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Is Digital Transformation The Secret To Getting CFOs Back To Strategy?

Estelle Lagorce

Compared to two years ago, CFOs report they are spending more time on their “operator” role and less in their “strategist” role, according to the results of a recent Deloitte Consulting LLP’s CFO Signals survey. And they don’t like it.

It’s a tilt that bodes badly for both CFOs and their organizations, diverting the CFO from the all-important task of helping plan for long-term growth.

These concerns and how to address them were the subject of a recent Webinar, “Leading the Way to Financial Excellence through Digital Transformation,” hosted by the Institute of Management Accountants (IMA) and attended by 930 finance professionals from 40 countries. Participants heard critical facts, figures, and findings from Susan di Zerega, director at Deloitte Consulting LLP and Birgit Starmanns, senior director for Product Marketing at SAP.

A tricky balancing act

During the Webinar, the speakers outlined the role of strategist versus operator, underlining why CFOs’ best intentions are being sidelined by pressing operational demands:

  • The CFO as operator: focuses on the running and efficiency of the finance department; balances cost and service levels; defines and evolves finance’s operating model; deals with talent management
  •  The CFO as strategist: is a driver of strategy for the company’s future; provides to the Board a financial perspective on innovation and growth; improves risk awareness and decision making and translates expectations of the capital markets into business imperatives

Why CFO as strategist is needed now more than ever

Besides the CFO’s own preference, the list of why CFOs need to increase, not lessen, their strategic role is both long and compelling, rooted in technological concerns and in the accelerated pace of doing business. The Webinar highlighted some of the major trends showing why CFOs need to offload operational tasks and concentrate on strategy:

  • External conditions are becoming increasingly complex.
  • There is heightened pressure to support global growth initiatives.
  • Millennials have put into play a whole new work style that embraces networks and mobility. Organizations have to keep up with them.
  • The adoption rate of technological innovations is continually accelerating.
  • There’s an ever-increasing requirement to reduce costs in the finance department.
  • Cybersecurity is an ongoing source of concern in a business world powered by technology – and CFOs must contribute to critical decisions on risk management.

These factors are creating a new and more difficult reality for the CFO. While doing business in today’s complex global world requires greater strategic involvement, it also places greater demands on the CFO’s organizational responsibilities – a vicious and hard-to-break cycle.

Enter digital transformation: the CFO’s lifeline to greater strategic involvement

The Webinar highlighted how technological innovations can update, innovate, and streamline operational functions and procedures that divert time, energy, and resources from a CFO’s strategic focus.

A few examples of how new technologies bring balance to the CFOs dual roles of strategist and operationalist:

  • Planning and predictive finance: The digital transformation allows for a single consolidated view of all planning and forecasting information. More options are available and fewer opportunities are missed because lag time for updates is eliminated.
  • Financial close: New technologies make it possible to look at transactions in real time with continuous intercompany reconciliation and financial reporting visibility. Technology helps eliminate end-of-period batch bottlenecks and can be used to calculate key performance indicators.
  • Fraud management: Top-down and bottom-up information helps pinpoint and focus on key areas of cyber vulnerability. Predictive models help detect patterns. New technologies also enable real-time performance analysis and automated mitigation responses to fraud, should it occur.
  • Cash management: New cash management solutions combine analytical functions with related transactions. Integrated bank account management becomes available, allowing for the central administration of bank accounts and signatories. Nondisruptive cloud or on-premise deployment options can be utilized if desired.

The experts agree: new technologies are becoming essential tools in helping CFOs successfully reimagine their roles as they help reimagine their companies.

For more information on this topic, listen to the Webinar on demand on the IMA Web site.

To learn more about how finance executives can empower themselves with the right tools and play a vital role in business innovation and value chain, visit the SAP finance content hub, which offers additional research and valuable insights.

 And join the upcoming live CFO.com panel Webinar with Deloitte on January 21, 2016, “Ask the Experts: Prepare Your Finance Team for Success in the Digital World.”

