Part 1: The Changing Role of the CFO
There is a revolution happening right now. From multi-nationals to SMEs and everything in between, a new digital economy is taking hold and it demands your attention. Digital technology is running rampant through the business world, ending dynasties, breaking down sector boundaries, and forcing traditional businesses to diversify or fail.
Nearly overnight, ‘digital first’ start-ups can be transformed into market leaders. The speed of change that’s occurring is unheard of. In remedy, CFOs must strive to pre-empt what lies ahead, or at worst, react to market changes. CFOs must be unafraid to upend their own organisation’s operating models, and be willing to invest in the emerging technology required to build an end-to-end digital enterprise.
To highlight the risk that companies are facing by being slow to act, here are some stark numbers. McKinsey and Company recently calculated the impact of digitisation on competitiveness. They said that “industry leaders that had embraced digitisation across the entire enterprise have increased revenues; stock prices 20-30% higher than digital laggards; [and] not to mention the potential 50% bottom-line impact.”
Undoubtedly, there’s a lot of evidence for the need for digitisation, yet according to an EY study, only 50% of CFOs surveyed consider it a high or very high priority in the next three years, and only 49% responded that they will make a high or very high contribution to the shift to digital. If CFOs want to continue to act as a strategic business partner as they have in recent years, they’ll need to take a strong lead in the race for digitisation, equipping businesses with the range of digital tools and technology needed to forge ahead.
CFOs will however face a number of challenges in driving digital transformation. The complexity in moving from legacy systems is one of the biggest obstacles, and often draws resistance from across the board. To get the buy in from all departments, you’ll need a thorough understanding of the benefits, and be able to show that whilst the move may be costly and time consuming, the ability to bring together data from every area of the business under one roof will be worth its weight in gold.
How the CFO role is changing
The role of finance and the CFO has changed beyond comprehension in the last decade. The recent global financial crash brought CFOs into the limelight, earning them both respect and recognition. As digitisation continues to disrupt everything from financial models, to business models, regulations to valuations, CFOs are without a doubt, under immense pressure to react, forecast and drive business change.
In the past, the role of a CFO was of a fiduciary duty, mainly concerned with looking back, driving efficiencies and managing budgets. Today’s CFO is expected to carry that forward whilst adding strategic insight that can shape business and operating models. CFOs of the future will need to be curious about every area of the business, as consumer experience, customer relations and branding become inextricably linked with company value. With this change in focus, future CFOs will need the technical know-how to guide business decisions and build the much-needed digital infrastructure. In a recent CFO Research survey, 93% of the senior finance executives surveyed believe that the CFO of the future will need a much stronger technology skill set than is currently required for the job.
The benefits of embracing digital
For digitally savvy CFOs and forward thinking companies, the benefits of embracing digital are boundless. Principally, the proliferation of Cloud computing will allow companies to consume software innovation as and when it happens. In the past there would be lengthy waits for IT departments to upgrade in-house applications. Now companies can access the latest software as soon as it is available through SaaS providers. A large majority of this tech is focused on facilitating access to big data, and herein lies the importance for finance departments and CFOs.
Cloud based technologies have opened up access to real time data, not only in the financial realm but also in more intangible assets such as customer satisfaction, quality of business processes and customer relationship data. The growth of cloud based ERP and performance management systems are helping CFOs to see the bigger picture, providing one truth, where all the data points are connected rather than being viewed in isolation. In doing so CFOs will be able to strive towards a more customer-centric future, focusing not only on the financial numbers, but on strategic growth through a greater understanding of consumers and their needs.
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