Strategy

There’s A Difference Between Disruption and Chaos and You Need Strategies for Both

Speakers at this year's MIT Sloan CFO Summit shared how disruption and chaos require different approaches and how to go from disruptee to disruptor.

Disruption occurs across industries, from retail to travel to technology. But what’s the difference between disruption and chaos? Does disruption create chaos, or the other way around? Perhaps the most important question for financial executives should be asking themselves: Am I a disruptor or a disruptee?

According to Stephen J. Priest, Executive Vice President and Chief Financial Officer of JetBlue, chaos is anything that fractures the ecosystem in which you’re operating in an immediate and discerning way. At the recent MIT Sloan CFO Summit in Newton, MA, Priest and fellow panelists Gina Mastantuono, Chief Financial Officer of Ingram Micro, and Robert Eddy, Executive Vice President and Chief Financial Officer, BJ’s Wholesale Club shared their personal experiences dealing with chaos and disruption and how the difference between the two challenges affects the strategy designed to manage them.

Robert Eddy, BJ’s Wholesale Club, Inc., Gina Mastantuono, Ingram Micro, Stephen Priest, JetBlue, and Interviewer Kimberly Johnson, Editor of WSJ’s CFO Journal.

The airline industry is certainly no stranger to chaos, as the price of oil, geopolitical risks, weather, and several other difficult-to-predict factors can create chaos at any time. Disruption, on the other hand, like the growing need for Wi-Fi on flights, has a longer-term impact and should change the way your business operates.

In-flight Wi-Fi is not only an example of how important prediction, strategy, and agility are when it comes to disruption, but also how quickly organizations can move from disruptor to disruptee. “We started Wi-Fi many years ago on JetBlue,” said Priest. “It got disrupted with Gogo. And then we re-disrupted it again with Wi-Fi on-board. So, you can go from disrupting to getting disrupted and then back again.”

Whether its weather conditions causing chaos or disruptive forces like in-flight Wi-Fi, the reason it’s important to distinguish between the two comes down to how we manage them. When it comes to chaos, “it’s really about having a very strong hand on the teller and making sure that you can continue to drive the business through those occurrences, back to normalcy. On the disruptive side, it’s things that structurally change the way you run your business,” Priest shared.

Eddy agreed that chaos includes an element of unpredictability and a high pace of change, whereas disruption may be one predictable thing. The retail industry is changing rapidly and though Eddy wouldn’t yet describe it as chaotic, it requires a “different look from the CFO’s desk.” Of CFOs, Eddy said, “We’re used to looking at the numbers, but you have shift to look at the trends from a forward-looking standpoint and be able to communicate that in a coherent way to your CEO, to your board of directors, to your team at large.”

Today’s financial executives must be more strategically-focused than ever before, especially in the face of disruption. If executives do not have the capabilities to spot disruption before it occurs, organizations will find themselves in chaos. Mastantuono stressed the importance of stakeholders believing that the CFO should have a seat at the table. “In most areas right now, that’s the trend. So if you’re not going to be that strategic leader, it’s harder and harder to be successful.” Eddy recognized the challenge this presents for many in the CFO position. “It’s not a natural thing for reformed accountants like myself. You have to be out there leading the company and helping develop the strategy and the company’s reaction to disruption together with the CEO and the other leaders.”

Whether you’re being disrupted or disrupting your industry, financial executives are presented with an abundance of ideas and many areas for investment. In any industry, it’s imperative to be aligned on strategy before committing to any investment. Discussions with CEOs are no longer about net income, but instead about what areas to be investing in to stay ahead of the curve. Mastantuono explained, “In companies are large as ours, the ideas are rampant on where we should be investing, so the conversation with the CEO and with the board is about ‘where should we be leaning in?’”

Eddy agreed. “There are millions of ideas and somewhat finite amount of money to go do it with. How do we prioritize that? And if we have more great ideas than money, how do we get more money?”