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Even though the economy appears uncertain, geopolitics are volatile and inflation is trending in the wrong direction, a new report from McKinsey & Company shows that businesses might miss out by delaying expansion. Companies that are building new ventures have seen relatively quick and decisive success, the report shows. It also revealed that new ventures launched by large businesses can now scale with 40% less capital. They’re also making more money faster. For ventures started in the last five years, 61% made annual revenue above $10 million this year—an increase from 45% in 2023. About the same percentage said the new venture broke even in its first two years of operation. Many of these successful new ventures, the report says, come from expanding into areas their company already does business. A similar report from McKinsey last year found that nearly nine in 10 business leaders said their organizations had assets with unrealized potential. This year, 72% of those companies that built ventures to take advantage of those assets reported above-average growth. Six in 10 new ventures this year were within the larger corporation’s primary business area, and many used expansion playbooks from other companies. AI is helping to build and scale these new ventures quickly. The report mentioned companies that used AI to mine customer and competitor data to find unmet needs. AI can be used to build business models, identify high-value target customers, and generate insights and analytics for predictive modeling. Close to three-quarters of companies that have built three or more new ventures in the last five years are using AI for complex activities. Corporate culture also contributes to this success. Companies that prize innovation and creativity, emboldening employees to experiment without fearing failure, lead easily to successful venture building. More than two-thirds of successful builders had this kind of culture. More than half of successful builders also invested in upskilling programs for employees to learn technology and business design skills. Another area that leads to growth is an investment in customer success. ERP software provider Certinia recently analyzed more than 4,000 earnings reports and found that companies that mention customer success alongside net revenue retention performed better. I talked to Certinia CFO Erin Sawyer and Head of Global Product and Solution Marketing Damian Trzebunia about the connection. An excerpt from our conversation is later in this newsletter. We’re always looking to improve the stories and format of this newsletter. We’d appreciate your feedback in this brief reader survey. This is the published version of Forbes' CFO newsletter, which offers the latest news for chief finance officers and other leaders focused on the budget. Sign up here to get it delivered to your inbox every Tuesday. ECONOMIC INDICATORS A customer shops at an H-E-B grocery store in Austin, Texas. Brandon Bell/Getty Images As the federal government shutdown enters its fourth week with no end in sight, the drag on the economy—both now and in the future—is becoming apparent. Delayed government inflation data for September was released on Friday, revealing that inflation continued to tick up last month. Prices were up 3% compared with a year ago, and had risen 0.3% since August. And consumer sentiment continues to decline, with the University of Michigan’s monthly survey dropping 2.7% to a score of 53.6. According to the survey, Americans’ views on current economic conditions fell to the same level as August 2022, when inflation was 8.3%. Focusing only on businesses, Forbes senior contributor Simon Moore writes that this shutdown is likely to suppress Q4 GDP growth by as much as 0.5%, though not completely neutralize growth or turn it negative. How much it will hurt is not known, especially since negotiations do not appear to be underway. The most recent government shutdown in 2018 and 2019, which was also the longest on record, had an impact of $18 billion, according to the Congressional Budget Office, Moore wrote. Much of the planned spending for that period happened anyway, but was delayed, so the lost spending was estimated at $3 billion. Some economic policy changes may be close on the horizon, though. The Federal Reserve’s Open Market Committee meets later this week and will discuss interest rates. According to CME FedWatch, on Tuesday morning 97.8% of analysts are expecting a quarter-point rate cut this week, bringing rates down to between 3.75% and 4%. But that’s not necessarily great news. Forbes senior contributor Erik Sherman writes that the conditions may be ripe for stagflation—when economic growth is tepid, but inflation and unemployment are both rising. Other potential policy changes are contributing to greater success in the stock market, which has posted a record-setting rally, up 36% over the last six months. On Monday, following news of a framework trade deal negotiated between the U.S. and China that could withdraw the 100% tariffs President Donald Trump announced two weeks ago, the S&P 500, Nasdaq Composite and Dow Jones Industrial Average all closed at record highs. Trump and Chinese President Xi Jinping will meet on Wednesday to discuss the deal further—though the New York Times reports that it would largely reset U.S.