No longer concerned purely with accountancy, today’s forward-thinking CFOs are embracing digital technologies as a means to improve their business’s commercial prospects. Mark Evans, chief financial officer of Telefonica UK (O2), explains the role played by the ‘digital CFO’ in driving technological change throughout an organisation.
The role of the CFO has undergone a subtle, but important, shift. Once focused predominantly on budgeting and reporting, it now entails something far broader than bean-counting. Today's CFOs fulfil an important leadership role, taking the reins of their company's growth while shielding it from risk.
"The truly effective CFO is becoming one who can shape strategy and advance the organisation from a commercial perspective," says Mark Evans, CFO at O2. "I look at the CFO as the business partner to the CEO first and foremost, and as the director of the finance function second."
Evans is speaking to Finance Director Europe about the 'digital CFO', a term that, until recently, would have sounded counterintuitive. While we are all aware of the ways that digital transformation is shaking up organisations' operating models, we rarely hear much about the CFO's involvement in this digital disruption.
"Some might say that the profession has tended to attract more conservative characters, who might be reluctant to invest in new technology without the certainty of what it will bring," he says. "I hope that isn't the case. In fact, I'd like to see members of my profession have real belief in what technology can offer."
He cites the example of the My O2 app, an innovation that has altered the firm's business model to the satisfaction of customers and shareholders alike. Historically, customer services in the mobile industry were based around call centres, which were expensive to operate and notoriously frustrating from the customer's point of view.
In late 2009, however, O2 launched the My O2 app for iPhone, followed by an Android version two years later. It allows customers to view their account information securely, and also features a comprehensive 'help' section, with all the tools they need to manage their account.
"It enables customers to resolve 90% of the service queries that would previously have required a call centre agent, quickly and efficiently, whenever and wherever they are," says Evans. "As a result, satisfaction in O2's products and the services increases. Since that application launched six years ago, O2 has been regarded as the best service provider in the industry."
It is possible to track these satisfaction levels precisely, because customers who use the application demonstrate a stronger affinity to the brand: they are more likely to purchase additional services, and to remain loyal to O2.
"It's brilliant technology for the customer, but let's think about it as a changing business model as well," says Evans. "The company is getting millions fewer voice calls into its call centres, which, of course, makes everything far more efficient. That's how technology can be used to enhance both aspects of the organisation."
After all, as technological changes make themselves felt, they cannot help but effect a shift in how companies invest their resources. While the CFO may still be regarded as the commercial conscience of the business, they are increasingly called upon to be digital pioneers, too.
"CFOs that embrace technology not only enable new products and services to be brought to customers, but they also create new ways in which their organisations can become more efficient and effective," says Evans. "I define a digital CFO as someone who is close to the numbers, but also open to embracing technology, for the sake of customers and of the business model. Technology opens up a whole host of opportunities and possibilities."
Evans is a veteran of the mobile industry, having worked at Vodafone for 11 years prior to joining O2 in 2012. The industry excites him in part because it is naturally amenable to technological evolutions: as customers demand change, providers will race to ensure their services adapt to suit. These days, he feels mobile phones are viewed less as simply a tool for making calls, and more as the remote control to your life.
This forward-thinking approach means that it is perhaps no surprise that the industry expects its finance teams to go beyond managing transactions. At Vodafone and O2, the CFO functions as a true business partner, with a vital role to play in assessing commercial options.
If there is a distinction to be drawn between the two companies, Evans feels it comes down to their attitude to decision-making. Vodafone, he contends, tends to be conservative, whereas O2 typically takes a more courageous approach.
"Two years ago, O2 decided it would divorce the industry, and give customers a clear understanding of what it was paying for, whether it was the handset they were buying or the services they used," he says.
"Back then, organisations would lock you into a minimum two-year agreement, and, as new handsets became available to the market, customers were not really enabled to make the very best use of the new technology that was coming out.
"So, in 2013, O2 decided that it would break away from that and offer real flexibility. It now offers flexible contracts, which is what the Refresh proposition is about."
O2 Refresh enables customers to split their monthly bill into two parts: a device plan (the cost of their phone or tablet) and an airtime plan (data, texts and minutes). Once the device has been paid off, the overall bill halves, meaning 63% of customers save 50%, or more. They can also upgrade to a new phone any time they please.
"A CFO might wonder why on earth a company might do that: isn't it better just to lock customers in?" continues Evans. "O2's thinking was quite the reverse: it was the only company to give customers the option to move away if they so chose, on the grounds that this would actually encourage loyalty and commitment to the brand, and that is precisely what has happened. There are now higher levels of retention for O2's customers, and people are committing to the organisation for even longer than they were before."
Naturally, higher customer retention leads to higher revenues, and that in turn can mean the money to invest in ever more exciting innovations. As the fastest-growing mobile operator in the UK, O2 profits are growing, but rather than rest on its laurels, it is always looking for new technologies that will cement its status at the forefront of the sector.
Evans believes the concept of the digital CFO can be broken down further into three separate strands. The first one is to view technology as a critical asset, with the ability to enhance products and customer service, as well as potentially opening up new markets. It can be used to streamline and simplify internal processes, improving efficiency and the speed of decision-making.
"CFOs should be proud of their strong financial acumen, but they should actively embrace technology, because I'm sure that both your customers and your own business will be better off as a result," he says.
The second part of the equation is to ensure that CFOs play a proactive role in the business.
"Yes, we're here to provide the accounting, the financial transaction support and the reports, but that's not really what an organisation needs from a digital CFO," he continues. "A digital CFO will help strategy, understand the market and customer demands, and will play an active role in making commercial evaluations for his business."
Finally, the CFO needs to put customers first, and be prepared to take risks. This may mean cutting ties with convention and breaking away from entrenched business practices and services in the quest for something truly cutting-edge.
Of course, to fulfil their potential, any new technology strategies will have to be implemented across entire organisations. Going digital is not just about creating particular technology channels or silos, but about implementing far more sweeping changes. Its purported benefits are only likely to come about as a result of cross-functional collaboration.
"If we're fully aligned and excited by the possibility, then we'll maximise our chances of achieving it,' says Evans. "O2 prides itself on offering flexible working conditions as a result of technology that enables remote access to its systems. Everyone loves the autonomy, which means they are quick to embrace the technology, and this improves their lives, while helping the company become effective."
To this end, it is particularly essential that finance teams collaborate with HR departments. Human capital one of the biggest and most important costs for any organisation, and the digital CFO should make sure this critical resource is used to the full.
"You must understand the skills the organisation needs, and what efficiencies are required in certain areas," says Evans. "If you have close alignment with HR, then the chances are you're going to have a similar mindset and want to deliver in a similar way. At O2, someone from HR sits with my leadership team each week and makes sure they understand exactly how we assess the business."
Technology can help CFOs identify unnecessary costs, such as inefficiencies in payrolls. While Evans says this has not been the case at O2 - largely due to the company's highly engaged workforce - he does see technology as a means of improving communication between departments.
"I don't think we've ever used technology to drive out hidden costs, but we've used it to make life easier and help with decision-making processes," he says.
'Digital CFO' is a term we can expect to hear far more frequently in future. It is essential that finance directors in today's fast-evolving business climate understand that technology not only gives them the capacity to achieve a company's strategy, but also helps to define what that strategy should be.