecting growth in the United States and the European Union, while political shifts in the Middle East have created uncertainty around markets and supply chains.

Consider also that leadership changes and demographic challenges from aging populations in China and Japan have affected current and potential future regulatory policies in those regions.

All the while, technology continues to evolve, opening up the possibilities and pitfalls of cloud environments, social media, data and analytics and wide-scale mobility. These and other technology changes are fostering the creation of entirely new industries and enterprises at the same time that they redefine how existing businesses operate and influence customer choices.

The biggest question of all is: How can a business translate all of this rapid change into a competitive advantage and, ultimately, a sustainable profit growth profile? In the face of so much change happening at so fast a pace, today's leading businesses are challenged to develop an operating model that will allow them to meet and exceed growing market demands.

But even beyond just keeping up with change, many businesses have opportunities to use the economic uncertainties, regulatory changes and disruptive technologies to their advantage. Those seeking to find that advantage are focused on "transformation" to drive profit growth and evolve and build for the future. In fact, 93 percent of 91 0 executives at U.S.-based multinationals and asset management firms said their companies were in some stage of changing their business models, according to a KPMG survey due to be released this fall.

The goal of such transformation is to create an operation that is not only aligned with current strategic objectives of the moment, but is also innovative, agile and responsive to change. Businesses that undertake transformations are better focused on their customers, and better equipped to stay ahead of current competitors, as well as to new challenges and opportunities.

Transformation as a Competitive Advantage

Transformation is about making comprehensive changes to the business at a time when incremental shifts are not sufficient. Businesses are challenged to think holistically, to develop operating models that will empower them to respond to current pressures and translate change into a competitive advantage.

Though the presence and persistence of change are obvious, finding the right response is a more significant challenge. To transform an operation into a model better suited to today's demands, C-suite executives have to ask a wide range of pressing questions, such as:

* With the changes in markets around the world, impacts on costs and supply chains, opportunities for mergers or acquisitions and emergence of innovative and disruptive technologies, what will the business look like in the next five years?

* With access to information growing--and the demand for goods and services evolving--how will customer needs and wants change in the future?

* Who are the competitors today, and who will be competitors in the years ahead? Is this a space where existing or new technology lowers the barriers to entry? Stacked up against competitors, what are my company's greatest vulnerabilities and what are its greatest strengths?

* To stay innovative, cost-effective and ahead of the curve, what will be the most effective...