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Estelle Lagorce

About Estelle Lagorce

Estelle Lagorce is the Director, Global Partner Marketing, at SAP. She leads the global planning, successful implementation and business impact of integrated marketing programs with top global Strategic Partner across priority regions and countries (demand generation, thought leadership).

The Future Of Supplier Collaboration: 9 Things CPOs Want Their Managers To Know Now

Sundar Kamak

As a sourcing or procurement manager, you may think there’s nothing new about supplier collaboration. Your chief procurement officer (CPO) most likely disagrees.
Forward-thinking CPOs acknowledge the benefit of supplier partnerships. They not only value collaboration, but require a revolution in how their buying organization conducts its business and operations. “Procurement must start looking to suppliers for inspiration and new capability, stop prescribing specifications and start tapping into the expertise of suppliers,” writes David Rae in Procurement Leaders. The CEO expects it of your CPO, and your CPO expects it of you. For sourcing managers, this can be a lot of pressure.

Here are nine things your CPO wants you to know about how supplier collaboration is changing – and why it matters to your company’s future and your own future.

1. The need for supplier collaboration in procurement is greater than ever

Over half (65%) of procurement practitioners say procurement at their company is becoming more collaborative with suppliers, according to The Future of Procurement, Making Collaboration Pay Off, by Oxford Economics. Why? Because the pace of business has increased exponentially, and businesses must be able to respond to new market demands with agility and innovation. In this climate, buyers are relying on suppliers more than ever before. And buyers aren’t collaborating with suppliers merely as providers of materials and goods, but as strategic partners that can help create products that are competitive differentiators.

Supplier collaboration itself isn’t new. What’s new is that it’s taken on a much greater urgency and importance.

2. You’re probably not realizing the full collective power of your supplier relationships

Supplier collaboration has always been a function of maintaining a delicate balance between demand and supply. For the most part, the primary focus of the supplier relationship is ensuring the right materials are available at the right time and location. However, sourcing managers with a narrow focus on delivery are missing out on one of the greatest advantages of forging collaborative supplier partnerships: an opportunity to drive synergies that are otherwise perceived as impossible within the confines of the business. The game-changer is when you drive those synergies with thousands, not hundreds of suppliers. Look at the Apple Store as a prime example of collaboration en masse. Without the apps, the iPhone is just another ordinary phone!

3. Collaboration comes in more than one flavor

Suppliers don’t just collaborate with you to provide a critical component or service. They also work with your engineers to help ensure costs are optimized from the buyer’s perspective as well as the supplier’s side. They may even take over the provisioning of an entire end-to-end solution. Or co-design with your R&D team through joint research and development. These forms of collaboration aren’t new, but they are becoming more common and more critical. And they are becoming more impactful, because once you start extending any of these collaboration models to more and more suppliers, your capabilities as a business increase by orders of magnitude. If one good supplier can enable your company to build its brand, expand its reach, and establish its position as a market leader – imagine what’s possible when you work collaboratively with hundreds or thousands of suppliers.

4. Keeping product sustainability top of mind pays off

Facing increasing demand for sustainable products and production, companies are relying on suppliers to answer this new market requirement.

As a sourcing manager, you may need to go outside your comfort zone to think about new, innovative ways to collaborate for achieving sustainability. Recently, I heard from an acquaintance who is a CPO of a leading services company. His organization is currently collaborating with one of the largest suppliers in the world to adhere to regulatory mandates and consumer demand for “lean and green” lightbulbs. Although this approach was interesting to me, what really struck me was his observation on how this co-innovation with the supplier is spawning cost and resource optimization and the delivery of competitive products. As reported by Andrew Winston in The Harvard Business Review, Target and Walmart partnered to launch the Personal Care Sustainability Summit last year. So even competitors are collaborating with each other and with their suppliers in the name of sustainability.

5. Co-marketing is a win-win

Look at your list of suppliers. Does anyone have a brand that is bigger than your company’s? Believe it or not, almost all of us do. So why not seize the opportunity to raise your and your supplier’s brand profile in the marketplace?

