Financial Stability: Flying your own F‑16 Fighting Falcon

In our previous article, we looked at what business and finance could learn from an F-16 Fighting Falcon. With the future business climate uncertain, and many businesses searching for financial stability, we are looking for a way to respond to these challenges in an agile way, being adaptable to changing conditions. What we demonstrated in our previous article was that using the F-16 Fighting Falcon as an example, with its adaptability, agility, and resilience we can actively respond to the challenges we face.

Despite these challenges, we are looking for positive outcomes. What outcomes are we looking for?

  • Clarity and awareness, of where we are today, where we want to get to, and all that can affect us from the environment.
  • Resilience, there is a need to build strength and flexibility into our business, and the systems and resources that run it.
  • Enduring value, our frameworks and foundations protect the current value and can create ongoing future value, meeting stakeholder expectations.

These outcomes are not solely the responsibility of finance, they are business outcomes where working together with our senior executive colleagues, as well as our finance teams is crucial.  By operating as “one team” we can achieve these.

In this article we will be sharing more of our learning from the F-16 Fighting Falcon, going under the hood, looking more closely at its strengths and their relation to some specific business challenges we face. Firstly, we begin again by enabling ourselves to fly level.

What do we mean by Flying Level?

In the context of the F-16, flying level enables stability, an ability to focus on its objectives and respond to any changes in conditions it may experience. Within our businesses, we want to create as stable an environment as possible. This does not mean being rigid and unchanging, it means being adaptable to changing conditions. Making the changes necessary as conditions around the business change.

An example of this can be seen in cash flow. When there are changes in the volume of cash that comes into the business, we adapt and change to ensure that the level of cash that leaves the business changes too. By responding this way, we protect the value we have created and turn our attention to creating future value.

How then, using our knowledge of an F-16, can we create stability when there is uncertainty all around us?

Creating a stable and self-righting mechanism

This would mean knowing the variability in the business, being able to measure its size and impact, and having the mechanisms in place to absorb the impact. Examples being cash covers, burn rates, working capital and external credit terms, economic forecasts and sensitivity analysis. It is about finding the right tools to help you do this through a sustainable process.

Creating your own bubble canopy

In our previous article, we shared how the pilot of an F-16 has great visibility. How his bubble canopy creates an unobstructed forward and upward visibility, and to the side, and to the rear. Along with enhanced GPS,  the pilot is always able to see where they are going, where they are now, and as necessary, where they have come from.

To sum this up, the pilot has, through systems and design, great situational awareness.

Right now, with all the changes going on around us, how good is your situational awareness? Not only of what is happening or projected to happen in finance, but across the business. We are, after all, one integrated system.

Situation awareness has been recognised as a critical, yet often elusive foundation for successful decision-making. We need to create the kind of bubble canopy the pilot of an F-16 has in both finance and across the business to enable us to make the most effective decisions we can, no matter how changeable the conditions.

The starting point is understanding the current position for the whole business, not only the financials. But how do we do this?

Create a visible and actionable dashboard

Within the cockpit of a F-16, there is what is known as a Heads-Up Display (HUD). This provides combat information in front of the pilot meaning it prevents them from having to look into the cockpit. The pilot’s eyes are always looking forward, increasing their situational awareness.

The cockpit also has a long-range radar which scans the “beyond visual range” area, essentially looking for any threats that may affect the mission or itself. These threats could be the weather or the enemy.

We need to create our own dashboards which report on the key numbers including lead indicators, this will show whether we are on track to achieve our objectives and whether there are potential issues in the future.  However, it is not just about having a dashboard with revenue, profit, and cash on it, it’s much more than that.

Set a destination

Every fighter pilot has a mission, a clear concise objective and they know what a successful outcome looks like.

We need to set our financial, business and personal destinations meaningfully. We need to understand the true impact of achieving them or not. Furthermore, what is very critical is knowing what milestones you will need to hit in order to achieve your objectives. The path to your destination is never a straight line.

Having clarity on destination and waypoints

Set the objective, determine how you are going to get there, and above all, always keep it visible and relevant in your day to day operations. This will ensure that you reach it.

Understand the drivers –  what makes an impact and how much?

Knowing the outcome is just the start, you also need to understand and monitor the drivers that impact the outcome. How much does each of them move the needle? They all have different impacts and in fact do not always positively correlate with the effort you exert with each one of them.

