Ep. 236: Ashish Gupta - The Role of CFO in Developing a Sustainable Earnings Model

< Intro >

– Welcome back to Count Me In.

Today we are joined by Ashish Gupta,
CFO, North America at Reckitt.

Ashish has worked across various continents,

and his international experience
has greatly influenced

his approach to developing a
sustainable earnings model.

Ashish shares valuable insights on the
importance of sustainable leadership.

The link between strategy,
transformation and execution,

and the need for clear communication
and business transformations.

Join us as we delve into the CFO's role,

in driving sustainable growth
and empowering teams.

< Music >

Ashish, we're so excited to have
you on the podcast, today.

And you've had extensive leadership
experience, across various continents.

And maybe you could share with our audience,

how has this international
experience influenced your approach

to a sustainable earnings model?

– Hi, Adam, I am actually privileged
to be talking to you today.

Yes, I've been lucky to have
experience in various continents.

But I must say that it has also been
one of the challenges that I have faced.

It has not been easy, but it's also
been quite enriching and rewarding.

It has taught me that there is
no one-size-fits-all approach,

either to leadership, or to developing

a sustainable earnings model,
or managing teams.

Well, my greatest learnings
have been two, in this situation.

The first one, has been that
leadership must be situational,

and it must be relevant to the place
and the situation you are in.

And there could be different
leadership styles that you could adopt.

For example, you could be empathetic,
but at the same time be decisive.

You could be collaborative,
but be very unambiguous.

You could come across as vulnerable,
but still be authentic about it.

And that's what people appreciate,

and that's what brings your
whole self to work, really.

The second one is you also need to know,

and as I said, that there's
no one-size-fits all approach.

You also need to know when to make
a switch from one style to another,

depending on how your team is reacting to it.

For example, sometimes, we say that
it's best to give feedback to people,

at that moment.

But that may not be the
right approach every time.

Because, sometimes, we just want
people to get over the emotions

and have a calmer head.

Before you go back and say,
"Hey, look, in this instance,

we could have done it a little bit differently."

And, maybe, the people are more
receptive, at that point of time,

when that heat has settled down
and they are more calm.

So I would say that, it has taught me, also,

because I've worked in different
countries, different cultures.

But people are people,
so people are the same.

They've got emotions, they like to
be heard, they like to be respected,

and that is universal, that does not change.

– Yes, the human experience is universal,

no matter where you go and,
I think, people forget that.

Because they want to divide
each other because of this or that,

and the human experience is
so universal, like you just said.

And as you're going out through your career,

I'm sure you've hit different things like
transformation, strategy, execution.

You've had to hit all these different
things in your different leadership roles.

How has that set of skills supported you,

in driving success in the different
organizations you've been a part of?

– Well, Adam, you've just hit
on three magic words in that.

Which is strategy, transformation, and execution.

And I think most of the organizations
struggle with the relationship

between these three to their teams.

Because you cannot have a transformation

before you have got a clear strategy, about
how do you want to drive the business.

And transformation is an
outcome of your strategy,

and execution is implementing that
strategy and transformation.

So, very often, teams, in the business,

fail to see the link of the transformation

that is, sometimes, being led by global
teams, to the company's strategy.

And, then, it becomes even more
muddy when it comes to execution.

And I love this quote from Einstein, I'm
not a science buff, but I love what he said.

He said that, "If you can't explain to a
six-year-old, then you don't understand it."

And I think it's very true.

And it may sound complex
strategy, transformation, execution,

but organizations need to keep it very simple.

Because if people don't get it,
then it doesn't reflect in teams

not interested in executing a project or program.

And it may sound something
similar to Silent Resignation,

that we talked about today,
so people are not just interested.

With my experience, I have had experience,

and I'm lucky to have experience on both sides.

I've led global transformation
programs from the corporate side,

and I've been at the receiving end,

and large markets of those
transformation programs.

I've always wanted to understand
the strategy behind a transformation.

Why are we implementing a project?

What's the corporate strategy in it?

What do we get out of it?
What do I get out of it?

And that helps me put in the right
execution force and resources behind it.

– So, you're speaking about leading
transformation into the finance function.

