Leadership as a Competitive Advantage: A CFO’s Perspective-Part 2

In the previous article, we discussed the importance of leadership in the venture capital (VC) process. Indeed, leadership is not only innate but can also be cultivated through learning and practice. An entrepreneur who is willing to learn and constantly improve often has the potential to become an outstanding leader.

In today's world, where information is exploding and technology is advancing rapidly, having a learning-oriented team means there is great potential for growth and limitless possibilities. This is the "imagined space" that investors see in a company’s future. The larger the imagined space, the greater the potential for valuation premium.

When investors decide to invest in a company, the timeline can range from one or two years to seven or eight years. During this period, the market may undergo drastic changes, and the business model may evolve. However, one thing remains constant—the leadership of the team is at the core of the company.

A capable entrepreneur, even when faced with setbacks, can find good solutions or adjust the business model. When market demands change, they can discover new needs or even create new markets. Markets can change, products can change, and technologies can change, but the guarantee of success lies in having a leadership team that is adaptable, execution-driven, and cohesive. As the saying goes, "survival of the fittest"—being able to adapt to change is the key to the survival and growth of a business.

Therefore, for entrepreneurs, continuously improving their comprehensive skills and leadership ability is crucial to winning the favour of investors. A team with strong leadership can navigate through challenges, keeping the company competitive in turbulent times, and help it continue to grow, which boosts investor confidence.

At the same time, investors are also concerned with the target market size of the business. In addition to knowing how big the market is, they want to understand whether this market can continue to grow rapidly, and how much equity value appreciation they can expect annually from their investment. Investors are primarily focused on whether the investment will yield a profit. They hope that, over time, the business can either go public (IPO) or achieve significant valuation growth, allowing them to exit through equity transfer or other means.Therefore, companies that continue to grow and raise their valuations, while attracting more investments, are more likely to gain favour from investors because they increase the potential for capital inflows and liquidity.

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A Personal CFO Experience

As CFO, I once heard a real-life case that vividly illustrates the critical role of leadership in helping a company navigate market changes.

This company initially thrived as a traditional electronic products manufacturer, relying on low-cost labor to sustain its profits. However, as global labor costs increased, the company faced immense pressure. Profit margins were thinning, and competitors began adopting more advanced production techniques, making the traditional business model increasingly uncompetitive.

Atthis point, the leadership team did not panic. Instead, they took decisive action. They recognized that the future of manufacturing would rely onautomation and smart technologies. Therefore, they made the strategic decision to invest heavily in robotics and automated production lines. This move notonly reduced their dependence on low-cost labor but also significantly improved production efficiency, allowing the company to maintain its competitiveness inthe global market.

AsCFO, I personally witnessed this transformation. The leadership team’s keen market insight and bold decisions ensured the company stayed competitive in an increasingly tough market. Meanwhile, the leadership also steered the company to venture into emerging fields like renewable energy and smart hardware, opening up new avenues for growth. This strategic shift helped the company navigate through market disruptions, ensuring long-term growth and stability.

From this experience, I truly understood the importance of leadership in adjusting business strategies during times of uncertainty. A company’s leadership team must not only set a clear direction during normal operations but also possess the decisiveness and foresight to steer the business through critical moments of change. In times of market volatility, a leadership team that is adaptable and decisive can quickly pivot and seize new opportunities, leading the company to long-term success.