The CFO to CFO podcast is hosted by David Axson, the CFO Whisperer.
This week's guest is Syniti's Chief Digital Officer, Chris Knerr, whose had a long career both as a CEO, board member, finance executive, as well as moving significantly into the digital and data transformation space.
Subscribe Here: Listen to all the episodes in the Syniti Podcast Series
David Axson (00:07):
Hello, and welcome to the Syniti CFO to CFO podcast series. My name's David Axson and I'm going to be your host through the series of podcasts that explore the deepening relationship between CFOs and the use of data across the enterprise.
Nearly every business interaction now creates a digital footprint, creating more and more data that we can begin to infuse into our management reporting analysis and decision-making processes. And CFOs are becoming increasingly active in guiding the governance of that data and the use of that data to ensure that the organization achieves real value.
In this series of podcasts we'll be speaking to some CFOs and practitioners in the space about how their role is changing in the use of data across the enterprise and how they're combining data with talent within that finance organization to deliver ever more value. Please enjoy the series and don't hesitate to follow up with any questions if you would like further information.
David Axson (01:03):
Hello everybody, it's David Axson here. Welcome to the CFO to CFO podcast. And I'm delighted to be joined by Syniti's chief digital officer Chris Knerr, whose had a long career both as a CEO, board member, finance executive, as well as moving significantly into the digital and data transformation space. Delighted to welcome you today Chris.
Chris Knerr (01:25):
I am delighted to be here David, thank you for having me and looking forward to chatting this morning.
David Axson (01:31):
Great. Well it's been a pretty extraordinary year 2020. What lessons have you seen that your CFOs of your clients have been learning during this crazy year?
Chris Knerr (01:40):
Yeah, it's a great question and as you said, a lot of water under the bridge and a lot of forward-looking opportunity in 2021. From a CFO lens David, I think there continues to be a great deal of interest in and pressure to optimize. And what we've observed in working with our client basis that companies are in different moments of still responding to the pandemic, recovering and reimagining their business. And all of those moments from an optimization, so P&L management, working capital management, fixed asset management and long-term capital optimization. All of those heavily depend on good data in order to be successful.
I think there's an interesting moment too where non-technology companies in particular are struggling with how they're going to grow after the pandemic. And in a sense, I think one might take the view from a long-term perspective and certainly from a CEO CFO lens, that what's happened in 2020, in addition to the economic impact that we all understand is almost like a deepening of the digital divide between core technology companies and non-technology or what I would call global value chain incumbent companies. That's a lot of our client base, so we're both spending a significant amount of time from a CFO lens in figuring out how do we continue that let's call it unharvested optimization on EBITDA. But let's not make it a zero-sum game, let's figure out how we drive a growth agenda. And there are a number of avenues that clients and executives are pursuing for that.
David Axson (03:42):
Yeah, I think that's really interesting because one of the insights I've gained over the last six to 12 months is really how well most organizations have coped with the unprecedented nature of the pandemic. The level of creativity of businesses, and continuing to be able to operate pivoting their business to new business models. And from a finance perspective, the ability of CFOs to husband cash and capital in an efficient way.
There was a study in the Wall Street Journal just last week, talking about the growth of cash balances on balance sheets over the second and third quarter, which to me was quite surprising given the speed and nature of the pandemic. So I think we're beginning to see this appreciation of visibility and transparency in data and how that can then be translated into some positive financial outcomes. I think we're seeing that a little bit with the uptake in M&NA that's going on at the moment.
Following on from that, you have a really interesting and unique perspective based upon your background, because you work for one of the world's largest global companies and you've also been CEO of a startup. Now, how do the approach is to realizing value from data differ? Or is it the same across the board, regardless of what type of business you're in?
Chris Knerr (04:53):
Now, that's an excellent question. And I'd say they're quite different. So, when I was at Johnson & Johnson for many years and I'd actually represent that there are a couple of things that J and J is absolutely world-class in. One is the whole research and development and bringing innovative products to market. But the other is financial management and financial discipline. The finance function at J and J in my view, they're the best that I've ever worked with. But that said, J and J it's essentially a portfolio company, right? So you can think of it as being a collection of different assets that either perform well or don't and they're in a certain stage of life cycle as it relates to whether their innovation differentiated or whether they're commodity. And J and J is extremely successful at moving through that portfolio to maintain positions in differentiated products.
That said, it can be slow moving. So there's a whole complicated decision framework for anything that you need to do. And people live and die by that yearly planning cycle, the P&L planning cycle on the capital budgeting cycle. And that cycle is really about two years long. Now, on the opposite bookend working in the startup that I ran for five years. It started with me by myself in my living room and ended up growing to not a large, but a fairly significant business over the course of five years. And in startup world, you're almost managing everything week to week.
