The concept of strategic finance has been in the discourse for over 25 years, yet the phrase “Becoming more strategic” remains pertinent, especially for middle market companies. The sector often faces unique challenges, balancing between the agility of small enterprises and the resource availability of large corporations. This balance makes the need for great or strategic finance both critical and complex.

Defining the Ambiguous: What is Great/Strategic Finance?

Strategic finance is elusive to define, often reduced to a “you know it when you see it” kind of standard. But let’s not get lost in semantics. Instead, let’s focus on its function—to aid leadership teams in creating and sustaining value. Strategic finance doesn’t inherently create value; rather, it serves as the intersection of critical data flows within the organization. It can collate this data into actionable insights, helping to understand the company’s economic engine and enhance financial, strategic, and operational literacy.

The Endgame: Creating a Sustainable Competitive Edge

The primary aim of great or strategic finance is to equip leadership with the tools and knowledge required to make better decisions, thereby creating a sustainable competitive advantage. Building this capability is easier said than done, evidenced by the businesses that fail to accomplish it. However, it is precisely the challenge that makes it worth pursuing.

Pragmatic Steps Toward Realization

Based on extensive experience working with middle market companies, the following steps are suggested for those aiming to realize the benefits of strategic finance:

1. Prepare the Field

Before you sow the seeds of strategic finance, your organizational soil needs to be fertile. Alignment across departments, clarity in objectives, and commitment from top leadership are prerequisites.

2. Define Your Strategy

Knowing what you aim to achieve is crucial. Outline the strategy that will guide your business activities and the key metrics that will measure progress through the execution phase.

3. Understand the Interplay

Recognize the symbiotic relationship between strategy, operations, and finance. Each affects the others, and understanding this dynamic helps in creating a well-rounded view of the business.

4. Information is Power

Determine the types of information that will empower your team to “Know More Now.” This could involve real-time dashboards, automated reports, or deep-dive analyses that intersect strategy, operations, and finance.

5. Data Processing

Agree on robust methods and processes to capture data and transform it into meaningful insights. Whether it’s through advanced analytics, machine learning, or good old Excel, the key is to make the data digestible and actionable.

6. Integrate Insights

Don’t let your newfound knowledge gather dust. Integrate these insights into planning cycles, accountability metrics, and reward systems, ensuring that the language of value creation becomes a cornerstone in organizational decision-making.

Beyond the Basics

While these steps lay the foundation, the journey toward great or strategic finance demands more. It involves honing various other capabilities and strengths that the finance team must develop. And it starts with helping the organization “Know More Now.” This not only aids in quick decision-making but also creates a foundation upon which other disciplines can be effectively built.

Conclusion

Strategic finance is not merely a concept but a necessity, especially for middle market companies looking to edge out the competition in today’s complex business environment. It involves an iterative process of gathering data, generating insights, and implementing them into action—all aimed at the ultimate goal of value creation. Therefore, the time to become ‘more strategic’ is not in some distant future; it is now.

Intrigued? Download our presentation for a deeper dive into how you can implement these concepts in your organization.

In the meantime, if you would like to connect- here is my email: pjm@pmccventures.com