Unlocking Customer Lifetime Value with Non-Financial Metrics - Jack Sweeney, Managing Director of Middle Market Media

Welcome to the CFO Corner. I'm your host, Nick Ezzo. In the CFO Corner, we sit down with CFOs and corporate finance professionals and their advisors to hear about the innovative approaches and technology they use to scale and grow their organizations. With me today is Jack Sweeney.

Jack is the host and creator of the CFO Thought Leader Podcast, available on Apple Podcasts, along with this podcast, the CFO Corner. And Jack's also the author of the CFO Yearbook 2022. As a career business journalist, Jack is a senior contributing writer to Forbes.com and was the recipient of the Excellence in Finance Journalism Award in 2018 by the NYSS CPAs.

He's held senior editorial roles with Business Finance Magazine, Consulting Magazine, Integration Management, and Washington Technology. He's also been a panelist on our own webcast here at Auditory AL. Welcome, Jack. Thanks, Nick.

Good to be with you. Well, great. Why don't we just get started? Jack, first question, how has the role of CFO changed in the last five to 10 years?

And where do you see that function heading in the next five years? I have three responses. First of all, it's changed because, as we all know, finance leadership has broadened. And the second reason, the number of finance stakeholders has multiplied in terms of who finance leaders have to interact with on a regular basis.

And I would argue my third reason is that this class of CFOs that began arriving in the office in the last five to 10 years began to widely reject what had been the traditional professional narrative. That CFOs had relied on for more than 60 years. They said, this isn't going to work for us anymore. And I want to just talk about that because that's really what I'm involved in, or at least how I look at my world or what I do today, other than being a podcast host.

But if you turn back the clock to the mid 20th century, I have a quote here I want to read from Drucker. Peter Drucker, famous managerial consultant from the 1970s, 80s, 90s. Concept of the Corporation was published in the late 1940s, and it was really the book that brought him to prominence. And again, that's where he went to GM, and it was Alfred Sloan and his CFO, Donaldson Brown.

They're both going to retire, and Brown convinces Sloan that, hey, there's this guy Drucker, he's written a few books, let's bring him in, take a look around, it would be great. Someone can, you know, put down a blueprint of all of what we've done here. And so he does that. And frankly, Sloan, it's debated, but Sloan wasn't happy with concept of the corporation.

And he wrote another book years later that he came out with sort of set the record straight my years at GM. But what I want to share is Drucker's comments on Donaldson Brown, the CFO, who, by the way, was a very pioneering CFO. He came over from DuPont. He actually married a DuPont.

But he came over. He had pioneered an ROI formula. And this is going going back to the 1920s, late teens, perhaps. And it was really innovative.

And he put it to work at GM. And he still thought to be a very prominent CEO of the first part of the century. But anyway, here's what Drucker said about him. Yet while he was universally admired throughout the company and known as a truly wise person.

Most managers wanted as little to do with him as possible. They simply could not understand a word that he was saying. He was dependent on the CEO to translate everything. Now, again, I would tell you that that stuck because Drucker had an attitude about the finance department.

And we forget, you go into the 1950s and Drucker has sort of given birth to this new space management, thanks to the success of corporation, concept of the corporation. And he came out with the practice of management. And he's giving birth to the discipline. And he's going to teach it in schools and what have you.

But that's really the birth of Peter Drucker. And I want to share what he says there, because it reflects on, I think, what's happening today. So in that classic text known as the practice of management, Peter Drucker wrote, if two people can work together, they form an ideal leadership team. But two people like this are rarely found.

And two people are always a highly unstable combination. If there are only two people, even a slight disagreement may become dangerous. Now, think about that. Now, we take for granted that CFOs have been around forever.

And in fact, they've been called a number of things. Not until the 1970s did the title CFO really begin to catch on and people used it. But they would have been corporate finance directors. They've had all sorts of...

So what Peter Drucker is getting at is there really wasn't a CFO leader in the C-suite. And more broadly. Now he did say at GM, Donaldson Brown clearly was a great pairing. Part of what he was sharing there was this was unique.

Sloan and Donaldson Brown had something special. But anyway, I've given you too much, but I wanted to plant a seed here that finance leaders today, that professional narrative has been evolving quickly. And it's been over the last 10 years that the people who step into the finance leadership role have had to learn how to speak about business differently and to more constituencies. So let's double click on that professional narrative concept because I want to know more about that.

