“When you’re finished changing, you’re finished.” – Benjamin Franklin
Organization leaders and companies of all sizes are contemplating the impact of digital transformation on their industry, market, organization and staff by exploring the boundaries of traditional definitions. This includes the role of the Chief Financial Officer (CFO).
At its core, the function of the CFO is based largely around data. Traditionally it’s financial data. In a digital world where data is the fuel of progress, the value of all data should be measured and realized. The CFO is in a primary position to leverage the full value of that data, and should be focused on expanding the function of the finance organization into the digital realm. Recognizing the value of data and its Return on Investment (ROI) needs to be measured and one essential question needs to be asked: Is the office of the CFO bringing its full value to bear?
Additional questions need to be addressed as well, including:
Andrew McAfee and Erik Brynjolfsson, Co-Directors of the MIT Initiative on the Digital Economy, describe this opportunity and report that “companies in the top third of their industry in the use of data-driven decision making were, on average, 5% more productive and 6% more profitable than their competitors.”
Digitized financial dashboards are tools that allow data to come to life and can be essential to the success of the CFO by providing right-time, right-place, data-driven decision making. They allow for digital financial statements that provide brilliant and comprehensive overviews and a drill-down into a specific areas with a click or touch from the task worker to the boardroom. They allow for automated workflows of routine, time-consuming and task-based work so organizations can make the right investments or divestments. These are basic tools in today’s digital world. If you’re not using them, it’s likely that your competitors are, and you’re playing at a disadvantage.
The modern CFO requires modern tools, but even more importantly, a modern way of thinking. Your competition is global, and more and more of the competition is disrupting the rules of the game and fundamentally shifting the market. Elon Musk went from PayPal to Tesla to SpaceX. Amazon went from a bookstore to an everything store to a media company to a cloud services provider. Traditional industries like eyeglasses and mattress sales are being disrupted by companies that are “born in the cloud.” Agility needs to become a core competency in the culture of every organization if they are to survive the fourth industrial revolution.
The good news is digital transformation is a journey that yields results-estimates include an increase in revenue of 3% and a reduction in costs of 3.6%. Out of over 2000 companies recently surveyed, over 50% expect ROI in less than two years and over 90% expect ROI in five. But more important than that, the market is demanding digital services and digital response times. If you are analog (doing things “the way they’ve always been done”) and your competition is digital they will benefit from better, faster decisions and a more engaged customer base yielding in a bigger share of the market. Analog companies unwilling to change will go the way of Kodak, Blockbuster and others that failed to adapt.
The urgency in the need for CFOs to adapt to this digital transformation is spelled out clearly in a recent study by Adaptive Insights, which shows that while CFOs have a goal to double the time that their teams spend on strategic tasks by 2020, they don’t appear to be making the necessary progress. By mid-year 2016, CFOs reported that their teams were spending 18% of their time on strategy, and the latest survey shows this has dipped slightly to 17%; if CFOs intend to meet their goal, the survey makes it clear: “They can’t afford to take small steps backward or even accept the status quo-especially with report volumes on the rise.”
What’s more, the survey also found that 43% of CFOs believe big data and analytics will have the single biggest effect on their future role. This is a game-changing time and companies are going to want to stay ahead of the curve. Here in New England we led the first industrial revolution through a communication of natural resources, geographic location and an unparalleled work ethic. There is no reason we can’t rise again, but we have to be willing to change and embrace the new rules of the game.
Many companies have already started their digital transformations with the CFOs leading the way, recognizing this is a financial decision. Investments in modern business tools needs to be measured and realized. Culture change is a mandatory requirement that can-and perhaps should-start with the ones tasked with bottom line results.