One of the times, I was reading
about in a recent article you wrote,

was the Group Transformation
Finance Director at Reckitt

How is that experience?

What things did you learn
from that particular experience,

that helped translate into what
you're currently working on?

– Well, it has been immensely
useful to my learning, really, Adam.

And, normally, if you see in any organization,

there are about two to three centers
of gravity, in an organization.

The first one really is the corporate headquarters;

that drives the vision, purpose,
and strategy for the company.

The second one, in many instances, is the
geography or business unit headquarter,

depending on how the organization is set up.

And the third one, which I believe
is the most important one,

are the markets where the
business actually gets delivered.

And, sometimes, there's a confusion,

but it's so true, that the transformation
office always works for the markets

to bring in that change and shift.

In my transformation roles, I was
leading the selection and implementation

of certain cutting-edge projects
and tools, in various areas.

Planning, forecasting, controllership
and compliance, productivity.

And, then, I'm currently working
in the biggest market, which is U.S.

So it has helped me to understand

that once you understand the
strategy behind those projects,

you also need a proof of concept.

And there's no better proof of concept

than to pilot it in one of your biggest markets.

Because then you not only build
sponsorship behind these projects,

but you also are able to
prove the business' case,

and the return on investment
on these projects, really.

And once you've done it for
some of your bigger markets,

and you've built that sponsorship,

it helps you to globally scale
these programs much faster,

and with much less change resistance.

So this combination of being
in the global transformation roles,

being in the market, really helps
me to see both sides of the coin

and understand strategy, the transformation linked to it,

and how the execution can support
the strategy and transformation.

– It makes me think of that quote you
mentioned, from Albert Einstein,

about how when you need to say something,

say it like a six-year-old can understand it.

A lot of times, when you're in
transformations; business transformation,

strategy sessions, the C-level people
are all talking these lofty terms,

that nobody can really understand.

But you said your goal is to make
sure that everybody can understand.

And, so, doing these large scale
restructurings programs,

these enterprise system-wide thing, changes.

How has your experience shaped
your strategies for achieving

things like sustainable growth, and
helping your employees understand

how we're going to go about doing this?

– Adam, it changes from time to time.

I must say that the markets and the
environment today, is very different

to what it was a few years back.

Today, we are in a world where
macroeconomic conditions are tough,

and the stock market is very unforgiving
for publicly listed companies.

So, sometimes, there could be a tendency
to maximize short term gains, especially,

when you have to declare your
results quarter after quarter.

And then there are shareholders,
and there are analysts,

looking for whatever you improved
versus the last quarter, versus last year.

So there could be companies who could
look at maximizing the short-term gains,

at the cost of building long-term
capabilities, or competencies,

or what we call as taking
a squeeze and trim approach,

which is not sustainable.

Sustainable growth is about
growing profitably and responsibly,

in not one month, one quarter, or one year.

It is a long-term growth
model that you build in.

This is about building the
business for the long run,

that can become stronger every year
and could be sustainable for years.

So what does that mean?

That means you cannot focus
on maximizing short-term gains

because, at some point of time,

it's going to hurt the organization's
ability to grow sustainably.

This means replacing your
squeeze and trim programs,

where you're just niping out certain costs,

with long-term productivity, or what
we call as cost restructuring programs.

Which can give you, sustainably,
different ways to look at cost.

Different ways to cut down the waste.

These are the ones that allow you

to reengineer your cost in a way
that eliminates waste, structurally,

like harmonizing your product portfolio
to remove waste on manufacturing lines.

Using digital or AI tools to drive
better ROI, for your marketing spend.

Or, sometimes, we're used to talk about,

when you look at a product
package, just make it thinner, lighter.

No, you can redesign your
products packaging, today,

to deliver to what the consumer wants.

As just opposed to squeezing
some quality out of it.

For example, we've had cases
where industry used to believe

in having large bags which were
underfilled, but had a lot of empty space.

That just was lot of extra plastic and extra cost.

Consumer is very smart these days,

they're not interested in having large
bags because of empty head space.

So if you can cut down that plastic, and
give a smaller bag and reduce the plastic

that you generate for the
environment, it's better for everybody.

And last one is about keeping
your fixed cost fixed.

