Recent studies by Oxford Economics ask how finance leadership pays off. The final report from a global survey of 1,500 finance executives shows clearly how the finance function can make a difference in the era of morphing business models. In short: finance “leaders” show up at the front office.
Collaboration is one of the key success factors that shows the leadership of a CFO in a digital world with blurring boundaries between business units and even enterprises, and the massive growth and accessibility of data. However, the survey indicates clearly that nearly all CFOs say their finance function collaborates closely with internal audit, risk management and compliance, and operations. This can be taken as the mandatory housekeeping collaboration, and CFOs are usually perfect at it while executing their business capturing back-office activities.
The new insights demonstrate now that breaking out of their homegrown comfort zone and showing up at other business units is what improves enterprise performance markedly. “Collaboration is not a ‘nice to have’—it’s a requirement,” says Julian Whitehead, CFO of Airbus Defence and Space. Looking deeper at collaboration between finance and the customer-facing business units – marketing, sales, and service – shows the largest gap on the level of collaboration between CFOs identified as “leaders” and the majority.
And these are exactly the areas that are in the focus of digital transformation. On one hand, the digitized businesses allow new opportunities for customer interaction and make them enthusiastic about the company and its products and services. On the other hand, new expectations from the customers as more and more “digital natives” require new way to manage relationships and provisioning of information.
The finance area has three levers to support business units to improve their performance by increasing efficiency and even more, by focusing on the most valuable segments:
- Establishing an advisory for business analysis tools and procedures
- Providing business insights by analyzing business operations from the finance angle
- Enhancing operations by adding finance data about customer and markets
The digital CFO has to become a visible partner of the business.
In the past, the silos of finance and operational business units might have been established by a controlling approach that focused mainly on cost reduction. Companies that already went through a finance transformation program tell about the benefits of collaboration. According to Sam Parikh, managing director, Deloitte Consulting LLP, “Once the operating units see the power of analysis that finance can provide, they understand the value of the finance function, which in turn allows the CFO to play the strategy role more effectively. It’s a win-win situation.”
Finance operations organizations can take advantage of intuitive and iterative modeling to identify untapped opportunities, expose hidden risks, and simulate and model options for strategic decisions, all without the need for specialist IT skills or data scientists. The following two examples show how companies can already benefit from smaller steps in the right direction.
- Enhancing analytics application by a cloud layer (for example, analytics in the cloud for planning): Embedded real-time analytics capabilities bring access to real-time analytics like ad hoc reporting, forecasting, and what-if analysis to get insights right into a marketing campaign and related revenue plan, for example. With user-driven financial modeling, a business user can easily create and modify financial planning models on the fly – and make faster, better-informed business and financial decisions.
- Enhancing the sales order process by a cloud integration layer for accessing and requesting the newest credit information provided by external credit agencies: Internal information about the customer will be enhanced by the latest external information. Not only can an individual sales order be checked, but also, with further analytics behind the overall risk profile, a sales order portfolio can be managed. Even further, outbound marketing activities can be focused on the most relevant customer based on such additional financial information.
The next level of quality in collaboration could be achieved by integrating machine learning models. Stay tuned for future blogs on this topic.
For more information, read the full study, How Finance Leadership Pays Off.