A recent FDE Dining Club event, held with support from WorkForce Software at The Dorchester Hotel, featured an esteemed group of FDs and experts, with CFO of O2 (Telefonica UK) Mark Evans as keynote speaker, to discuss exactly what the new digital CFO will look like in the coming years.
As the rate of technological change continues to gather pace, staying ahead of the game is even more important for CFOs. The challenges they face are many: equipping the business for the next step of the digital revolution, working with the next generation of digital natives entering the workforce, and maintaining control over how the business invests in and deploys the new range of digital tools and services.
To help FDs understand and negotiate the changing landscape, WorkForce Software invited CFO of O2 (Telefonica UK) Mark Evans to address a carefully selected audience in an intimate setting on how he sees the next five years and what qualities the CFO will need to embody to rise to the challenge.
To set the scene, Jamie Lyon, head of the corporate sector at ACCA gave some compelling statistics that underlined the UK's place in a rapidly changing world.
"McKinsey and Company recently calculated the impact of digitisation on competitiveness. 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. So clearly there's a lot of evidence for the benefits of digitisation," he says.
Happily, the UK is at the forefront of digital economies and is one of the fastest-growing digital markets across the globe. The figures tell the story: 20 million homes have access to super-fast broadband, (around 80MB a second).
The rate of change is remarkable, and has fuelled the growth of firms like O2, to name just one. Consider that just a few years ago, only a third of homes had PC adoption. Today, 70% of people have smartphone technology as a device and 50% of homes in the UK this year will have a tablet. Also, the UK is the fastest-growing e-commerce industry in Europe; it's going to be worth £50 billion in 2015.
"The business landscape is changing every day, and that change is almost entirely driven by technology," says Evans. "Take Uber; now the largest taxi company in the world, but it doesn't own one vehicle. It started five years ago and now it's worth $50 billion. That's how quickly smart technology can grow."
Risk and reward
The consequences for the digital CFO are potentially enormous. As one CFO working in the media commented: "We decided to embrace digitisation and that was an enormous commitment - we moved a large number of staff [and] we created a complete new digital base so that we can manage our content better. Our methods have changed; [they have] become more digital, faster and have driven out millions in cost. But doing it did require a big change and a lot of work. But we couldn't avoid it as it was our lifeblood."
Evans points out that as the CFO of a tech firm committed to improving customer service, he had no choice but to change. "We recognise as an industry the way that technology is changing, and we recognise that the UK is at the forefront. We're investing more than we've ever done and at a pace that we've never seen before," he says.
"Collectively, we are investing £10 billion in the next three years, so that's the equivalent of building the Shard 25 times. We talk about the high-speed rail. That's a £40-billion investment until 2033. We're spending £10 billion in the next three years on national critical digital technology infrastructure for UK business."
But while the investment in infrastructure and kit may be readily available, the change and disruption it fosters present a challenge for the CFO. For those running the finances in traditional businesses that are vulnerable to disruption and competition, for Evans, the issue can be broken down into three parts.
"The first one is that even though the CFO has always been known to be very close to the financials, they now need to be even closer to the customer," he explains. "The digital CFO needs to know how the customer wants to use their technology, what their appetite for services is and what markets may come about as a result of digital technology.
"The second thing I would highlight is how digital innovation will change business models. Technology enables us to change how we motivate, influence and drive productivity internally, but equally how we serve the customer as well.
"The third one is this: as CFOs, we have to embrace technology and we have to be more courageous than we've been in the past. Digital technology is moving at such a pace that if we dwell and become too conservative, it will pass us by."
Call to digital arms
Evans's rallying call isn't lost on the assembled guests, many of whom are only now beginning the journey towards truly embracing digital innovation.
But what does this all mean in practice? How can the digital CFO truly engage with and get closer to the customer? Evans points to a recent innovation to illustrate his belief that every company can innovate with the tools they have in order to drive greater customer engagement.
"We thought, at O2, that we have the power to do something to change that customer experience, so we built the Priority app, which sits on your phone, collates offers [and] puts them into themes, but then uses location-based technology so that wherever you are in the country, it can tell you where the offers are in and around you as an individual, and you can benefit from those."
Clearly, for any business, anticipating changing customer needs and responding to them is critical. Internally, too, there is the issue of changing business models; something Evans believes is inevitable. Take flexible working and how businesses relate to, inspire and measure employee performance.
"We have flexible working at O2. That means we use Telepresence, the virtual video-conferencing facility," says Evans. "We also use Microsoft Lync, for the ability to file share and transfer ownership, and [for] someone to take control. We have, of course, all of our applications downloaded on smartphones and tablets so that they have access to ERP remotely, and it's fair to say that they love the freedom and autonomy it gives them. Productivity does increase when you enable someone to work how they want to work and it takes cost out of your business."
Courage under fire
Last, but not least, in Evans's list of qualities for the next decade is courage.
"As CFOs, maybe it's fair to say we have a reputation for being too conservative and not embracing the exciting world that digital technology has to offer. What I would say, is what's made you successful today may not make you successful tomorrow," he states.
"We all know the experience of Kodak: founded in 1888, by the early 1990s it had $10 billion in revenue, with a dominant share in the photographic film sector. Three or four years later, it was filing for Chapter 11 [bankruptcy], which happily it survived, before renaming itself, but it is now worth less than 5% of what it was. The point? Kodak tried to resist technology. Digital photography arrived and it said 'No, no. We'll stick to what we're brilliant at. We'll ignore it and it'll go away'.
"But it doesn't go away, and that, I think, is a massive lesson to all of us. You need to be prepared to write a few things off if you want to see some of your innovations and new initiatives flower."
This is where the CFO must grab the opportunity, according to one guest.
"The CFO is evolving; if we don't, we will simply be left as the technical accounting function - because, the CEO still trusts me on the numbers. But if I'm not part of the big discussions over things like big data and analytics, eventually I'll be pushed to the side [to] just be a functionary," says the guest.
For those at WorkForce Software, the issue was one of working with CFOs to design software that would truly work.
"We're committed to helping CFOs meet the challenges they face," says Kim Lewin, VP EMEA, sales and operations at WorkForce Software. "We understand the pressures CFOs are under and so we have developed a lot of new solutions - cloud based and otherwise - that equip them with the right tools to become a digital CFO."