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Why CFOs Must Become Digitally Savvy

Nilly Essaides

Digital transformation is all around us. New technologies are revolutionizing how companies do business and engage with customers. They are also changing the way finance delivers services to its internal customers. Out are paper invoices; in are e-invoicing portals. Out are legacy on-premise applications; in are cloud-based applications. Out is manual reconciliation; in is robotic process automation (RPA). Big Data and advanced analytics are giving finance the power to support better business decisions about investment opportunities, cost savings, and new sources of revenue.

Cases in point

  • At one telecom company, finance uses Big Data discovery and predictive analytics technology to help solve business problems. Finance set out to find out what kind of products customers in a particular area were looking for. Using Big Data and advanced analytics, the finance team came up with answers that help the business decide what to keep in inventory, increasing sales and reducing cost.
  • A medical device company decided to overhaul its order-entry process by using RPA. The company needed a comprehensive automation platform that was flexible and accurate, provided a strict control environment, and could be easily and quickly deployed. It took 6 months to deploy 14 robots and completely change the processes and significantly redeploy headcount. This approach also improved accuracy, which, among other benefits, helps get cash in the door faster.
  • At another company, an innovative cloud planning tool created a newly collaborative environment with self-service capabilities so that business units contribute directly to the forecasting and budgeting process. The new technology sped up the process while also improving data integrity.
  • Finally, at one global company, artificial intelligence (AI) is helping finance improve its forecasting accuracy by pulling in third-party data based on social media conversations from all over the world. The third-party provider relies on AI to gauge the intensity of the conversation to predict social and political events that may lead to market disruptions.

Many finance organizations still lag in achieving the full potential of digital technologies. Our 2017 key issues study shows that finance executives almost universally expect digital transformation to have a significant impact on their performance and service-delivery model. But they rank their current execution capabilities as low. They’re also not taking big steps to correct this mismatch.

How to become a digitally savvy CFO

That’s why CFOs need to become digitally savvy. Their primary goal is to close the gap between the development and execution of a digital strategy for the finance function. The digitally savvy CFO is the evangelist and steward of the effort to bring new technologies and a digital vision to the finance team. This way, the enterprise can benefit from the premise of more technologically enabled processes, advanced analytics, and self-service solutions.

Here are steps the CFO can take to move the finance function to the digital era:

  1. Build a customer-centric digital process: CFOs must focus finance on serving internal customers more efficiently and effectively. This may involve streamlining repetitive processes by moving them to a global business services organization. Or it might involve using tools like RPA to automate parts of the process that are rule-based and can be handed off to algorithm-driven technologies, freeing up staff time to focus on more value-added tasks.
  1. Build a digital architecture: Finance should create a connected and agile technology platform that integrates multiple applications to connect vendors/suppliers, end customers, and internal customers. This platform should be able to leverage a variety of internal, external, structured, and unstructured data.
  1. Develop digital competency through centers of excellence (CoEs). CFOs should establish digital CoEs where technologies like RPA can be tested to discover applications with strong business cases for deployment in the finance function. The CoEs act as “virtual sandboxes” in which new technologies can be tried out on a small scale.
  1. Create digital value through data governance: CFOs should spearhead data governance efforts to make sure enterprise data is accurate and ready to be used. Master data management (MDM), which defines the way data is stored and managed, is an increasingly important area of focus. Without it, analytics applications cannot run effectively.
  1. Develop data “smarts:” Data is of no value unless it’s used to drive action. Going digital means merging data with sophisticated analytics that provide insight into what is going to happen and what to do about it. Finance must deliver the right information at the right time to the right people so the business can take action.
  1. Develop a digital workforce: Finally, digitally savvy CFOs must come up with a talent development strategy designed to support their emerging approach. A full 80% of participants in our key issues study believe that digitization will change the skills and leadership approach required to manage their function. But the study also found that very few finance organizations plan major updates to talent management programs and practices this year. Finance will have to take bolder steps if it is to retrain and reshape its workforce to become more strategic in nature, collaborate with the business, and provide higher-level analytics support.

CFOs must stay vigilant regarding new digital technologies, continuously educating themselves and encouraging their staff to do the same. They must keep abreast of what other companies are doing, learning about potential use cases that may hold promise for their own activities and educating other company leaders on these topics. Most important, they must make it clear that they are fully committed to digital transformation by assigning these projects the highest priority and rewarding staff for implementing new technologies and mastering new skills.

For more digital transformation strategies, see Your Digital Transformation Journey Begins Here.

