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

October 02, 2023 | 29 Minutes

In this episode, host Adam Larson sits down with Ashish Gupta, CFO North America at Reckitt, to explore the CFO's role in driving a sustainable earning model for businesses. Discover how Ashish's diverse leadership experience across continents has influenced his approach to sustainable growth and learn valuable insights on strategy, transformation, and execution. Get ready to expand your financial knowledge and gain actionable tips for driving success in your organization.

Full Episode Transcript:
Adam:            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.
 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?
Ashish:           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.
Adam:            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?
Ashish:           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.
Adam:            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?
Ashish:           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.
Adam:            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?
Ashish:           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 their 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 nipping 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 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 twice lot of extra plastics and extra cost.
Consumer is very smart these days; they're not interested in having large packs 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 reengineering. 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.
Adam:            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.
Ashish:           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.
Adam:            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?
Ashish:           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.
Adam:            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.
Ashish:           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.
Adam:            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?
Ashish:           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 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.
Adam:            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.
Ashish:           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? 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. Future is now, and it's not five years from today or two years from today.
Adam:            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.
Ashish:           It has been a privilege, Adam, thanks a lot for inviting me and I hope you have a great day.
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