Anyone working in a business is well aware of the importance of corporate competition, and doing whatever it takes to have an edge over competitor organizations. Finance teams play a critical role in this, because they work tirelessly to create a foundation of information for all business decisions. Given this state of affairs, understanding competitive advantages and how to leverage them is of the utmost importance. The context of competitive advantages in today’s corporate landscape is unique due to the proliferation of a wide variety of technologies, particularly in the realm of corporate finance.
Considering the importance of competitive advantages, and the added complexity of new technologies in the mix, finance teams should cultivate a thorough understanding of how these two dynamics feed into each other. This article will define the different kinds of competitive advantages, and then dive into the specifics regarding competitive advantages in relation to corporate finance, and new technologies in the industry.
Defining a Competitive Advantage
A competitive advantage is an attribute that enables a company to outperform its competitors. This empowers an organization to achieve superior margins. Examples of a competitive advantage are as follows:
Access to natural resources that are restricted from competitors
Highly skilled labor
A unique geographic location
Access to new or proprietary technology
Ability to manufacture products at the lowest cost
Brand image recognition
For finance professionals, the second and fourth types of advantage are particularly important to capitalize on. There are a number of factors that go into constructing a competitive advantage.
Before a competitive advantage can be established, it is important to know the following attributes:
Target Market: An organization must establish who is purchasing from the company and how it can cater to its target market.
Benefit: An organization should clarify information regarding the benefit(s) their product or service provides. It must offer real value and generate interest.
Competitors: It is important for a company to understand other competitors and what they offer in the competitive landscape.
In order to establish a competitive advantage, a company needs to detail the benefit that they provide to their target market in ways that other competitors cannot. A competitive advantage must be difficult, if not impossible, to duplicate. If it is easily copied or imitated, it is not considered a competitive advantage.
Highly Skilled Employees & The Role of New Technologies
Given the rise of a new, hybrid workforce, new technologies and the skills needed to use them have become more critical than ever in maintaining operations and bolstering cash flow in finance. That said, it’s no surprise that accelerating digital skills is a priority for 82% of CFOs in 2021. For finance teams, this means that increasing finance tech skills is essential for maintaining their relevance in their field, and adding value to their respective companies. The following three skills are the most important for finance workers to learn in order to establish a competitive advantage:
1. Master advanced Excel skills
Familiarizing yourself with formulas and shortcuts in Excel can help you provide insights into cost analysis more easily. Although some may find this suggestion strange in an era rife with cutting edge technologies, Excel remains relevant, and as a staple of corporate finance.
The following Excel skills are widely regarded as most important for finance professionals:
VLOOKUP
INDEX and MATCH
Conditional logic
Finance function
Array formulas
Data formatting
Keyboard shortcuts
Charts
Building financial models
Solver and goal seek
Pivot table
VBA and Macros
Importing data
2. Improve SQL skills
As a finance professional, being able to develop insights, analyze data, and make well-informed recommendations is critical. That’s where structured query language (SQL) kicks in.
Structured query language (SQL) is a standard and widely used programming language that communicates with databases to extract specific information.
It’s so beneficial that Udemy’s Workplace Learning Trends Report ranked this programming language as a top tech skill for finance pros to master.
“Knowing how SQL scans and groups the data as it processes my questions has helped me think of better questions, which in turn revealed some very interesting trends,” wrote Ezgi Bereketli, a member of the Forbes Technology Council. “Scanning the data constantly with SQL and easily defining my criteria for an inflection, I can be a step ahead of a changing competitive environment instead of shifting my focus to it after the story is already discovered generally.”
3. Leverage financial software
While Excel can help create financial models, you can also use financial software to your advantage, especially when modeling. This software enables you to build models in a more efficient, scalable, and flexible way.
Financial software takes into account historical performance, current finances and assumptions about the future to empower companies’ budget, forecast, raise capital, manage accounts, etc. Simply put, it converts raw data into a story a business can use to get ahead of trends and potential market shifts. Data literacy is becoming increasingly important and valued. According to Accenture’s CFO Reimagined report, 81% of CFOs said data storytelling is an essential tech skill for today’s finance professionals.
“[CFOs] are increasing their focus on value creation as digital technology empowers them to shape strategy,” Accenture said. “They are also looking well beyond the borders of the finance function, proposing and shaping business models across the enterprise, and, ideally, leading the charge in mapping out the investments required to embrace digital and guide their organization into the next evolution.”
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