Digital transformation has risen to the top of the corporate agenda. Whatever the business vision at the top, innovation should figure highly. That’s because today’s connectivity supports new ways to engage with customers, with data insight being used to increase productivity and efficiency.
Technology and business strategies are interlinked. Top-level C-suite executives are now tasked with achieving better results through data and technology. And those that don’t do this successfully are at risk of being left behind. According to a 2017 study by Forrester Research, 38% of business and IT decision-makers believe that technological change such as digital transformation will have the greatest impact on their decision-makers over the next 12 months.
Digital transformation is a complete reimagining of work; an opportunity to re-write the rules of business. It allows any business to shorten the distance between what it wants and what it can get. But it also means that competitors are just as capable of taking advantage because they’ll have access to the same tools.
Data is at the heart of digital transformation
Data enables new technology. Digital transformation is about businesses becoming data-driven. But perhaps more importantly, it’s about creating insight and value from data. We’re already seeing this with the rise of automation, artificial intelligence (AI), and an ongoing trend of businesses moving their on-premise Enterprise Resource Planning (ERP) systems to the cloud.
Forrester Research says that digital transformation is about investing in systems of insight. Businesses must discover the insights that matter most, embed them into the software that customers and employees use to engage, and continuously learn and measure through results.
Chief financial officers (CFOs) are major stakeholders in digital transformation. Already responsible for overall financial planning, management, and record keeping, their role has evolved, particularly when it comes to data analysis and decision-making. They are the ones who see all vital business data, and should have skills to analyse and interpret it.
Rather than simply reporting on what a business has done in the past, the CFO is expected to use real-time information to guide day-to-day decision-making. They must also be able to find value with efficiencies that can add to the bottom line. The only way to do this is to measure advanced performance metrics, make predictions, and act quickly.
CFOs are in a great position to look at digital projects and assess whether they will deliver a return on investment when it comes to revenue and profit needed to justify a long-term change. They can look in detail at whether initiatives are likely to differentiate the business and result in better productivity and efficiency.
CFOs can lead digital transformation efforts
As part of digital transformation, CFOs should be looking for enterprise technology solutions that can provide fast and easy access to real-time financial data, which they can use to make decisions. As well as ensuring compliance, these tools must allow them to access financial operational data, with automated alerts and capabilities such as scenario planning.
The cloud is a great enabler, allowing CFOs to access real-time data anywhere and anytime. With enterprise cloud solutions now reaching maturity, businesses are now turning away from legacy Enterprise Resource Planning (ERP) systems to more flexible and cost-effective solutions.
The CFO and chief information officer (CIO) must work together to allocate technology investment and prioritisation. For example, they should be looking at where inefficient processes can be automated, rather than increasing headcount, which can be a costlier exercise.
Piers Moore-Ede, head of digital at Company Debt, says: “The biggest challenge for CFOs doing this is managing the increasingly vast amounts of data and gleaning what’s important from it.
“Whatever industry you’re in, you will have to learn to see yourself as a technology company first and foremost. Those CFOs who are at the forefront of this transformation have a grasp on both data analytics and finance, meaning they are in a unique position to grasp and define corporate strategy.”
CFOs can use digital transformation to push through investment in technology such as robotic process automation (RPA) – the use of software bots to automate existing, often tedious, work processes.
This can reduce headcount, which is an obvious financial benefit for a business. It can also free up employees to focus on more valuable tasks, like interpreting and improving business performance, rather than spending time on routine logistical work.
Over the next few years, we will see businesses investing more in AI, or what some have called ‘automation on steroids’. With AI more commonplace, we will likely see lower-level manual tasks disappearing and replaced by technology.
CFOs can also drive Industry 4.0
In industries like manufacturing, data is the driver of the Fourth Industrial Revolution, or Industry 4.0. This is because Industry 4.0 is made possible with the collection of real-time information across the supply chain, whether talking to suppliers or customers.
In industries where Industry 4.0 is on the corporate agenda, like manufacturing, successful digital transformation depends on a CFO who understands the competitive advantages inherent in digital transformation, and who has the capability to drive it.
According to research from Siemens Financial Services, CFOs should have or at least be developing these five key skills for successful Industry 4.0 digital transformation:
- Comprehensive understanding of the financing options enabling a commercial sustainable transition to Industry 4.0.
- An ability to introduce financing options early in an Industry 4.0 strategy, so that the business can access and take advantage of potential solutions.
- Specific industry knowledge and expertise, related to financial, technology, operations, and market analysis, so they can accurately assess digitisation opportunity and risk.
- Capability to build predictive Industry 4.0 investment models and performance monitoring processes.
- Proficiency to create an effective phased plan to operationalise a move to Industry 4.0.
Today, the job of a CFO is to create better financial strategies that align with the needs of the business. They must in effect become strategic partners, empowered with the real-time analytics and insight that digital transformation can bring.
Recommended Next Read
Accounting for change: The role of accountants in driving sustainable business practices
C-Level Guide to Digital Transformation
Through digital transformation, businesses can secure growth, as well as improve products and services. But C-level leadership must push through the strategic change needed to meet tomorrow’s challenges, today.