So how do you think about professional narrative for CFOs and why is it important and why have they swung and miss at that? Well, you know, there's this, again, I guess there's their tradition. There's probably three reasons. One is I think it's a deep tradition that CFOs always step back and allowed the CEO, of course, to be the visionary leader.

And then they're guarded by nature, finance leaders. And again, they weren't born that way necessarily, but with every analyst call, they've learned to give as little information as possible. Don't give that extra level of detail if you don't have to. I mean, so they're trained not to provide any detail.

And then third, well, it's the CEO. It really is the CEO. And CEOs have to become accustomed to sharing some of the visionary responsibilities today. And it's not easy.

It's, and again, going back to what Peter Drucker observed in the 1950s, it's a really delicate balance going on right now because things are changing. And I think, you know, my idea for the podcast early on for CFO Thought Leader was I knew that finance leaders needed to reboot how they talked about business. And I'll share something with you. I do, I feel almost like a coach sometimes as they come on.

Now, these are senior leaders, so much more experience. I don't have their skillset, but I do know something about storytelling. And like I said, they're trained not to give that little extra detail. So they began talking about how they first became public accountants and how they serve many, many interesting clients.

And I'm like, couldn't you say it this way? I began in the Houston office of KPMG, serving mid-size energy clients. Just that little bit of detail in storytelling that doesn't harm anybody. Just gets everybody much more involved.

And that's something finance leaders, as they sit across the table from data scientists, from HR working closely and the customer success people today, they have to be more engaging in a different way. And it begins with how they present themselves and the stories they share with one another. Across the table. You're speaking my language, Jack, because as a marketer, I'm a storyteller.

And we as human beings, although homo sapiens have been around for 60,000 years, 100,000 years, whatever, through most of that journey. Things weren't written down. So how were things carried forward through storytelling? And our brains are wired to remember stories.

And so, you know, I interview people all the time. I talked on this, on this podcast, I talked to CFOs every day. And the ones that get the most clicks, the most likes, the most engagements are the ones that actually tell the story. You know, they've got actually an origin story.

How did you get into accounting? Well, I was in fourth grade and I scored a hundred percent on my math quiz. And I knew that I was good with numbers at that point. It's like, I love that, you know, just, you know, keep that going.

So I couldn't agree with you more on that. Let's pivot a little bit though, because I know that you've spoken a lot and you've written about technology. I don't know if you consider yourself to be a technologist, but you know a lot about it. And you and I have worked together on some topics around the cloud versus on-prem about modern technology.

I don't know if this is a question or a statement, but Jack, why don't you just talk a little bit about your point of view on technology and how it's transforming the role of the CFO and the office of the CFO? Well, again, I love thought leadership and I love looking back in time. It amazes me that there was a book in 2006 that came out, Reinventing the CFO, Jeremy Hope's book. And for me, it was wonderful because I had sort of just arrived in the land of finance at a magazine.

And I really didn't have a clue as to how to write about it, report on it, what's new, what's different. And Jeremy's book really was something of a touchstone for me. But you think about when it came out, it came out before the cloud. And that's what's interesting here.

And I think the cloud was really an accelerator to all of the changes that Jeremy had written about in that book. And again, there was this anticipation, but as we know. It was really 2010 before some of these tools found their way into mid-sized companies and what have you, and that cloud and the SaaS model began to blossom. And then what's exciting to see inside so many of these SaaS companies were the finance leaders who were getting clued in on the the customer experience and coming up with new metrics, how to measure that experience and understand better how to be responsive.

So the SaaS CFOs, the CFOs and the technology companies themselves who had these SaaS models were really beginning to extend their lines of sight deeper. Than ever before. And that, from my point of view, that was a leap that technology allowed them to have in a comfort level with these tools and understanding this was important. And just like Donaldson Brown, who showed up with his ROI formula, he was an innovator in the 20s and 30s.

But the SaaS CFOs are really, in my way of thinking, the innovators today in terms of customer-centric model. And we can talk about what's next, but it was really that blossoming of the cloud. Well, you and I are both old enough to remember where the cloud was deemed to be the scary alternative, and I need to keep my data on-prem because I've got control over it. And And now here we are, February, 2023, it's inverted.

