Companies must not be paralyzed by indecision. As Jeff Bezos of Amazon says, you must go with 70% of the information as waiting for 90% will take too long and not provide you with significantly better outcomes. It is not about failing fast, but “failing well” as described by Google. If I can get more information than my competitor, learn faster and translate the learning into more actions I will win the race and have advantage over peers in the market.
A Brave New World for CFOs
CFOs are on the frontlines of this landscape of complexity. In fact, it is challenging everything they have traditionally done in their roles—especially their attitudes toward and relationship with risk.
By definition, CFOs are corporate gatekeepers, masters of risk avoidance and mitigation. They are the Dr. No of the organization. While they will always be charged with policing risk, doing so is a completely different undertaking in an agile world, says Perfetti. De-risking used to be an exercise in driving toward certainty. But now certainty is a mirage. And too much de-risking can actually trap a business in the past, choking future opportunity, and making it impossible to be agile.
What is the impact of this reality? CFOs have no choice by to embrace uncertainty, even though it goes against the grain of their expertise and natural mindsets. Instead of seeing it as the enemy, they must find the value in variance, in building ranges and optionality into budgets and strategic plans to account for the unknowns—both good and bad—that will impact the future of the business. In addition, they must excel at confidently and clearly communicating these variances to stakeholders inside and outside of the company. We must look to acquire options and build flexibility into our systems to move through and exploit the uncertainties. We must also look at failure not as loss but as an opportunity to learn. Note that to value an option you do not need to know the ROI of the investment. The primary driver of the value of the option is the range of the outcomes. Options become more valuable as uncertainty increases.