-China trade to where it was before Trump took office and started his trade war. HUMAN CAPITAL Smith Collection/Gado/Getty Images Online behemoth Amazon announced Tuesday morning it’s laying off 14,000 corporate staff. Beth Galetti, senior vice president of people experience and technology, wrote in a blog post that the company is performing well, but they’re seeking places to “remove layers, increase ownership and realize efficiency gains.” “This generation of AI is the most transformative technology we’ve seen since the Internet, and it's enabling companies to innovate much faster than ever before (in existing market segments and altogether new ones),” she wrote. “We’re convicted that we need to be organized more leanly, with fewer layers and more ownership, to move as quickly as possible for our customers and business.” This is just the beginning of big changes at Amazon because of AI. Forbes contributor Rachel Wells writes that internal strategy documents first reported on by the New York Times suggest that AI, robots and automation in general will replace 600,000 human jobs at the company by 2033. Wells writes that aside from administrative roles, the jobs most likely targeted by these layoffs include warehouse workers and order fulfillment operatives, as well as entry-level logistics, coding and customer service positions. However, Amazon has said it plans to hire the same number of seasonal employees it always does: 250,000 across full- and part-time positions during the end-of-year shopping season. Amazon isn’t the only company announcing large job cuts this morning. In its earnings call, UPS CEO Carol Tomé said so far this year, the shipping and logistics company has reduced its management workforce by about 14,000 positions, and its operational workforce by about 34,000 positions, the Wall Street Journal reported. The reductions were a combination of layoffs and buyouts. Following the announcement, UPS stock was up more than 7%. ARTIFICIAL INTELLIGENCE Tech companies have helped propel the stock market to new heights, prompting fears of an “AI bubble” set to burst—similar to the dot-com bubble in the early years of the internet that tanked company valuations. Forbes assistant managing editor Jeffrey Marcus collected several pieces written by members of Forbes’ contributor network on the topic. Some, like Jon Markman, write that this boom is built on solid technology gain, real demand and growing computing requirements. But Peter Cohan writes that there could be real danger, especially if a capital-intensive, not-yet-profitable company like OpenAI runs out of funding sources. Forbes’ Ty Roush turned to the real experts: AI chatbots. He asked seven of them to respond to the following prompt: “In 100 words or fewer, do you believe there is an ‘AI bubble’?” Answers varied. xAI’s Grok said there is one, noting that excitement about the potential of the technology has “driven massive investments, inflated valuations and unrealistic expectations, reminiscent of the dot-com bubble.” Many AI startups, it said, “lack sustainable business models,” and the “gap between promised breakthroughs and actual deliverables is growing.” ChatGPT explained that there is some “classic bubble behavior,” but said the technology is delivering real utility. Perplexity said there could be an emerging AI bubble, but said, “The risk lies not in AI itself but in unrealistic market expectations.” All the chatbots said that any AI-related stock market correction wouldn’t lead to a collapse. Grok said “economic corrections” would focus on “weeding out overhyped projects while strengthening viable ones.” Excitement surrounding AI will “stabilize,” ChatGPT said, leaving behind “mature, deeply integrated AI systems as part of everyday life.” OFF THE LEDGER Why Customer Success Is Vital To Business Success Certinia Head of Global Product and Solution Marketing Damian Trzebunia and CFO Erin Sawyer. In an analysis of more than 4,000 earnings reports from publicly traded companies between 2022 and now, ERP solutions company Certinia found that companies that mentioned consumer success (CS) and net revenue retention (NRR) performed better across the board. Market leaders referenced these two metrics 50% more often than other companies, and those that talked about customer success as a concrete strategy saw better results. I spoke with Certinia CFO Erin Sawyer and Head of Global Product and Solution Marketing Damian Trzebunia about the study and what it means for companies. This conversation has been edited for length, clarity and continuity. How do you define customer success? Trzebunia: We think of customer success through two lenses. One is simply as a department. Recently, we surveyed the services industry and we found that 70% of our customers have a dedicated customer success function, and they’re held accountable for metrics: churn, retention, renewals, net revenue retention. Net revenue retention, in particular, has become a primary indicator of financial health and future performance. It’s a very relevant metric for the CFO, but we also