Now, what I think is instructive to your point on cash balance management, it's almost like for enterprise clients that forced a reckoning and bringing those two approaches together. Which again, underscores the importance of good, timely, granular data for agile decision-making. So, companies like J and J and many of our clients have demonstrated resilience and the ability to leap into that agile mode.
There's been a phrase that I'm sure you've heard of in the past 10 years really about bi-modal information technology, right? Which is this idea you want your flagship programs, but then you want these experimental agile things that show proof of value quickly. I think what we've witnessed from a finance management lens, a CFO wants this year is bi-modal finance and enterprises, which brings those two moments together. And I know I'm a bit of a broken record because I am a data guy. Companies that do data well have got an advantage in being able to execute on that bi-modal approach that brings the big, heavy, thoughtful enterprise and the nimble commando of the startup agile approach together.
David Axson (08:09):
Yeah. And I think the finance teams are beginning to embrace that and the ability to be able to construct around frameworks and models without having to rely on the central IT function, but still having the confidence that central discipline and governance is in place to be able to manage the data assets across the enterprise. I think there's an interesting new balance point there that I'm seeing organizations think about.
One of those that things that I'm beginning to see of interest in your point of view on is with respect to technology, what I'm almost seeing is almost a democratization of access to technology. With the advent of cloud and software as a service, you no longer need to necessarily be a J and J to be able to access the latest and greatest tools and technology. Even relatively small, not the smallest maybe, but even relatively small, mid-size companies can access tools that can help them better manage and govern data, better do visualization, perform more advanced analytics. In the old days, the only tool they had was the spreadsheet and they made it do everything. So I think this democratization is really helping both small and mid-sized companies achieve some of the discipline and some of the value that larger companies are beginning to realize, do you see that as well?
Chris Knerr (09:24):
I do see that David, but I think there's a caveat that there's that moment of we've got new tools and new capabilities and they've been commoditized, but there's also a moment of the palette is almost too rich in a way. And what I actually see across the board is companies struggling to figure out where do I place my bets from a technology perspective? Like what capabilities are going to be meaningful? And the other thing that I think it's both a CIO and a CFO challenges that the, since I've been working 20 plus years in this space, I think we all would have said 20 years ago that things were going to get simpler. And in fact, they've gotten a lot more complicated. And as core, what I would call enterprise systems of record, ERP, high ceremony data warehouse, all of that have been disintermediated by upstarts in the cloud world.
Now everyone's got all the complexity they had 20 years ago. Plus it's been peeled apart by different cloud technologies. All of which is to say there are pearls there. You can do a lot more with a lot less investment but it requires leadership and a thought process about where you want to place your bets from a technology perspective in order to maintain that governance. Which obviously if you're doing CFO lens, right? In a way, one of the most important functions to me of the CFO is decision support, strategic decision support. So you want to make sure that the underlying analysis is correct, and that it hasn't been compromised by shiny objects I guess, if I could say it that way.
David Axson (11:21):
Yeah. It's a challenge then I suppose for CFOs it's like walking into a candy store and there's so many different choices on the shelves is sometimes difficult to work out, which are the right ones for your organization at that particular point in time.
Chris Knerr (11:34):
But just to interject on that point to close out that thought, I think it's very important from an executive lens. So, my advice is don't lose the discipline on governance, governance of data and governance of people process and technology as it relates to these decisions, right? So even though there're all these super cool capabilities out there, if you will, the old fashioned discipline that we applied to making sure that all the pieces fit together smoothly is still extremely important.
David Axson (12:05):
Yeah. The analysis is only as good as the data underpins it.
Chris Knerr (12:08):
David Axson (12:09):
You mentioned growth opportunities earlier, and one of the things that I've seen over the last few weeks, a month, is a fairly significant uptake in discussion and actually action around M&NA activity. As companies look for value out there in the marketplace, maybe look to put some of the cash and capital they've been able to conserve over the last six to 12 months to work.
M&NA is a very specific type of activity that has a mix track record, frankly. And I'm beginning to see that CFOs are beginning to start to think about the value of the tools and technologies around data to help them not just in the integration and day one operation, but also enough run due diligence. How do you see that moving forward in the future in terms of easing the pain of integration so that those synergy savings and long-term strategic benefits are more probable, more likely to be realized?