There's a reason fixed costs are called
fixed but, sometimes, we forget that.

And, so, we need to keep our fixed cost
fixed in absolute dollar value, really.

And how do you drive this?

Again, as I said, you have to
look at different ways of doing it,

instead of cost cutting, it has to be cost

It's about building capabilities
like SAP, AI, cloud-based tools,

that help you to perform better,
and deliver better experience.

Also for your teams and your
people, which frees up their time

to focus on delivering insights and transformation.

Rather than focusing on just pulling
out some raw data and numbers.

– So it's like you're thinking outside of the box.

Thinking outside of the normal, "Hey,
I just want to fix my bottom line,

but I want to actually re-innovate
how we're doing it.

So that we can do it in a better way."

Which is not something we always hear,
especially, in the world of manufacturing.

– Yes, absolutely, and manufacturing
companies, sometimes,

get too focused on getting the
product out from the production line.

And, then, there are companies
which have got brands,

and they're talking about building the
brands in the same old fashioned way.

Whereas, today, the market
is all about the consumer.

It's all about exploring different
means on digital media.

How much of a conventional TV
do you watch today?

Probably very little.

You're either watching streaming,

or you're watching YouTube,
or you're watching some apps.

So your way to reach the
consumer also has to change,

and there are various ways
to go and look at it.

And the KPIs that used to be
relevant in the last 10 years,

about what we used to call as media
GRPs are no longer relevant anymore.

So there's a huge change that is coming in,
and if we don't adapt to these changes

and we don't become more efficient
as organizations, we will struggle

to be relevant in today's world.

– Yes, and we've been talking about
sustainable business models

and that's hugely important.

Because if you want to continue on, you
can't just do things at the status quo,

as you've already been saying.

Maybe you can share, I think
about your whole career,

you've had a great career so far, and I'm
sure there's many more years to come.

But what are some learning
experiences that you've learned,

that have played and helped you walk
towards your journey, towards creating

a sustainable business model for
the organizations you work with?

– Yes, there have been lots of those,
Adam, and it might sound cliché,

but it's like picking your favorite child.

But there have been so many
experiences that have shaped me.

But I would say that my last few roles,

which were Global Supply Finance Director, Transformation Director

and my current role as
North America Finance Director,

have been pivotal on my journey towards
creating sustainable business models.

And that's because you cannot
create a sustainable business model,

unless you know how to transform your business.

So that is the part of transformation
that has taught me and showed me,

how you can use transformation

as a means to really deliver a business
model that is relevant not just for today,

but for next five years, next 10 years.

But also drive, not just incremental
improvements in the business,

really drive transformational
changes in the business.

And my role as Global Supply Finance Director

meant that I was looking at
the biggest cost lines, really.

Which is the manufacturing,
procurement, and logistics,

and therefore how much difference
you can make on these lines.

Which can really create space in your
P$L to invest where you want to invest.

Which is behind your brand equity, behind
your product, having the superior product

that you want to have in the market.

Behind the quality of the product,
behind your distribution.

Behind creating relationships with
your retailers and with your consumers,

so it all needs to be funded from somewhere.

And, therefore, I think looking at
your cost, and supply cost, normally,

in any organization are the
biggest part of your cost pie.

And looking at, then, how to transform
them, really, led me into this role.

Where I can say that I've been using it
and leveraging my prior experience, a lot,

to drive a transformational
journey in this business.

The other greatest learning that
I've had is that change takes time.

Change is uncomfortable, change
is uneasy, it drives uncertainty.

But what is important is to have
the vision of your end game.

It should be very crisply
articulated, what good looks like.

Because this would then help people
to understand, where are we heading to?

And that is very powerful, to engage
teams towards something that is better.

Do keep in mind, and that's
what we need to communicate

to our people, also, that in the interim

this could even mean more pain
before it actually gets better.

But if people see where the
tunnel ends, then they get it.

– Mh-hmm, yes, that makes a lot of sense,

sometimes, things have to get
worse before they get better.

That's part of the ups and downs
of business and of life, in general.

Circling back to the
sustainable earnings model.

You talk a lot about that in your article,

and you say the secret to it is knowing
what works well for your business.

