377: The SaaS CFO Reprise & Two CFO Tales of Collaboration

The tribe of finance leaders commonly identified as “SaaS CFOs” is busily developing the tools and management practices destined to reshape the finance function.

Listen to the Episode Below (00:23:42)

It was not quite 100 years ago that Donaldson Brown arrived inside the offices of General Motors Corp.’s finance department.

The future GM CFO had distinguished himself years earlier by developing a return-on-investment formula for the DuPont company—soon to be GM’s largest investor—a relationship that ultimately influenced Brown’s decision to leave DuPont and spearhead the application of the concept inside GM’s operations.

Thus a concept originally developed to shed light on the operations behind the manufacture of DuPont’s blasting powder and dynamite would become a central component of the automaker, whose elevation became synonymous with the rise of the modern corporation.

Fast-forward 100 years, and while it may be difficult to classify an imprint made by any one finance leader as “Brownworthy,” it is not difficult to identify the class of finance leaders that is unquestionably having a Brownlike impact on the evolution of the finance function: It’s the tribe commonly identified as “SaaS CFOs.”

Behind the rise of the SaaS CFO is what might be called the growth ultimatum—a challenge of sorts that many finance leaders have been issued in the wake of the economic downturn. Whereas the economy’s unexpected plunge guaranteed CFOs a seat at the strategy table, that place is no longer theirs for the keeping unless they can demonstrate that they are not only managing costs, but also driving growth.

No one group of finance leaders was prepared to answer the ultimatum more soundly than that whose members were inside the Software-as-a-Service realm. Armed with such metrics as return on revenue, customer acquisition costs, and customer retention, SaaS finance leaders are busily advancing a more customer-centric model for finance, a model with conceptual constructs suitable for application beyond the SaaS realm.

And so it was for ROI. Years later, reflecting on the effort to begin applying the ROI concept beyond blasting powder, GM’s historic CEO Alfred Sloan wrote: “Financial method is so refined today that it may seem routine. Yet this method—the financial model, as some call it—by organizing and presenting the significant facts about what is going on in and around business, is one of the chief bases for strategic business.”

The great attention that Sloan gives to ROI along with other financial concepts in his 1963 book My Years with General Motors has been interpreted by some business pundits (including this one) as a rebuttal to Peter Drucker, whose earlier book Concept of the Corporation had marginalized the contribution of financial models within the rise of GM while almost exclusively focusing on its management practices.

According to Sloan, within the modern corporation there is always a chicken-or-egg causality dilemma when it comes to financial tools and management best practices. Thus far, SaaS CFOs are quickly acquiring an edge as they help to define and execute the management best practices required to adopt and deploy their customer-centric metrics. It’s an edge that Sloan understood well, and one that is now maximizing the influence of SaaS CFOs. -Jack Sweeney

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