The CFO of the future – How to future-proof your CPO position

by | Aug 24, 2021 | Insights | 0 comments

INTRODUCTION

Thirty years ago, the idea of the Chief Financial Officer as a finance technician preoccupied with numbers and balancing the books seemed fitting. However, the CFO of today wears multiple hats, driving business growth, managing complexity while reducing costs. The CFO of the future is a finance professional but also a digital pioneer who identifies and uses the unique position of the finance function while embracing digitalisation and data to manage change and drive the overall strategy of the business.

As the context in which the firm finds itself becomes more complex and integrated, the traditional notion that CEO’s are leaders, COO’s are strategists and CFO’s are technical accountants has become obsolete. The C-suite is becoming more diverse incorporating professionals with a broad skill set, great leadership, strategic capabilities and extensive experience.

THE MOVE TOWARDS DIGITALISATION

Artificial Intelligence (AI) had always been a future promise; however, it has now become a reality. Today AI and machine learning has automated routine tasks so that finance professionals do not spend time completing mundane tasks but rather focus on what matters most – growth opportunities and efficiency gains. Companies that have not embraced this digital revolution are struggling to remain relevant against the Amazons of the world. According to a study done by McKinsey, Amazon accounts for 45{02771218e2e513754a9c39a07c959f387565c202c9a328b6b44c8300a8c46e66} of online retail sales. As a result of Amazon’s high levels of investment into Digitalisation and new technologies, the firm is able to focus on a superior customer experience as well as invest more in talent, intellectual assets and innovation. The widening gap between firms who make use of digital technology and those who do not, has become more and more apparent. The fear of being left behind has urged firms into digital transformation.

HOW THE COVID-19 PANDEMIC PUT A SPOTLIGHT ON BUSINESS SILOS

Although the wave of digitalisation itself has highlighted the traditional organisation and its disjointedness, the outbreak of Covid-19 has sped the digitalisation process along. The Covid-19 pandemic sent businesses into crisis mode as many unforeseen challenges came to the fore. Many found that their organisations operated within isolated silos manifesting isolated views of the world, for example, a sales point of view versus a finance point of view. The result of this meant that CFO’s and CEO’s did not have a unified version of the truth within their organisation. This lack of visibility meant that organisations could not see potential growth factors during a time of crisis.

The finance function occupies a unique vantage point as it is much better centralised than other functions within an organisation. With the right technologies and capabilities, the finance function holds great potential for visibility, innovation, efficiency and cost reduction, which has become imperative now more than ever before.

Digital finance refers to an agile finance function that makes use of AI, machine learning technologies and high-performance software that is able to manage and analyse data. Digital finance holds so much potential for the finance function itself that this potential extends across the organisation. Therefore, the CFO now has a responsibility to be that digital lighthouse for the organisation – the key orchestrator for a big change.

WHAT IS NEEDED FOR THE CFO TO TAKE ON A DIGITAL PIONEERING ROLE

There are three pillars the CFO should consider when moving towards finance transformation: Digital Strategy, Digital Opportunities and Technologies and Digital Foundation.

1. Digital Strategy

The move towards finance digitalisation and transformation does not start with technology but rather with a clear and well-defined strategy. Once the overall strategy of the finance function is well defined, only then can the modern CFO explore technologies and digital opportunities which align with the finance strategy and overall strategy of the business.

It is important to think big while implementing small changes to achieve the overall business objective. Therefore, a culture of continuous testing and learning becomes imperative to achieving a successful digital strategy.

In the past, the finance function focused much of its capabilities and resources on operations. The digital CFO should push more resources towards strategic management and business partnerships.

2. Digital Opportunities & Technologies

Previously, financial processes were fragmented between different legacy applications resulting in little visibility and division within the organisation. However, for the CFO of the future, it is no longer acceptable for different components of the organisation to have contrasting figures, or to look at a financial model once a month. Smart technologies such as EPM software provides an integrated view of the organisation and allows for real-time analysis of financial data so that the strategy of the firm can be tested against the business environment on a daily basis.

Exploring and implementing new technology can be the most exciting but also the most daunting part of the digitalisation process. For the digital CFO, seeking to learn is half of the battle as well as not allowing the seemingly complex technology to become overwhelming.

There are so many sophisticated innovations and technologies out there, whether its Enterprise Performance Management (EPM) software such as OneStream, User-Centric Design (UCD), Natural Language Generation (NLG) (used for report writing), Robotic Process Automation (RPA), Artificial Intelligence (AI) (used for emulating decision making) and so forth. What becomes important is matching the correct technology with the strategy of the finance function so to further advance the overall strategy of the organisation.

Using smart technologies, the finance function is in a great position to drive an agile mindset. Agility means that the business can adapt quickly to changes that occur within the environment the firm operates in. Agility in action, refers to an organisation being able to change their business objectives overnight as a response to a recent shock in the business environment and the newly found financial data revealed by the smart technology put in place. The use of technology allows the organisation to be nimble in its working while having the correct data to back it up.

In order to ensure agility, a great amount of visibility within an organisation is needed. Therefore, smart EPM software such as OneStream allows for financial processes such as reporting, financial consolidation, planning and analytics to be unified on one single platform. This ensures that there is a single version of the truth within an organisation. For example, the value for salaries will be the same whether the finance department or the HR department is reviewing the data. Not only does this smart technology provide greater visibility within an organisation but also, the various components of an organisation are better integrated.

Although financial acumen is still the most important skill for the CFO, it is no longer enough to get the job done for the modern CFO. Therefore, technology that matches the strategy of an organisation is imperative so that if a crisis hits, the CFO can strike a perfect balance between strategy and technical knowledge.

3. Digital Foundation

In order for CFOs to equip themselves for the future of finance, it is imperative that a strong digital foundation is formulated.

Firstly, the particular people and skills needed going forward is important for a strong digital foundation. The CFO of the future plays a prominent part in leading discussions around the organisation and s\he should have a good idea of the technologies being implemented and what this means for the workforce of the future.

A common question posed is where one might acquire the relevant technological skills to embrace digitalisation. However, a broad team made up of diverse professionals who hold a mixed bag of qualifications, skills and experiences may be best suited for the digitalisation process. The result is individuals challenging each other to think outside the box with the aid of smart technology.

Secondly, having access to correct and concise data is imperative to ensure a firm digital foundation. Financial data may only become insightful when it is combined with other data. Therefore, it is essential that one version of the truth is available so that the CFO of the future leads a unified organisation.

Lastly, front-end technology and tools that align with the overall strategy of the organisation are necessary to build a digital foundation. The implementation of technologies and innovations will allow the organisation to mobilise its resources more efficiently, contributing towards the perfect combination of people, processes and technologies. Thinking through partner management with those organisations that are leaders within the explosive technological landscape may become important.

The CFO of the future is a finance professional but also a digital pioneer, who realises the unique vantage point of the finance function to provide and drive value to the rest of the organisation.

Jigsaw Advisory specialises in guiding CFOs and finance teams through their digital transformation journey. We value and nurture our niche position as a trusted transformation advisor to many top-level CFOs and are so confident about our recommendations that we choose to implement the solutions ourselves. That way, we fully understand the business context for the challenge and use that to serve as the focus throughout the implementation and benefits realisation process. Get in touch with our senior team.