Like where a CFO does not want to stay up at night thinking about, oh my gosh, is somebody going to ransomware my data? Are they going to hack into my data center? I'd rather put it in the Cloud because I've got professional people there who know how to keep this stuff safe. Also, with the advent of Cloud computing, we have more computing power at our fingertips in the Cloud, which allows us to do things like Al, machine learning, natural language technology, computing power that we've never seen before at our fingertips, which really enables this whole new category of solutions.

How do you think about that, Jack? No, it's really exciting and it's interesting. We've gone through these cycles and there was a feeling, we've been hearing about how the accounting department, Al was going to play, the robots are coming. We've been hearing that for a while.

Of course, most recently, we've all seen firsthand experience with ChatGPT. We've all given it a test run. I've played around with it myself. Yeah.

We touched on this beforehand, but one of the things I typed in was, what are the non-financial metrics finance departments are using today. And it blurted out 13 of them, beginning with customer acquisition costs, customer lifetime value. You can take this to the next level. You know, what are the, you know.

Customer lifetime value measurements? How would you, you know, what are the most popular ones? Which ones are flawed? It would pop them out.

So, I mean, that's a fabulous tool for me, who's always trying to wrap their heads around a new metric that a finance leader might share. So the times are changing very quickly. I think chat GPT, it doesn't begin and end there. We just know, well, it begins there maybe because we're all like thinking, wow, things are going to change here much quicker than we anticipated.

And what does that mean for business, you know, the finance function where finance leaders reside, but also more broadly, how are business models gonna be modified and shaped and the concept of value where value resides in an organization. How is that gonna be impacted? So finance leaders have a lot of reading to do, late time reading, it seems to me. For sure, for sure.

And people are probably listening to this podcast right now, like quaking on their boots, thinking, oh my gosh, are robots coming to take away my jobs? So I'll ask you this specifically, Jack, are robots coming to take away accounting jobs? Well, yeah, it's kind of obvious folks and it concerns me, but yes, I think that's one of the ripest areas for robots to step in and play an important role there. And for all that accounting talent, I think for years you go to a conference, in the last five years, and it's all about how you can blaze that path upward and play a more important role in your organization.

But I do think that- Elevate that role, just bringing that role up to more valuable things that people could be doing instead of just data entry. More than data entry, But accounting, again, as a discipline. It's interesting because as we know, it's the language of business and how people think about it And it's such an important sort of credential that first. Threshold so many of the finance leaders we speak to came through that public accounting, That you know hurdle Had their years there and it was such fabulous experience for them, That it worries me a little bit as to uh how that might be reformed in some way and again, you know, there's a whole.

Academic community built around accounting. So I don't think it's going anywhere, but it's going to be interesting to see how that evolves, that first plateau, if you will, for finance leaders on the way up. Well, Jack, it's been great talking to you. I'm going to leave you with the final word.

Anything else you want to leave our audience with before we sign off today? Oh yeah, I have some pointers actually. Forgive me, I wrote these down quickly. Because again, part of what I think I like to think I do is help finance leaders get their thought leadership out there.

And I'll tell you, what is a professional narrative? That is your own personal thought leadership. Just the way we put white papers on our company page and what have you to educate companies about what our company, you know, the problem that our company is helping solve. You need your own professional narrative battened down.

But I'm gonna give you a few pointers here, how to tell your narrative. Small things or what might seem like small experiences of little consequence often have a profound effect on professionals. You remember them for a reason, okay? Number two, it's never good to cast yourself as a hero.

Avoid it at all costs. Storytelling is an art, make yourself a secondary character. And my third thing is people are what make experiences stick in our minds. So tell us about them.

Tell us about them. Start talking about people in the past. We just had, and I'll mention this, Calendly, which by the way, you scheduled this using Calendly. Their CFO was on, a guy by the name of John McCauley, began with a wonderful anecdote about his water polo or coach in high school.

I don't doubt that it's the most memorable story in the last month because it was a person that he was talking about. It was very involving. Anyway, that's my little plug. Well, on behalf of the CFO corner team, all of Auditoria, Jack, thanks so much for spending the time with us.

To our audience, thank you for listening and have a wonderful day.