Take Intel, for example. The laptop you’re working on right now may very well have an “Intel inside” sticker on it. That’s co-marketing at work. Consistently ranked as one of the world’s top 100 most valuable brands by Millward Brown Optimor, this largest supplier of microprocessors is world-renowned for its technology and innovation. For many companies that buy supplies from Intel, the decision to co-market is a strategic approach to convey that the product is reliable and provides real value for their computing needs.

6. Suppliers get to choose their customers, too

Increased competition for high-performing suppliers is changing the way procurement operates, say 58% of procurement executives in the Oxford Economics study. Buyers have a responsibility to the supplier – and to their CEO – to be a customer of choice. When the economy is going well, you might be able to dictate the supplier’s goods and services – and sometimes even the service delivery model. When times get tough (and they can very quickly), suppliers will typically reevaluate your organization’s needs to see whether they can continue service in a fiscally responsible manner. To secure suppliers’ attention in favorable and challenging economic conditions, your organization should establish collaborative and mutually productive partnerships with them.

7. Suppliers can help simplify operations

Cost optimization will always be one of your performance metrics; however, that is only one small part of the entire puzzle. What will help your organization get noticed is leveraging the supplier relationship to innovate new and better ways of managing the product line and operating the business while balancing risk and cost optimization. Ask yourself: Which functions are no longer needed? Can they be outsourced to a supplier that can perform them better? What can be automated?

8. Suppliers have a better grasp of your sourcing categories than you do

Understand your category like never before so that your organization can realize the full potential of its supplier investments while delivering products that are consistent and of high quality. How? By leveraging the wisdom of your suppliers. To be blunt: they know more than you do. Tap into that knowledge to gain a solid understanding of the product, market category, suppliers’ capabilities, and shifting dynamics in the industry, If a buyer does not understand these areas deeply, no amount of collaboration will empower a supplier to help your company innovate as well as optimize costs and resources.

9. Remember that there’s something in it for you as well

All of us want to do strategic, impactful work. Sourcing managers with aspirations of becoming CPOs should move beyond writing contracts and pushing PO requests by building strategic procurement skill sets. For example, a working knowledge in analytics allows you to choose suppliers that can shape the market and help a product succeed – and can catch the eye of the senior leadership team.

Sundar Kamak is global vice president of solutions marketing at Ariba, an SAP company.

For more on supplier collaboration, read Making Collaboration Pay Off, part of a series on the Future of Procurement, by Oxford Economics.

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Sundar Kamak

About Sundar Kamak

Sundar Kamak is the Vice President of Products & Innovation at SAP Ariba. He is an accomplished Solutions Marketing and Product Management Execuive with 15 + year's broad experience in product strategy, positioning, SaaS, Freemium offering, go-to-market planning and execution.

The CFO Role In 2020

Estelle Lagorce

African American businessman looking out office window --- Image by © Mark Edward Atkinson/Blend Images/CorbisThe role of the CFO is undergoing a serious transformation, and CFOs can expect their role to continue to evolve, according to a recent CFO.com article by Deloitte COO and CFO Frank Friedman.

In the futurist article, Friedman says one of the biggest factors that will contribute to the CFO’s significant change over the next five years is technology.

Digital technology is obviously expected to drive change in high-tech companies, but Friedman says it’s industries outside of the tech sectors that are of particular interest, as they struggle to understand how to grasp and harness the digital capabilities available to them.

Working with high tech in low-tech industries

Five years from now, a finance team may be defined by how well it uses technology and innovative business tools, regardless of what industry it’s in. The article outlines some examples of ways that digital technology will increasingly be used by CFOs in “non-tech” sectors:

  • Predictive analytics: CFOs in manufacturing companies can forecast results and produce revenue predictions based on customer-experience profiles and current demand, instead of comparing to previous years as most companies still do today.
  • Social media and crowdsourcing: You may not think CFOs spend a lot of time on social media or crowdsourcing sites, but these methods can actually expedite finance processes, such as month-end responsibilities of the finance organization.
  • Big Data: CFOs already have a lot of data at their fingertips, but in 2020 they will have even more. CFOs in both tech and non-tech sectors who understand how to use that data to make valuable, informed decisions, can strategically guide their company and industry in a more digitally oriented world.

