I spoke recently at a couple of CFO events in Germany and presented basically the same ideas I described in my last blog, Digitalization: Building Blocks for the CFO. Speaking with others at the events, I found it fascinating to note that we’re at an inflection point with digitalization, with many peers holding the answers to the issues they’re facing since they’ve already had to deal with them.
Interestingly, most of my peers were not overly interested in core finance processes. Most wanted to understand the strategic implication of digitalization – for instance, developing new business models and understanding better the digital economy and its implications to their companies. We had lots of discussions at the business-model level – exploring the risks, opportunities, and fundamental changes, ultimately wanting to understand whether they’re positioned right.
The implications of change can start out seemingly insignificant, yet as you tease out the thread, the broader impact is remarkable. For instance, consider the key to unlock your house. If the lock system is replaced with a fingerprint recognition system, or an app on your smartphone, physical keys are no longer necessary. If these keys are no longer necessary, then the locks associated with them also become obsolete, which leads to the machines that produced the keys and locks. The entire value chain is affected. Changes such as this are coming faster than people think, and the change will accelerate in ways that are hard to fathom.
This is where I see the CFO’s strategic role coming in. We need to be strategic and operational, to get people to sit around the table and discuss the impact of change on our business. This provides the ground cover that a CEO needs, since the CEO is under pressure to create and drive the company’s vision and strategy for the digital economy. The CFO has the unique opportunity as the known protector of the company, ensuring that it grows sustainably. Others with a seat at the table have a different agenda. For instance, the head of sales has a sales agenda; the head of human resources is focused on the workforce. The CFO must take the strategic role to play out scenarios, to explore new business models and consider how to operationalize them. Like an orchestra conductor, the CFO directs the boardroom discussion on digitalization as the CEO’s wingman.
I was really impressed with what some of my peers were saying at these events. They shared not only what they’ve learned, but what they’ve experienced and lived through. It’s not a numbers discussion, or a control discussion – it’s a business conversation, solving a business challenge, one that’s evolving in front of us and unfolding on a daily basis. These are exciting times.
CFOs from our customers I’m speaking with are also sharing what they’ve achieved, and it shows that they’re in the strategic role in their companies. One CFO told me how his company is now using additive manufacturing (3D printing) to produce spare parts for their machines. The advantage is that the company no longer needs to keep inventory, or run into operational disruption when a part can’t be quickly replaced by a supplier – due to back order, for instance. In this case, he wasn’t a part of the business process, but clearly strategically involved in the business case to change the supply chain of the company. Digitalization is thus happening everywhere, not just in the software industry.
To continue the discussion on the pivotal role finance will play in digital transformation and how CFOs can help their organizations reimagine efficiency, read Digital Finance: Transforming Finance for the Digital Economy. Learn more about how CFOs can drive the use of comprehensive automation to improve, simplify, and completely rethink back-office operations, leverage business networks, and speed up decision making. There will be more of this to come in my next blog.