By Matthias Thurner
Digital transformation – using new technologies to drive significant business improvements – is all the rage. Organisations in every country and sector are working out how best to leverage mobile, AI, analytics and the Cloud to improve customer service, increase profitability, and shorten time to market.
Yet a lot of digital transformation initiatives end up running in the sand. A survey last year by Wipro Digital showed that many executives believe they are on-track to miss at least half of their digital strategic objectives.
Many things can bog down corporate change initiatives, but not having one office with insight into all the elements under review can be fatal. Responsibility for executing digital transformation initiatives usually falls to the CIO or COO – sometimes to the CMO. But only one C-suite executive sits at the intersection of strategy, technology, operations, and financial management: the CFO.
Today’s CFO is the organisation’s true digital native
In the past finance was an administrative function. Accounting focused on cash flow, capturing numbers, and reporting to stakeholders. Interactions with other departments were limited. In today’s networked and collaborative world, finance increasingly works in an advisory capacity to solve problems and set objectives across the enterprise.
CEOs expect CFOs to add strategic value, using their view of cost and revenue drivers to protect margin while helping grow the organization. They are measured on their ability to measure results and contribute to actualising company strategy.
To do that a growing number of CFOsnow collect and analyse shedloads of business data from across the organisation and use it for decision support, forecasting & budgeting. As this is impossible without a proper digital strategy and software tools this makes them the C-suite’s true digital natives. It only makes sense that they assume a leadership role in mapping the issues that boards want technologies like big data and AI to address, and in shaping their organisations’ response to emerging business models for the digitally-oriented economy.
Seeing beyond the numbers
Another factor that can slow down digital transformation projects is undue focus on operationally-driven strategies that should be financially-driven. When OPEX dominates project decision making, there can be a built-in hesitation to act and avoid overspend. With the CFO in the driver’s seat, project mindset can actually shift away from reductive and short-term thinking towards how to deliver ROI, value, revenue benefits and sustainable cost-effectiveness.
CFOs can determine the cost-effectiveness and added value that digital processes and technology can bring to the wider organisation.
How to measure overall business success of the transformation initiative? What to aim for in terms of project ROI? What are reasonable objectives for increased revenues, reduced operating costs and expanded gross margin? Only the CFO is in a position to answer these core questions and measure the true financial impact of digital transformation on the organisation.
With systems like CPM and predictive analytics becoming more established in the office of finance, CFOs increasingly have the tools and expertise to conduct detailed cost-benefit analysis and develop rational objectives based on accurate, real-time measurements. Those that have embraced new finance technologies are also in a better position to assess the longer-term benefits of transformation, such as competitive differentiation, talent acquisition, improved service and business agility.
The office of finance as digital case study
Perhaps the best reason to have CFOs in the lead of digital transformation is that many have recently lived through the experience in miniature within their own departments.
As the expectation on finance has grown from reliably recording and reporting numbers to providing strategic insight, more and more CFOs are leaving legacy technologies and manual processes behind, replacing them with automation, analytics, machine learning and Cloud deployments. They are seeing what works, what doesn’t, what skill sets are required, and as such can better anticipate the impact of culture and process on success.
Today’s CFO knows it’s about more than beating last year’s revenue forecast and can see both the direct and indirect potential of digital to create future value in the organisation. That must be the goal of digital transformation.
Global Banking & Finance Review
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