CFOs are assuming broader roles as companies adapt to an increasingly digital world. That was the keynote message at a recent dinner briefing in the Andaz Hotel, London, hosted by Finance Director Europe in association with Genpact. Steve Dunkerley speaks to six leading European CFOs to discuss this idea in more detail and see how these challenges can be addressed.
A recent study by HfS Research reveals the impact that digital transformation has had on the finance function. Of the 160 finance and accounting (F&A) service buyers surveyed, 84% of respondents agree that enterprises embracing digital transformation across business units will outperform their competitors within two years. Moreover, three quarters say that the new wave of digital technologies is fundamentally changing the way that finance functions operate. Half of the buyers, however, are not satisfied with the current impact of digital technologies on their F&A processes. This highlights important challenges that CFOs face as their roles change.
There is consensus among the interviewees that there are three fundamental challenges that need to be overcome to successfully implement digital transformation in the finance function: establishing talented teams; understanding, selecting and implementing the most appropriate technologies; and redefining CFOs' traditional roles.
"The biggest challenges I face concern the journey from local to global," says David Long, global director of operational finance and finance transformation at Dentsu Aegis Network. "We've got every possible permutation of processes in the world, and one of my personal challenges is to form a team that can move from the old to the new world with the best combination of people, processes and systems."
Technology choices and team building are ongoing challenges. Mark Evans, CFO for Telefónica UK (O2), says: "Digital technology is fundamentally changing customers' behaviour and business models, which is a threat and an opportunity, depending on whether we can foresee the next evolution."
Evans says that talent management is a key part of this challenge. "Every high-performance business needs to be able to attract, retain, develop and motivate high-performance individuals while also establishing a connection with the brand."
Bill Castell, CFO of corporate banking at Barclays, says that CFOs must reshape their functions to reflect the role that digital technology plays in empowering their customers. "I think the expectations and behaviours of our end customers are changing in terms of more instant demand, and an expectation of real-time data analytics." As a result, challenges that CFOs face include finding the balance between pure finance and managing the customer, establishing leadership in a changing environment and moving from being a technical expert to a leader.
Digital trends manifest themselves differently across business lines. "Keeping and attracting talent is an important part of the identity of the finance function. It's a strong part of the business," says Bruce Marson, director of financial control, EMEA at Dentsu Aegis Network. "We're looking for people from outside the media industry who have big industry experience that will help us to develop processes and systems, and also for people from bigger media agencies who can bring commercial knowledge."
To combine these competencies effectively, finance teams need access to external data from sources such as Google and Facebook, and a strategy for putting it all together to create powerful information for clients.
Doug Alexander, executive vice-president of finance operations at Shell, says: "We have been on a journey starting with the globalisation and consolidation of our systems and processes to drive transformation. We're reducing costs and increasing efficiency in the context of the interdependence of people, processes, data and technology to drive the outcome. We are focusing on getting the right people in the right place with the right skills to transform the organisation."
The need for digital transformation is accelerating as the demand for real-time analytics and customer services intensifies. Digital technology is enhancing the role of the finance function as a strategic partner in the business. "Cloud technologies and big data in particular are moving us away from the traditional role of data mining, reporting and simple planning towards delivering insights based on advanced analytics," Castell says. "This is transforming us into a partner rather than a pure finance function, giving us much greater impact and bearing on the overall business strategy of the organisation."
An end-to-end approach
Digital technology's rapid evolution impacts CFOs' abilities to make the right choices, but they need to avoid a piecemeal approach. Alexander says: "In the future, cognitive and artificial intelligence will have a big impact, but it's still emerging. Today, we are focusing more on the basic end of the spectrum, such as automation, ERP systems and robotics."
Based on its research, Genpact has found that companies are spending nearly $400 billion a year on digital initiatives that do not generate the expected ROI.
This is largely because digital technologies are adopted sporadically and for different interfaces of the business, rather than holistically and end to end.
Barend van Doorn, Genpact's vice-president and head of financial services and capital markets in Europe, says that failure to align strategy across different parts of the organisation is the main reason for the poor ROI that many companies experience. "What I see customers doing in the first phase is implementing digital in the front end of their organisations, such as the internet, social media and mobile," he says. "If you want to have a perfect customer journey, then you need to integrate the mid and back offices, and apply technology end to end and not in bits and pieces."
Van Doorn advises companies looking to transform their finance functions through technology to adopt a 'Lean Digital approach', which combines design-thinking methods that focus interventions on the end user with leading technologies and Lean practices that embrace end-to-end process design. "Approach automation from an end-to-end perspective and apply Lean management principles to automate the processes that really matter. If you automate broken processes, then you still have an overall broken process. So the best approach is to apply lean principles to digital."
The role for today's CFO is to lead the finance function by adopting a broader role as a strategic advisor to the business. Each CFO needs to address challenges that are unique to the organisation, but will be rewarded for their abilities to recognise the interdependencies among people, processes and technology, and the foresight to approach digital transformation end to end: across the front, middle and back office. By doing this, CFOs will have greater impact and outperform the competition.