Maybe you can elaborate a
little bit on that for our listeners,

to help determine what works
best in different business contexts.

Because, maybe, not
everybody's in manufacturing.

Maybe not everybody's in the
examples that we've been using.

Maybe you can elaborate
a little bit on that for us.

– Yes, we live in a complex world, so
they say horses for courses, for a reason.

I think, it's important for a business
to understand what their strategy is,

and I think it's also important to
understand where they are today.

So I like to segment the relevant
businesses in consumer goods,

for example, under three main categories.

First of all, they are startups, or relatively
new businesses with niche offerings,

or what we call as insurgent brands.

The ones who suddenly come from nowhere

with a completely different offering
and they disrupt a category.

We're trying to acquire consumers,

build top line growth and brand
awareness with new brands.

The second one are normally
what we call as private labels,

that are trying to capitalize
on pricing value dynamic cap.

That some of the more
trusted brands have left

for more value conscious consumer,

more so in today's environment
with high inflation.

Then there are more established
businesses, with trusted brands,

with loyal consumer base.

So it's important to know the
short and long term strategy,

and have a clear vision of it.

For example, for these startups and
new businesses, their focus today

could be to drive top line
growth and consumer numbers.

While they continue to invest heavily
in digital or influencer media

to create a niche consumer market,

but they always have a
budget on the cash burn.

And therefore for them,

does the sustainable growth
model matter so much today?

Maybe not, because they have a budget

to burn cash and drive up the
consumer awareness, and top line.

They might have a target to break down, probably,

at a certain future point
of time, but not now.

Then let's talk about private labels.

Private labels are since driving
towards value conscious consumers.

They rarely would invest on brand equity

and would rather play on keeping
their overheads very thin,

to invest heavily on value creation.

So, for them, the only thing that matters
is volumes, really, at very low margins.

But they do make money at any point of
time that they play in the market

because they're trying to bridge the gap.

But the first two businesses that I
described, these could also be subject

to heavy volatility on their sales and earnings.

And, therefore, their sustainable
earnings model could be very different.

Contrary to some of the established
businesses, with established brands,

loyal consumer base, and these
businesses play to their strengths,

which is product superiority,
and trusted brands.

They know they have consumers
who trust their products,

and they trust their products to do the job.

And therefore there is a peace of mind

that comes in buying those products,
and these businesses continue to invest

behind these brands and products.

So they will make sure that
their quality of the products

is clearly far ahead of
products of private labels.

But the only way they can do it,

especially, in today's tough
macroeconomic environment,

is to continue dialing up on
productivity, in all the areas.

It's not just the supply cost, or your
product cost, or your fixed cost.

But also in how they invest in the media now.

How they reach out to consumers now.

– Yes, and you keep mentioning our
current macroeconomic environment

is not the greatest right now.

There's high inflation, all over
the world, there's high interest rates.

We're experiencing a lot of different things.

How can companies maintain these
earnings model you've been describing?

How can they maintain that in this environment,

and are there any challenges
they should be looking out for?

– It's tough, Adam, for everybody out there.

It's a difficult environment
that we're experiencing today.

I think a few years back
we used to call it VUCA,

which was Volatile, Uncertain,
Complex, and Ambiguous.

But this is the next level now, I mean,
all of these factors are still there,

but there is also high inflation
with high interest rates.

And that's a situation that
consumers and companies

have not experienced in decades, especially,

in some of the western markets, really.

So, probably, some of the people

have not even experienced that
phenomena in their lifetime,

some, of the younger people.

So this is putting a lot of
pressure on consumer wallets

where the mortgage payments have increased,

their disposable incomes have shrunk.

At, the same time, for companies,

also, they are facing inflation
pressure on their input cost and label.

And with the current difficult
macroeconomic environment,

there's very little ability for the companies
to pass on the pricing to consumers.

Compounding the situation is that there
is intense competition from private labels

that are trying to approach
the value conscious consumers.

So what does it mean?

It looks all gloom and doom.

No, but I think there are
silver linings to it, as well.

I think it's going to be tough,
but I think the key

for the companies is to
keep focusing on product.

Product is a hero, product is your king.

So keep on investing on product superiority,

that brings the consumers
to trust their brands.

