As companies in every industry strive to become end-to-end digital enterprises, Oracle CEO Safra Catz—who earlier in her career led that very transformation at Oracle—offers this advice: “The attitude you need to have is not ‘think outside of the box.’ Instead, it’s ‘don’t even see the box.’”
These profound business transformations promise to reshape the responsibilities of every C-level executive, and for CFOs the new challenges center on driving digital-first priorities, processes, and culture across teams that, in most companies, are chafing to get the heck outta that box—permanently.
The best way out for CFOs and their finance teams, says Catz, is a complete commitment to an enterprisewide overhaul that obliterates silos; integrates data and collaboration; demands new skills and approaches; and leverages fast, flexible, and powerful new cloud-computing technologies.
“It totally changes the role of what finance does,” said Catz, speaking at the Oracle Modern Finance Experience conference in 2015.
“The real way it was in finance—in the world I grew up in—is we spent all our time looking backwards. And what Enterprise Performance Management brings to it—especially when it’s connected with core finance operations via Enterprise Resource Planning—is now it’s about looking to the future.”
CFOs have a once-in-a-generation opportunity to help build that future by taking a leading role in a three-stage digital journey: in digital disruption, they got a glimpse of what customers will need and demand in the future; in digital transformation, they’re scoping out the path to a smarter, nimbler, and more customer-centric future; and now they’re planning how to complete that transformation and emerge on the other side as a modern and end-to-end digital business.
To explore just what that future holds, and to help digital CFOs navigate the journey successfully, Oracle late last year commissioned a detailed research survey called The Digital Finance Imperative that revealed large and troubling gaps separating the modern, customer-oriented data and insights that CFOs say they need, and the fragmented and incomplete data their current legacy systems provide.
For example, the global survey of 744 executives from 34 countries identified this huge disconnect involving intangible assets, with CFOs saying they simply cannot generate or find sufficient data about the customer-oriented issues they feel are most vital to their businesses:
- What they want: The top three drivers of business value identified by respondents are customer satisfaction (76%), quality of business processes (64%), and customer relationships (63%).
- What they have: Only 25% of respondents are able to assemble and analyze data on customer sentiment (while 76% say customer satisfaction is their #1 value driver), only 33% said they have metrics on the quality of their business processes (whereas 64% said it’s essential), and only 20% can access data revealing the impact of their brand (in spite of 63% saying customer relationships are critical to their business).
So how do CFOs close those troublesome gaps between what’s needed and what’s available? How can they become the “digital guidance systems” for their businesses? Oracle Senior Vice President Rondy Ng, who has worked with hundreds of CFOs while building and leading Oracle’s booming cloud ERP business, offered this perspective:
“Finance is running the risk of sitting on the sidelines while more digitally savvy lines of business deliver the insights that management needs to differentiate and grow. By unlocking the value of data using a modern and complete cloud-based ERP and performance-management system, CFOs and their finance teams can seize the unique opportunity to become the new digital guidance system for the enterprise.”
And, one of the lead authors of The Digital Finance Imperative report, Dr. Noel Tagoe, says CFOs have to aggressively seize the “digitization” opportunity. “As digitization makes it more difficult for businesses to differentiate and earn a premium, the quality of decision-making has become essential to success, and finance can take the lead in ensuring this quality. It has the enterprisewide overview and skill required to work with diverse internal stakeholders, ensuring that the business assembles, analyzes, and applies data to improve performance.”
Against that backdrop, here’s our list of the Top 5 Digital CFO Issues for 2016:
- Digital KPIs: How do you quantify IP, customer data, and brand reputation? Traditional performance metrics simply can’t capture or quantify the true value of intangible assets, such as intellectual property, customer data, and brand reputation. That creates huge exposure for businesses today because of the soaring value of those intangible assets, which today account for 80% of the value of companies that make up the S&P 500 Index. To measure and monitor—and exploit—these new value drivers, CFOs need new, digital KPIs that modern cloud-based tools and technologies can capture.
- Digital CFOs go from “bean counters” to information brokers. By working intimately with LOB heads to help them capture, measure, and report—in real time—on the data and information that are most important, the Digital CFO helps reverse the company’s financial focus from rearview-mirror history to future priorities and opportunities. From The Digital Finance Imperative research: “Management accounting has the potential to bring professional rigor to decision-making by ensuring that decisions and performance management are informed by proper analysis of the relevant information and that the business is managed in the long-term interests of its stakeholders.”
- For financial operations, businesses go all-in on cloud computing. To modernize mission-critical internal operations—including finance, HR, and supply chain—CFOs are rapidly turning to the cloud to leverage its end-to-end digitally optimized tools that allow the entire enterprise to keep pace with today’s relentless waves of change. On the top-priority issue of security in the cloud, CFOs have grown comfortable that proven enterprise providers such as Oracle devote massive resources to security on a 24/7 basis, which lets those businesses devote more of their time and resources to serving their customers rather than battling increasingly devious cybercriminals.
- Cloud-based business models will help address new revenue recognition rules from the accounting standards boards. As more companies look to boost valuations by focusing more on intangible assets—a trend accelerated by cloud-based business models—companies must also recognize revenue in new ways. To meet these new realities, Digital CFOs are moving to new financial-reporting systems that have the nimbleness and flexibility required to comply with these new standards. And cloud computing allows CFOs to deploy and optimize those dynamic new digital systems more quickly than would have ever been possible in the legacy world.
- CFOs need to infuse digital skills across their teams. Forward-looking CFOs are tackling an ambitious digital agenda including:
- The creation of entirely new types of digitally enhanced business models that align with emerging customer behavior
- The infusion of deep analytical abilities across their teams to allow them to generate not just data but market-facing insights
- The development of new ways of engaging with lines-of-business leaders to, once again, reorient financial discussions from static views focused on the past to dynamic views of future trends, opportunities, and approaches to evaluate
To be sure, that’s a bracing set of challenges, and will certainly require the full commitment and support of the CEO and board. And the good news from the survey is that it’s still early innings in the Digital CFO game: only 15% of respondents say their finance teams have become fully engaged with other parts of the business in pursuing strategic initiatives, and in identifying the appropriate “intangibles” that Digital CFOs must measure and manage.
So CFOs, it’s time to make the unconditional leap into digital business. CIOs are helping infuse digital know-how and capabilities into all parts of the company, CMOs are exploiting marketing automation to connect directly into their companies’ revenue streams, and CHROs are using modern cloud apps and analytics to find, recruit, nurture, and retain world-class talent.
Perhaps a good starting point would be for CFOs to ensure that, as Oracle CEO Catz says, rather than putting themselves inside a box and trying to see outside of it, they undertake this journey believing the box never existed.
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