It's now an imperative for CFOs to get greater value from new and existing key performance indicators (KPIs). That's a topic that Michael Schrage (pictured at top) will focus on during his upcoming presentation at MFM's CFO Summit, scheduled for March 15-17 in Orlando, FL.
He will explore and explain how (and why) CFOs can use KPIs as "organizing principles" to better define and design how capital allocation delivers measurable value. Schrage will also discuss the impact of digitalization, instrumentation, next-gen algorithms and analytics on how enterprise performance gets monitored, measured and managed.
Schrage is a Research Fellow at the Massachusetts Institute of Technology Sloan School of Management and a Visiting Fellow at Imperial College's Innovation and Entrepreneurship program. He has written several books on the role of collaborative tools and technologies in enabling innovation and has done consulting and advisory work for a variety of Fortune 500 corporations, including several in the media and entertainment industry.
Recently MFM President and CEO Joe Annotti conducted an e-mail exchange with Schrage to ask a few questions related to his CFO Summit session.
Joe Annotti: Three years from now, the media and entertainment business might look much different than it does today. Will KPIs still be relevant then?
Michael Schrage: KPIs have a terrific future; that's why I spend so much time with them. Given the ongoing explosion of instrumentation, digitalization, data capture and algorithmic innovation, KPIs will become far more important, insightful, predictive and strategic for serious organizations.
With tongue only slightly in cheek, I'd argue that KPIs in some media organizations will do a better job of learning than the CFOs and CMOs who ostensibly oversee them. I don't think anyone can look at the rise of programmatic advertising and the streaming wars and not immediately recognize that pre-pandemic KPIs are not fit for media purpose come 2025.
To be sure, there will always -- always! -- be hardy perennial KPIs, i.e., revenue, subscribers, etc. But people are kidding themselves if they don't believe that having 10X to 100X more data won't force them to revisit and revise KPIs like churn and CLV (customer lifetime value).
Annotti: What will CFO Summit attendees walk away with from your presentation? How will it help them become better leaders and performance managers?
Schrage: That's a trick question. The CFOs I know have a mix of strategic, operational and organizational priorities. Some are obsessed with cost cutting; others are doubling down on more strategic capital-allocation issues, and still others want to better collaborate with their C-suite colleagues and SBU (strategic business unit) leadership. What they all have in common is a need to better measure both "inputs" and desired "outmodes." Their existing measures and methodologies are no longer good enough, and they know it. My brief talk should suggest actionable insights about getting greater value from better defining and measuring performance.
Annotti: How will advanced technology and artificial intelligence affect financial forecasting? That is one of the most important functions of the financial executives attending the CFO Summit. Is it possible to use KPIs to measure AI?
Schrage: That horse has left the barn. AI -- both narrowly and broadly defined -- already informs and influences financial forecasts for many of the firms participating in my executive education classes and workshops.
I already know financial analysts using ChatGPT-3 to manage their Excel spreadsheets. I already see churn-prediction algorithms being mashed up with performance-marketing campaigns to see what kind of retention offers make sense and which ones don't. So this is going on. The big catch? Most of it is on an ad hoc, opportunistic basis. A strategy is not the sum of your five best "point solutions." I see this as a real challenge for CFOs and the C-suite alike.
As for using KPIs to measure AI, I think that's a superb example of the wrong question. What you really want to measure is AI's contribution/attribution to the value you wish to create or the costs you wish to save.
The CFO Summit is attended by the most senior members of the media financial community. This year's event will be held at the JW Marriott Grande Lakes Resort in Orlando, FL. To register, visit this link.
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The opinions expressed here are the author's views and do not necessarily represent the views of MediaVillage.com/MyersBizNet.