But there's only a finite pool
of funds that you have.

So you need to continue
to dial-up on productivity

and ensure that the inflation impact is,

to a large extent, offset through
these productivity measures

without having them to outprice themselves

from the reach of the consumers.

There's even a bigger burning
need today for companies.

They have to dial-up productivity
to simplify their operations.

Make decision making quick.

Make the organization more nimble and agile,

and that is going to remain
relevant and important, in continuing

the sustainable earnings model
agenda, in today's environment.

– That makes a lot of sense,
and thanks for covering that.

Because it can be really confusing,
especially, as you're looking at things

and you're like, "These are great concepts,

but how do I make it fit in the current environment?"

That can be very hard as we're all
trying to navigate these things.

As we're wrapping up the conversation,

we can't talk about all of this stuff
without talking about the role of AI.

AI and the new data tools
that are coming out,

and the advances in technology
are just happening so rapidly.

What do you see the role of AI
and these new data tools

in achieving sustainable earnings model?

Given the economic climate
that you just talked about

and how things are looking toward the future.

– Well, it's a buzzword, isn't it, Adam, now?

AI, machine learning, data tools,
and some people consider it

still as something that's going to come in
the future but, I think, it's already there.

We have to board the train now
or we are going to miss it.

The companies who are not
embarking on this journey, today,

will very quickly become outdated.

And I think while there are different approaches

to AI and applications, in the organization.

One of the important things that AI
or these tools bring, is to join

the various dots in the organization
and see what the human eye, sometimes,

cannot see in the maze of data.

I think most of the organizations,
today, have a lot of data.

But they say that information
is power, while data is just data.

and I, also, think that most
of the companies are still

in that discovery phase of this AI journey.

And there are some proofs of
concept, but there are few.

But things are evolving very quickly.

I tell you today you have
tools that you can join

the whole sales and operation
process that you have today.

Which used to be earlier, in the
companies, operated separately

to a financial planning
process in the organization.

So you do your sales
and operational planning

and then you do your
financial planning process,

and then you try to make sense
of how to join that together.

Today, there are tools which we know,

which we have worked on, which can
actually seamlessly combine, these two.

And they could start with your
sales and operation planning,

and link into your financial
planning softwares and processes.

Giving one source of truth to everyone, and
bringing a huge amount of simplification

and effectiveness in the organization.

Then there are tools and AI-based,
and machine generative tools,

which help you to get more
out of your marketing spend.

Which tell you that you
spent X amount of dollars,

on a particular campaign or
a promotion, and this is what you got.

Versus you spent X amount of dollars on a
second campaign and this is what you got.

And then you can evaluate which is the
one which is going to drive more reach

and awareness and return for you.

And where do you start
getting only marginal returns

from a particular kind of promotion?

And we have tools in the market
that can do that, today.

There are tools that can help
you to drive better forecasting

of your consumer demand,
based on weather predictions.

And then they tie that to
the historical demand patterns

linking it to macroeconomic forecasts.

So they can play very well
in terms of your historical data,

plus the future trends that they are forecasting.

And they can give you pretty good
accurate picture of what you don't know

and what can happen in the future.

What I'm trying to say is there's a lot
out there, today, and it could help

tremendously for companies to
understand their problem statement

and find a solution for it.

But I think it's important for companies,
before they embark on these tools

to find their problem statement.

What is it that I want to solve?

And if they can make that problem
statement, I think, there are enough tools

available in the market to get a solution for it.

But they have to start now, the future is now,

and it's not five years from
today or two years from today.

– Well, I think that's a great
way to wrap things up.

Ashish, thank you so much for coming on

and sharing your knowledge
with our audience, today.

– It has been a privilege, Adam,
thanks a lot for inviting me

and I hope you have a great day.

< Outro >

– This has been Count Me In,

IMA's podcast, providing you with the
latest perspectives of thought leaders

from the accounting and finance profession.

If you like what you heard
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for more relevant accounting
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visit IMA's website at www.imanet.org.

Creators and Guests

Adam Larson
Adam Larson
Producer and co-host of the Count Me In podcast
Ashish Gupta
Ashish Gupta
CFO for Reckitt's North America Hygiene
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