Chris Knerr (13:04):
Yeah, great question. And backdrop, we see the same thing. So our business currently is and historically is about 40% M&NA related, a lot of integration work but a lot of an increasing amount of work on the front end as well. Yeah. Look, I think both on the buy side and on the sell side, if you think about the life cycle of a deal from the shopping phase to the due diligence phase, preparation, integration and then clean up, there's a dawning awareness that data is critically important in all of those phases.
And to your point on M&NA having a checkered past, it's fairly often the case that the growth synergies are not realized. And what we do and what I would advocate everyone do is get all the tools we were just talking about digital clean room, as an example, do the empirical analysis upfront. I think too often, the deals look very exciting, but at the next level of detail down, not much has been done beyond a high value management consulting type framework analysis by consultants or by investment bankers.
My plea to get the value out of the deal is let's go a couple of levels deeper and if the story is a geo synergy or across product line or across market synergy, it's actually possible now to do that analysis on a pro forma basis upfront at a very granular level. You don't have to wait until you get into the integration phase to discover that the growth synergy that you sold the deal on is not actually there. Those are the two ways that the deals afterwards don't have a good value is if the growth isn't there or if the integration is botched. Due diligence as it relates to data is extremely important in both those vans.
The other thing that I'd offer and what we see this is not a mature area, but every banker on every high value ad consultancy and every acquisitive company I talk to is very interested in getting a better quantification of data as an asset. So, essentially if you think of a data pool as essentially being capital in the form of information at least under US gap rules, there's certainly no way of valuing that except as good will which is more art than science.
So one of the trends that we're exploring and then I encourage all financial leaders to explore is how do we over the next three to five years in an environment we know is going to be rich with M&NA and tied to a digital transformation agenda, how do we bring that balance of valuing data as an asset more into the realm of science from the realm of art where it currently is?
David Axson (16:10):
Yeah. And I see that following some of the work that's been done over the years in trying to value and measure things like brand equity. Data as an asset has similar characteristics and can generate real value. If you start to think about things like the network effect of combining customer databases and being able to understand customer needs in that context. So I think there is some interesting opportunities there.
Chris Knerr (16:32):
Yeah, absolutely. You could do a thought experiment where if you were to value a peer, say this is really a thought experiment, right? So you were going to buy Google, how would you value Google? So it has physical assets in the form of servers, but most of its asset is actually capital in the form of pooled information. And so there's not really in my view, an accepted way of valuing that. And my hope is that that's a bit more amenable to quantification than brand equity over time. And that's actually something from data services, data science perspective that we can bring to the table collectively, as again, as we're expecting a lot of deal volume in the next couple of years.
David Axson (17:25):
That's great insight. Finally Chris, looking to the future, what do you see as the most significant or exciting developments that are really going to help organizations monitorize the data asset?
Chris Knerr (17:36):
Well, one thing that I think is, I'll say it's both a huge risk and a huge opportunity. And I'll go back to the discussion we had about the digital divide between core technology and the old industry companies. The old industry companies are really looking for growth. And I think there's a tremendous opportunity for companies to reconnect with their business to business to consumer base in a way that it's changed a lot with all of the ad tech platforms in the last 10 years in particular.
So that there's really been an acceleration of just intermediation of the end customer from companies that produce goods and services by pure play technology companies. And I think you can see suddenly there's an explosion of interest and energy around consumer data privacy, consumer data protection, and the idea that there's growth in understanding what consumers want, rather than continuing to aggressively serve a myriad of ads to them all the time.
So, look I bring that up because I think that the data opportunities on the AI, digital transformation, EBITDA, continuing to harvest EBITDA optimization. Those are all fairly straightforward, everyone's working on all that already. The excitement that I see and the excitement that we have is working on the ecosystem in a way that we can reconnect to primary demand. And I believe that there's a critical opportunity to do that through reconnecting with customers under an improved umbrella of privacy and security in a way that is really not typified by the consumer experience and even the B2B experience of today.
My exhortation for anyone in the data space and CFOs in particular, is of course, I don't have to tell CFOs not to forget about EBITDA. But what I would encourage is let's look at where the growth is and how we improve growth by reconnecting to primary demand in terms of what the market wants in a way that takes us a bit, if you will, it takes a step back to take two steps forward with respect to how we're collectively interacting with the big data ad tech stack.
David Axson (20:23):
Making sure that we connect it to value. Chris Knerr, chief digital officer at Syniti. Thank you so much for your time today. Some wonderful insight there thank you for joining this podcast.
Chris Knerr (20:33):
Thank you for having me. I enjoyed our conversation and hope you have a terrific rest of the day, and thank you to the audience for listening.
David Axson (20:41):
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