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Nilly Essaides

About Nilly Essaides

Nilly Essaides is senior research director, Finance & EPM Advisory Practice at The Hackett Group. Nilly is a thought leader and frequent speaker and meeting facilitator at industry events, the author of multiple in-depth guides on financial planning & analysis topics, as well as monthly articles and numerous blogs. She was formerly director and practice lead of Financial Planning & Analysis at the Association for Financial Professionals, and managing director at the NeuGroup, where she co-led the company’s successful peer group business. Nilly also co-authored a book about knowledge management and how to transfer best practices with the American Productivity and Quality Center (APQC).

China Leads On Mobile Wallets — Will Others Follow?

Tom Groenfeldt

Mobile wallets have taken off faster in China than in the U.S., concluded a recent Forrester Research study. It found that 76% of metro Chinese consumers use mobile wallets or are interested in doing so, compared with only 36% of the urban online U.S. population.

The past influences the future, and as a fast-developing country, China has not had the payments infrastructure and regulatory legacy that developed in the U.S., said Brendan Miller, a principal analyst at Forrester.

“Incumbency is a factor. We have the highest penetration and usage of credit cards in the world, plus high debit card usage. As you go into other countries you will find they have alternative or local payment options, so consumers are used to using these methods like direct debit from a checking account and they avoid a lot of the credit card and interchange fees we have.”

Asia has smart cities and well-developed networks that are simpler than those in the U.S., where multiple levels of government make integration of payments and services more complicated.

Asia’s mobile wallet providers have the potential to gain the understanding of customers that department stores used to enjoy before the big brands replaced many store cards. “Nordstrom,  Kohl’s, Macy’s, Sears — all those retailers had their own private label credit cards for years and years,” Miller noted. “They provided a way of getting a better understanding of what consumers were buying, and a way to avoid credit card and debit interchange fees.”

The rise of Alipay and WeChat in China has been driven by the value the services provide for consumers. “First they made it super convenient for consumers to buy, and then they layered on additional services that consumers found engaging, such as gamification and the idea of sending gifts on the Chinese New Year — red envelopes — that got people engaged with the system.”

In the U.S., payments systems have made it convenient, but that’s the lowest rung on the ladder, Miller added. “Mobile wallet providers will have to up their game.”

Mobile payments with NFC have the potential to be faster than EMV, which Forrester expected would drive mobile payments. Miller said that when he presented to a group of retailers last year, they told him that hasn’t been the case. “Retailers haven’t updated their terminal logic. So when you pay with NFC you should be able to tap and have transaction process immediately. Instead, I get prompted for my debit PIN or a signature because the POS is using the old terminal logic and not running NFC.”

If a buyer provides a thumb scan in Apply Pay, no additional identification should be needed. “But it is going to take a while for retailers to reprogram those terminals to improve the flow at checkout.”

Retailers have been preoccupied with getting EMV to work right that they haven’t focused on the user experience with NFC, he added. “Right now NFC is not that much more convenient, and meanwhile EMV is getting faster. Visa and Microsoft have done a lot to speed those up.”

The Forrester study predicted mainstream mobile wallets in the U.S. will add customer engagement features. The Chinese may provide some examples.

Miller said that Alipay has made some announcements of partnerships with American payment processors, primarily with a focus on targeting Chinese consumers within the U.S., such as pushing adoption in place where Chinese consumers visit. The Chinese payment companies may have the potential to reach beyond the Chinese markets, he said, but the attitudes of U.S. consumers will be different from the Chinese. “This is all harder that anyone thinks is it. Everyone is disappointed by Apple Pay or Android Pay adoption. This is going to take time; payments is hard to do.”

Consumers won’t bother with mobile wallets until they see some extra value beyond what cards or cash can offer, like the ability to order ahead at Starbucks or Dunkin Donuts, or get recommendations or coupons while shopping. Alipay and WeChat have evolved into lifestyle platforms for Chinese consumers. Miller predicts space will open in the U.S. for third-party providers like Apple, Facebook, and Google that could merge their other customer engagement tools with a mobile wallet.

For more on this topic, see Survey: Mobile Payments Can Boost Growth And Profitability.

Twitter @tomgroenfeldt

Image: AP

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Oxford Economics Research: Leading CFOs Have Become Real-Time Guides For The Entire Company

Neil Krefsky

The interim results from the latest Oxford Economics global survey of CFOs and finance executives are just in. With over 750 already interviewed – and another 750 to be interviewed in the coming weeks – one thing is crystal clear: Top CFOs are leading in the boardroom. They have become real-time guides that drive business strategy across the enterprise. But there is a big difference between leaders and laggards: The top CFOs use pioneering technology and Big Data to collaborate effectively with every function in the business and deliver the operational and strategic insights they need to be successful.