think of it as a cross-functional discipline. In order for the customer to get the very best outcome, we believe that sales, professional services, delivery and customer success have to be aligned: working from the same definition of a customer, the same unified data foundation. They have to have workflows that are unified, and only then can they work together in the service of the very best outcome for the customer. The study seemed to insinuate that if you thought that customer success was dead, it is not. How is its importance growing? Trzebunia: One of the things that we found in the report is that mentions of CS and NRR have been steadily increasing every year, so it’s been on companies’ radar. What’s interesting in this report is how companies talk about customer success in net revenue retention. The best performers point to it frequently, but they also speak of it as something they’ve invested in operationalizing, and make it truly part of their core strategy. Whereas everyone else talks about it aspirationally. It’s almost an afterthought. We’ve been living in the age of the customer for a long time. There’s so much business literature centered around the customer that in the last couple decades. That’s not new, but it’s the focus, attention and the intent. It’s really operationalizing that cross-functional discipline that is ultimately going to drive NRR metrics. That’s the difference: It’s how companies think about it, approach it and invest. Sawyer: Having it siloed is not impactful for the organization. Operationalizing it across the company is really what helps in the full customer journey to make the customer successful. The study showed companies that talked more about customer success and net revenue retention on their earnings calls saw their stock prices do better immediately afterwards. What is it about these metrics that inspires more confidence in the markets? Sawyer: Higher net revenue retention rates are a competence metric in the company itself: The customers have confidence in the value that the company is providing to both stay with the company and continue to invest in it. That’s really the financial indicator of health, confidence and the strategic direction that the company is going: what they are producing overall, as well as their engagement with the customer. It’s a really strong confidence metric that the company’s customers are putting within the company itself to say: I believe in the value that they’re delivering. How can a company begin making the big move, investing in customer success and operationalizing this function across different departments? Trzebunia: One starting point would be just having clean, unified data: A common definition of a customer so that sales, delivery and customer success are all looking at the same up-to-date data about a customer would be a huge step forward. We know that data integrity is a real challenge for enterprises. It also happens to be one of the largest barriers to AI adoption because AI feeds on data. It’s only going to be as good and as effective as the underlying data, the processes and the workflow. I think so many customers—large brands, blue chip brands—are still doing a lot of this on spreadsheets. They’re not really set up for success. What we’ve seen with our customers is that when their data is unified and they start to unify workflows across these customer success functions, that starts to spark the right culture. Now there are fewer silos, fewer barriers. There’s much more openness, collaboration, working together in the service of the customer. That prepares you to adopt AI in a responsible way, a meaningful way that’s really going to drive results for you: the right results. COMINGS + GOINGS Real estate investment firm Trinity Investments hired JoAnne Halligan as its chief financial officer, effective October 27. Halligan joins the firm from Oaktree Capital Management, where she served as managing director of real estate fund accounting, and she succeeds Kevin Hayashi, who is retiring. Behavioral healthcare service provider Acadia Healthcare Company appointed Todd Young as its new chief financial officer, effective October 27. Young most recently worked in the same role at Elanco Animal Health, as well as ACADIA Pharmaceuticals. Sustainable waste management company Reworld selected Paul Ligon as its executive vice president and chief revenue and growth officer. Ligon most recently worked as chief revenue officer at Casella Waste Systems. STRATEGIES + ADVICE The business world is changing faster now than ever before. Here are four ways to adjust your strategy to adapt to quickly shifting markets and customer needs. When you need funds, there are several traits that angel investors look for to ensure that your business and its leadership are worth their money and partnership. Here are eight things to prioritize in your pitch. Which billionaire philanthropist donated more than $300 million to universities and higher education scholarship organizations in October? A. Michael Bloomberg B. Marilyn Simons C. MacKenzie Scott D. Phil Knight See if you got the right answer here. Got a tip? Share confidential information with Forbes. Editorial StandardsReprints & Permissions
