Seven Finance Strategy Questions That Can Start The Paradigm Shift In The CFO Domain

Johannes Vogel

For CFOs, the beginning of the year is frequently a busy season. The planning cycle for the next year is finalized, year-end close is “in the box,” and the first strategy meetings for the next planning round are already scheduled.

For most CFOs, the planning process has proven that the external market and competitive environment are becoming increasingly dynamic. Established companies are facing the threat of disruption from other smaller, more agile players or startups, which succeed in leveraging new technologies better or faster. New platform-based business models are gaining momentum and need to be considered in parallel to existing business models. Client-centricity and better anticipation of clients’ needs are fast becoming the rule rather than the exception in today’s growth strategies.

Opportunities for CFOs through maturity in new technologies

In light of these factors, CFOs are increasingly focusing on innovation in technology and sociological changes. In many application areas, they are recognizing that new technologies have reached a maturity that’s worth considering. These include Big Data analytics solutions, applications based on artificial intelligence or “cognitive computing,” as well as cloud-based solutions. And they are offering significant opportunities for the companies that succeed in adopting them to win a pole position among their peers.

Introducing these innovative approaches also requires new skills within the team and frequent updates to existing job profiles. Demographic shifts are changing labor markets and ways of working. Members of Gen Y and Z bring new requirements and a different attitude concerning work-life balance, which are fundamentally influencing the way work is done.

Sales, product development, and R&D teams have been the first to adapt to the changes in the markets and explore the opportunities arising from digital technologies. However, more and more CFO teams have started to consider these opportunities as well. According to a study by Oxford Economics, “How Finance Leadership Pays Off,” conducted in April 2017, 72% of the study participants’ top-performer group (so-called “leaders”) are underscoring the increasing impact of finance on growth and development of the overall enterprise. This high score in the importance of finance for the enterprise naturally triggers demands regarding the quality of output from the CFO team and broadens the playing field in which the team operates.

Business model innovation

Due to the tension caused by technology innovation and competitive dynamics, businesses are conceiving new ways of creating products and services for clients and business partners and exploring new ways of working. One key driving force is clearly the proliferation of digital technologies, which create new ways to provide individualized and customer-specific products and services. (One example: Microsoft CEO Satya Nadella stating that the company is now focusing on products that are “loved” by customers). And these technologies open up new channels for value creation using platform-based business models (see, for example, the “kloeckner.i” steel trading platform created by Gisbert Rühl and his team in Berlin).

Digital also provides opportunities to boost efficiency for transactional processes via robotic process automation (RPA) or by implementing artificial intelligence (AI) solutions for better cash-flow forecasts. In parallel, companies are starting to intensively use internal and external data to generate business insights for better and faster decision making using Big Data analytical applications.

Why CFOs need to update their team’s strategy now

For the CFO team, these changes and new opportunities are ushering in a paradigm shift. Begin laying out the finance strategy with the following seven questions – although certainly, others will follow.

  1. How do we need to adjust the performance management of the company over the next few months and years to take advantage of the opportunities of innovation and market dynamics, within the context of the enterprise’s strengths?
  1. How will the CFO team collaborate more intensively with its operational business counterparts?
  1. How can we improve the quality and speed of enterprise decisions?
  1. How will we use RPA, AI, and Big Data/predictive analytics in the best possible way, and what basics are required to leverage the technologies?
  1. How will we support the digital platform business today and in the future?
  1. What employee profiles and skills do we need on the finance team in the next three to five years?
  1. What is the best organizational structure for the finance department of 2020, and how will the definition of the role of the team change?

More and more companies are starting functional finance strategy and finance roadmap workgroups, and industry practice groups like Germany’s “Schmalenbach-Gesellschaft” have created workgroups for digital finance.

Working on functional finance strategies helps companies begin to answer these questions, and then, based on updates, the team can better set priorities for CFO projects and initiatives. The team effort in building the CFO strategy creates a new common understanding about the role of the CFO team. It helps define how the team will support the operative business with future-focused analysis and a new focus on its business-partner role, and then identify development opportunities and a roadmap.

In an upcoming blog, I will discuss approaches, how a functional finance strategy can be set up, and which components are of particular relevance.

Johannes Vogel

About Johannes Vogel

Johannes Vogel is director of Finance & Regulatory for Finance Strategy & Digital CFO Services at BearingPoint. Johannes is an experienced professional in management consulting in the areas of finance strategy, finance process improvement, digital CFO services, and process management. He has worked with national and international clients in creating functional strategies for CFO teams preparing to support the business by creating value and business insights, while running a cost-efficient yet technologically modern organization. Other projects Johannes conducted with his clients included digital CFO assessments and benchmarking, as well as ERP and finance process implementations. Prior to consulting, Johannes worked in various finance functions of an Atlanta-based international media group. Johannes is a lecturer for a Master Program at the Universität der Künste in Berlin and likes to post on finance topics. In his time off, he enjoys playing guitar with friends and tries to spend as much time as possible with his sailing buddies somewhere off the coast of Croatia or elsewhere.