Finance has arrived

At nearly all the companies around the world responding to the survey, finance executives are involved in strategic decision-making outside finance, and over three-quarters of respondents agree that the finance function’s influence and activity is growing. The change, which has been talked about for so many years, has definitely happened and is widely accepted as a mainstream responsibility of the finance team.

Leading CFOs today are influencing major business decisions. The majority report that they have final decision-making authority or a high degree of influence over activities such as changes in the business model, entering new markets, new business partnerships, and technology investments.

And, as you would expect, optimizing risk and compliance management and optimizing working capital are closely tied as the top business goals for CFOs around the world. But, perhaps unexpectedly, driving strategic growth initiatives comes in second. Finance has truly moved from being an historic advisor to being a real-time guide.

Collaboration and data management

However, it isn’t all clear sailing. It’s clear that there is a big gap between those CFOs who are excelling at guiding their companies’ future strategy and those that are lagging behind. And the areas where this is most noticeable are collaboration and data management.

While finance departments have high levels of collaboration with risk management, compliance, internal audit, and operations, their collaborations with sales, HR, supply chain, sales, design/R&D, manufacturing, and customer services are considerably lower. However, where collaboration is occurring, two-thirds or more of respondents say it is effective.

At the same time, nearly all respondents cite increasing amounts of data as adding more complexity to the finance function, which is more than the number who point to regulatory compliance or new skill requirements.

Interestingly, those who can address the complexity of data management seem to excel at breaking down the traditional barriers and collaborating with other functions in the company.

Technology is really the only way of overcoming the challenge of data complexity and turning it into an enabling strength. This is borne out in the survey, with more than a third mentioning outdated technology as their biggest obstacle to achieving their business goals, and another third blaming lack of skills. A quarter cited manual processes.

By contrast, nearly all respondents rated Big Data, real-time analytics, and predictive analytics as being important for the finance function’s successful performance in two years’ time. In addition, training and technology were the top two activities respondents see as promoting collaboration between the finance function and other business units. And more than half are intent on providing better business analytics.

Discover what it takes to be a leader

The final research will be available in the next few weeks. By registering below for your complimentary copy, you can discover what leading finance executives have done to separate themselves from the rest of the pack and how you can become one of them.

  • Learn why improving collaboration with other functions is a priority
  • Understand where CFOs see the most room for improvement and what actions leading CFOs take
  • Learn why tech woes frustrate finance as much as regulations and budgets
  • Find out why technology is enabling finance to have a more strategic focus
  • Discover why additional data is adding more complexity to finance

Register now to get your complimentary copy and become one of the first to read the results of the full Oxford Economics survey.

Please join me and my colleague Judy Cubiss at SAPPHIRE NOW on May 17 at 3 p.m., for an interactive session, Take the Right Steps to Create a High-Performing Finance Organization. 

Follow SAP Finance online: @SAPFinance (Twitter)  | LinkedIn | FacebookYouTube

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Neil Krefsky

About Neil Krefsky

Neil Krefsky is a Senior Director of Product Marketing at SAP Finance LoB Solutions. He is responsible for the development and execution of the product marketing strategy for SAP's solutions for the Finance Line of Business including: SAP S/4HANA Finance, Financial Planning and Analysis, Accounting and Financial Close, Treasury and Financial Risk Management, Collaborative Finance Operations, Enterprise Risk and Compliance.

The Future of Cybersecurity: Trust as Competitive Advantage

Justin Somaini and Dan Wellers

 

The cost of data breaches will reach US$2.1 trillion globally by 2019—nearly four times the cost in 2015.

Cyberattacks could cost up to $90 trillion in net global economic benefits by 2030 if cybersecurity doesn’t keep pace with growing threat levels.

Cyber insurance premiums could increase tenfold to $20 billion annually by 2025.

Cyberattacks are one of the top 10 global risks of highest concern for the next decade.


Companies are collaborating with a wider network of partners, embracing distributed systems, and meeting new demands for 24/7 operations.

But the bad guys are sharing intelligence, harnessing emerging technologies, and working round the clock as well—and companies are giving them plenty of weaknesses to exploit.

  • 33% of companies today are prepared to prevent a worst-case attack.
  • 25% treat cyber risk as a significant corporate risk.
  • 80% fail to assess their customers and suppliers for cyber risk.

The ROI of Zero Trust

Perimeter security will not be enough. As interconnectivity increases so will the adoption of zero-trust networks, which place controls around data assets and increases visibility into how they are used across the digital ecosystem.