Knowing you need to raise £1m in 60 days by improving debtor days from 60 to 45 is just the start. Not every client is at 60 days, some clients have specifically agreed times to pay. Understanding the variables and the sensitivities, and what you can do to change and influence them is key, not just knowing what the outcome is.

It’s a team game

Achieving an objective like £1m is one that requires a business solution, not only a finance one.

When setting the objective make sure that all those in the business know what the objective is, why it is important and what their role is in achieving it. Then make sure they can all see the results, how their effort is impacting the outcome and are focussed on it (Flying Level).

This requires clarity of roles and responsibility within the organisation and how they affect the overall picture. Each member should be playing to their strengths and toward furthering the cause of achieving the objectives. Make the “Organisation Chart” skill-based, ensure each member knows their role and monitor regularly.

Create a feedback loop

The way an F-16 can consistently adjust to changing conditions is that it is always learning. Responding to changes in its environment by adapting accordingly.

We need to have consistent and immediate feedback on how we are going, what is working, what is not. When a client asks for a payment plan or when a product’s price or costs change, these need to feed back into the system immediately so we can clarify the impact on hitting our objective.

Right now, is your business able to do this? Can you affect your course and directions as quick as the F-16 pilot? It is all about how far away you are from the customer and the system you have put in to affect the change.

Create your own Fly-By-Wire Flight Control System

The Fly-By-Wire is a flight control system that has replaced traditional pilot controls with an electronic interface, enabling all the systems of the aircraft to connect. This means the F-16 becomes far more agile, making timely incremental course corrections.

In finance and in business, our systems and processes tend to not be so agile.

  • Finance systems that do not link together with sales, marketing, or HR systems.
  • Manual processes where automation or technology would help.
  • No one version of the truth for decision making.

The impact of these? To name a few, confusion, lack of clarity, board room friction and ultimately slow or poor decision making, or even indecision.

What can we do to create our own Fly-By-Wire control system?

Replace manual process with technology where possible

Replacing manual process with technology does several things for us:

  • It reduces the amount of scope for error. How many of us have multiple spreadsheets which link together? One incorrectly manually keyed number, and we know what the impact can be.
  • It saves time and money. No double entry or duplication.
  • Gives us improved control and visibility. We know exactly how our processes are being enacted every time.
  • Ability to measure more effectively. We have clarity as to where the information is coming from, and it’s easier to do future forecasts.
  • Improved communication. The connection of independent systems, and improved communication with clients.
  • Connect our systems so they talk. Creates an electronic interface so we are using the same information.

And ultimately, create one version of the truth.

Create one version of the truth

Fly-By-Wire is an integrated, one version of the truth system. Real-time decision making based on a single, unambiguous, and reliable set of data.

In many organisations, decisions are made using different versions of data, data from different sources, data which can and is many times, interpreted different ways.

Removing all the imperfections from our systems and processes, removing elements where we know things can go wrong, streamlining and creating a connected-up approach enables us to all be looking at information from the same source.

A lightweight fuselage, without reduced strength

F-16s have demonstrated you can have a lightweight fuselage without losing the strength or agility necessary to handle even the toughest of conditions.

By enacting the above, we build resilience into our systems. We ensure that we can bounce back from adversity faster or even better still, reduce the initial impact. This is done through robust processes, technology, and automation. Most importantly having a team that knows what to do in the time of adversity. One right person at the right place with the right tool will have a greater impact than a whole team with the latest gizmos.

We do this, without losing any of the strength we need, in fact, we build in strength and flexibility by creating quality tools to aid us in decision making in uncertain times.

Looking at where you are now, are you able to pilot your own F-16? Are you able to navigate any change in your environment and focus on creating future value? Most importantly are you and your team capable of flying the advance machine that you have just made?

How can Cognition24 help?

Cognition24 are proud authorisation partners of FinancialForce. Our expert product specialists and project managers will guide your team through the implementation process and steer you clear of common pitfalls. FinancialForce unites front and back of house systems – providing a complete view of the business from sales to accounting. Whether you are a CEO, CFO, Sales leader or financial controller, FinancialForce’s suite of tools put you in touch with your organisation’s data.  If you’d like to find out more, please contact one of our FinancialForce specialists today.