To do this, Friedman says CFOs can lead the way by addressing some critical areas:

  1. Know the issues: Gather the key questions that leaders expect Big Data analytics to answer.
  1. Make data easily accessible: Collect data that is manageable and easy to access.
  1. Broaden skills: The finance team needs people with the skills to understand and strategically interpret the data available to them.

The tech-savvy CFO

The role of today’s CFO has already expanded to include strategic corporate growth advice as well as managing the bottom line. In 2020, Friedman says expectations placed on the CFO are presumed to be even greater, and CFOs will likely need a much more diverse, multidisciplinary skill set to meet those demands.

The article details several traits and skills that CFOs will need in order to keep up with the pace of digital change in their role.

  1. Digital knowledge: CFOs must be tech-savvy in order to capitalize on technical innovations that will benefit their company and their industry as a whole.
  1. Data-driven execution: CFOs will need the ability to execute company strategy and operations decisions based on data-driven insights.
  1. Regulatory compliance: Regulations continue to be more stringent globally, so CFOs will need to be proficient at working closely with regulators and compliance systems.
  1. Risk management: With the growing global economy comes increased cyber and geopolitical risks worldwide. The CFOs of 2020, especially those in large multinational organizations, will need to have the expertise to monitor and manage risk in areas that may be unforeseen today.

The future CFO’s well-rounded resume

By 2020, the CFO role will require much more than just an accounting background. According to Deloitte’s Frank Friedman, “CFOs may need to bring a much more multidisciplinary skill set to the job as well as broader career experiences, from working overseas to holding positions in sales and marketing, and even running a business unit.”

So if you’re a current or aspiring CFO, you have five years to round out your resume with the necessary skills to be ready for the digitally driven role of the CFO in 2020.

The above information is based on the CFO.com article What Will the CFO Role Look Like In 2020?” by Deloitte COO & CFO, Frank Friedman – Copyright © 2015 CFO.com.

Want to learn more about best practices for transforming your finance organization? View the SAP/Deloitte Webinar, “Reshaping the Finance Function”.

For an in-depth look at digital technology’s role in business transformation, download the SAP eBook, The Digital Economy: Reinventing the Business World.

To learn more about the business and technology factors driving digital disruption, download the SAP eBook, Digital Disruption: How Digital Technology is Transforming Our World.

To read more CFO insights from a tech industry perspective, read the Wall Street Journal article with SAP CFO Luka Mucic: Driving Insight with In-memory Technology.

Discover 7 Questions CFOs Should Ask Themselves About Cyber Security.

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Estelle Lagorce

About Estelle Lagorce

Estelle Lagorce is the Director, Global Partner Marketing, at SAP. She leads the global planning, successful implementation and business impact of integrated marketing programs with top global Strategic Partner across priority regions and countries (demand generation, thought leadership).

How Much Will Digital Cannibalization Eat into Your Business?

Fawn Fitter

Former Cisco CEO John Chambers predicts that 40% of companies will crumble when they fail to complete a successful digital transformation.

These legacy companies may be trying to keep up with insurgent companies that are introducing disruptive technologies, but they’re being held back by the ease of doing business the way they always have – or by how vehemently their customers object to change.

Most organizations today know that they have to embrace innovation. The question is whether they can put a digital business model in place without damaging their existing business so badly that they don’t survive the transition. We gathered a panel of experts to discuss the fine line between disruption and destruction.

SAP_Disruption_QA_images2400x1600_3

qa_qIn 2011, when Netflix hiked prices and tried to split its streaming and DVD-bymail services, it lost 3.25% of its customer base and 75% of its market capitalization.²︐³ What can we learn from that?

Scott Anthony: That debacle shows that sometimes you can get ahead of your customers. The key is to manage things at the pace of the market, not at your internal speed. You need to know what your customers are looking for and what they’re willing to tolerate. Sometimes companies forget what their customers want and care about, and they try to push things on them before they’re ready.