A Layered Approach

Companies that embrace trust as a competitive advantage will build robust security on three core tenets:

  • Prevention: Evolving defensive strategies from security policies and educational approaches to access controls
  • Detection: Deploying effective systems for the timely detection and notification of intrusions
  • Reaction: Implementing incident response plans similar to those for other disaster recovery scenarios

They’ll build security into their digital ecosystems at three levels:

  1. Secure products. Security in all applications to protect data and transactions
  2. Secure operations. Hardened systems, patch management, security monitoring, end-to-end incident handling, and a comprehensive cloud-operations security framework
  3. Secure companies. A security-aware workforce, end-to-end physical security, and a thorough business continuity framework

Against Digital Armageddon

Experts warn that the worst-case scenario is a state of perpetual cybercrime and cyber warfare, vulnerable critical infrastructure, and trillions of dollars in losses. A collaborative approach will be critical to combatting this persistent global threat with implications not just for corporate and personal data but also strategy, supply chains, products, and physical operations.


Download the executive brief The Future of Cybersecurity: Trust as Competitive Advantage.


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How Digital Transformation Is Rewriting Business Models

Ginger Shimp

Everybody knows someone who has a stack of 3½-inch floppies in a desk drawer “just in case we may need them someday.” While that might be amusing, the truth is that relatively few people are confident that they’re making satisfactory progress on their digital journey. The boundaries between the digital and physical worlds continue to blur — with profound implications for the way we do business. Virtually every industry and every enterprise feels the effects of this ongoing digital transformation, whether from its own initiative or due to pressure from competitors.

What is digital transformation? It’s the wholesale reimagining and reinvention of how businesses operate, enabled by today’s advanced technology. Businesses have always changed with the times, but the confluence of technologies such as mobile, cloud, social, and Big Data analytics has accelerated the pace at which today’s businesses are evolving — and the degree to which they transform the way they innovate, operate, and serve customers.

The process of digital transformation began decades ago. Think back to how word processing fundamentally changed the way we write, or how email transformed the way we communicate. However, the scale of transformation currently underway is drastically more significant, with dramatically higher stakes. For some businesses, digital transformation is a disruptive force that leaves them playing catch-up. For others, it opens to door to unparalleled opportunities.

Upending traditional business models

To understand how the businesses that embrace digital transformation can ultimately benefit, it helps to look at the changes in business models currently in process.

Some of the more prominent examples include:

  • A focus on outcome-based models — Open the door to business value to customers as determined by the outcome or impact on the customer’s business.
  • Expansion into new industries and markets — Extend the business’ reach virtually anywhere — beyond strictly defined customer demographics, physical locations, and traditional market segments.
  • Pervasive digitization of products and services — Accelerate the way products and services are conceived, designed, and delivered with no barriers between customers and the businesses that serve them.
  • Ecosystem competition — Create a more compelling value proposition in new markets through connections with other companies to enhance the value available to the customer.
  • Access a shared economy — Realize more value from underutilized sources by extending access to other business entities and customers — with the ability to access the resources of others.
  • Realize value from digital platforms — Monetize the inherent, previously untapped value of customer relationships to improve customer experiences, collaborate more effectively with partners, and drive ongoing innovation in products and services,

In other words, the time-tested assumptions about how to identify customers, develop and market products and services, and manage organizations may no longer apply. Every aspect of business operations — from forecasting demand to sourcing materials to recruiting and training staff to balancing the books — is subject to this wave of reinvention.

The question is not if, but when

These new models aren’t predictions of what could happen. They’re already realities for innovative, fast-moving companies across the globe. In this environment, playing the role of late adopter can put a business at a serious disadvantage. Ready or not, digital transformation is coming — and it’s coming fast.

Is your company ready for this sea of change in business models? At SAP, we’ve helped thousands of organizations embrace digital transformation — and turn the threat of disruption into new opportunities for innovation and growth. We’d relish the opportunity to do the same for you. Our Digital Readiness Assessment can help you see where you are in the journey and map out the next steps you’ll need to take.

Up next I’ll discuss the impact of digital transformation on processes and work. Until then, you can read more on how digital transformation is impacting your industry.

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Ginger Shimp

About Ginger Shimp

With more than 20 years’ experience in marketing, Ginger Shimp has been with SAP since 2004. She has won numerous awards and honors at SAP, including being designated “Top Talent” for two consecutive years. Not only is she a Professional Certified Marketer with the American Marketing Association, but she's also earned her Connoisseur's Certificate in California Reds from the Chicago Wine School. She holds a bachelor's degree in journalism from the University of San Francisco, and an MBA in marketing and managerial economics from the Kellogg Graduate School of Management at Northwestern University. Personally, Ginger is the proud mother of a precocious son and happy wife of one of YouTube's 10 EDU Gurus, Ed Shimp.