R. “Ray” Wang: You need to be able to split your traditional business and your growth business so that you can focus on big shifts instead of moving the needle 2%. Netflix was responding to its customers – by deciding not to define its brand too narrowly.

qa_qDoes disruption always involve cannibalizing your own business?

Wang: You can’t design new experiences in existing systems. But you have to make sure you manage the revenue stream on the way down in the old business model while managing the growth of the new one.

Merijn Helle: Traditional brick-and-mortar stores are putting a lot of capital into digital initiatives that aren’t paying enough back yet in the form of online sales, and they’re cannibalizing their profits so they can deliver a single authentic experience. Customers don’t see channels, they see brands; and they want to interact with brands seamlessly in real time, regardless of channel or format.

Lars Bastian: In manufacturing, new technologies aren’t about disrupting your business model as much as they are about expanding it. Think about predictive maintenance, the ability to warn customers when the product they’ve purchased will need service. You’re not going to lose customers by introducing new processes. You have to add these digitized services to remain competitive.

qa_qIs cannibalizing your own business better or worse than losing market share to a more innovative competitor?

Michael Liebhold: You have to create that digital business and mandate it to grow. If you cannibalize the existing business, that’s just the price you have to pay.

Wang: Companies that cannibalize their own businesses are the ones that survive. If you don’t do it, someone else will. What we’re really talking about is “Why do you exist? Why does anyone want to buy from you?”

Anthony: I’m not sure that’s the right question. The fundamental question is what you’re using disruption to do. How do you use it to strengthen what you’re doing today, and what new things does it enable? I think you can get so consumed with all the changes that reconfigure what you’re doing today that you do only that. And if you do only that, your business becomes smaller, less significant, and less interesting.

qa_qSo how should companies think about smart disruption?

Anthony: Leaders have to reconfigure today and imagine tomorrow at the same time. It’s not either/or. Every disruptive threat has an equal, if not greater, opportunity. When disruption strikes, it’s a mistake only to feel the threat to your legacy business. It’s an opportunity to expand into a different marke.

SAP_Disruption_QA_images2400x1600_4Liebhold: It starts at the top. You can’t ask a CEO for an eight-figure budget to upgrade a cloud analytics system if the C-suite doesn’t understand the power of integrating data from across all the legacy systems. So the first task is to educate the senior team so it can approve the budgets.

Scott Underwood: Some of the most interesting questions are internal organizational questions, keeping people from feeling that their livelihoods are in danger or introducing ways to keep them engaged.

Leon Segal: Absolutely. If you want to enter a new market or introduce a new product, there’s a whole chain of stakeholders – including your own employees and the distribution chain. Their experiences are also new. Once you start looking for things that affect their experience, you can’t help doing it. You walk around the office and say, “That doesn’t look right, they don’t look happy. Maybe we should change that around.”

Fawn Fitter is a freelance writer specializing in business and technology. 

To learn more about how to disrupt your business without destroying it, read the in-depth report Digital Disruption: When to Cook the Golden Goose.

Download the PDF (1.2MB)

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Our Government's Legitimacy Is In Danger

Hein Keijzer

It is a growing phenomenon: Governments are gradually losing support from their citizens. Citizens in European countries are also becoming disillusioned with their governments. This calls for a drastic improvement of the services provided to the most important and sole shareholder of the government—the citizen—because the government’s legitimacy is at stake.

Citizens’ confidence in government has been waning for some time now. There are reasons why populist and eurosceptic parties  have been gaining votes over the past years. The government must do everything within its power to win to rebuild confidence, and not just by fulfilling its basic tasks, because a feeble six can no longer save the parliamentary democratic system.

The victory of populist parties is the beginning of the end of the current democratic order. It is very likely that these parties will not participate in the government, because the other parties will mostly exclude them. As a result, the chasm between citizen and government keeps growing, creating a situation that reinforces itself and that holds very little chance of success in the future.

The base

We must return to the base to touch on the core of the problem. Western governments are complex bodies, but the basic idea behind them is rather simple: Citizens pay tax to a central, democratically elected system. In return, they expect basic services such as security, education, physical infrastructure, healthcare—and in the case of the Netherlands, dry feet, i.e. protection against water. It is not unreasonable to expect a western country to provide at least this bare minimum.

But this is where things is going wrong these days. Every country is dealing with at least one case in which the tax payers’ money is not allocated correctly. The Panama Papers is a recent example of this. The term cover-up often does not apply anymore, because civil servants are no longer even capable of hiding the chaos in a cover-up. These days the media are capable of making the content  of the cesspool available to the public in no time. A ministry that cannot manage its internal affairs has even more trouble proving its legitimacy to society.

The government must not only deal with organizational problems; mentality comes into play as well. Many governmental institutions see the taxpayer as such: a taxpayer with mostly obligations. This mindset need to change. It is time for a customer-centric approach: The citizen is the customer, and the customer is king. As is the case with the boardroom of a commercial party where shareholders cannot get away with mismanagement, the government should not be able to get away with mismanaging the assets of their sole shareholder: the citizen.

This approach requires a number of very strong measures:

1. Earnest use of apps and social media

In the past it was necessary to go to an office and make an appointment in order to communicate with the government. These days, social media allow for much more efficient communication. Governments can use apps and social media—potentially—to more quickly discover trends, indicate problems, and communicate with citizens. Now digital communication is mostly housed in separate departments. This is not sufficient for the much-needed model in which the citizen is the shining center of the services provided. Communication with the citizen should be at the core of the organization.

2. Make the policy completely transparent

Backroom politics and convoluted decision-making are no longer feasible. Citizens are entitled to the best possible access and information provision. The government has come a long way with open data, but is still very far from doing enough.

3. Clear communication

It is the duty of a good service provider to communicate clearly with its client. This also applies to the communication of the government with the citizen. Unfortunately, this fails all too often. Vague, official language and unclear wording are the order of the day. If a citizen does not understand the government, it creates a wedge. Civil servants should be forced to follow compulsory courses on clear communication on a B1 level. This is an official language level that is understood by the majority of the population and is effective to communicate messages in a clear way.

4. Smarter information linking

The government knows a lot about their citizens, but this information is not linked well or not linked at all. As a consequence, the government does not know anything about us at all. From a privacy point of view, this is of course not unattractive, but it is disastrous for the provision of good services.  The government cannot think with us if it doesn’t know who we are, if it doesn’t know our preferences and our problems. In order to achieve this, systems and an integral data policy must be connected, for one version of the truth. I provided a few examples of this in my previous blog.

Unfortunately these four points are still far from reality. This isn’t the first time that I have broached these problems. The communication between the government and the citizen is often very difficult. There are few apps, and the government uses social media in a very reactive way. It is not rare to only receive an answer after a few days. Smart connections between citizen data points are missing. Many governments are developing the majority of their IT solutions themselves, and barely believe that integration via standard solutions is possible. The government’s outlook is inward and doesn’t change, because there is barely any staff turnover.

Governments could follow the example of the Australian government, which started a digital transformation with a genuine Digital Transformation Office. Its primary focus is efficient and transparent service provision toward the citizen. Its motto: “Simpler, clearer, faster public services”—an easy but meaningful statement. It touches the core of what has to happen here as well.

The gap between government and citizens will not close on its own. A digital transformation is unavoidable if the government wants to stop the downward trend and not lose its legitimacy completely.

For more insight on digital transformation in the public sector, see Unlocking The Benefits Of Digitization For Governments.

 

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Hein Keijzer

About Hein Keijzer

Hein Keijzer is customer solution manager for the Public Sector Business Unit at SAP Nederland. After his education in Applied Economics and Public Administration, Hein worked for the Dutch Ministry of Finance, Budget Affairs directorate, and since 2000 at SAP. Connect with me on Twitter @heinkeijzer or <a href="https://nl.linkedin.com/in/heinkeijzer"LinkedIn.