The Evolving Role of the CFO in a Digital World

By Noah T. Ullman, Director, BlumShapiro Consulting

Starting the Process:
Case Studies

Starting your organization on the path to digital transformation can be as simple as migrating some of your internal systems to the cloud.

The British Beer Company

The British Beer Company, a group of 14 pubs across New England, was drowning in paper as they managed these locations. This made it complicated to analyze financial results and complete month-end closings in a timely manner.

The British Beer Company moved its financial system to a cloud-based system. Moving to the cloud enabled streamlined decisions, reduced paper, emails and phone calls, and delivered access to key information and metrics in real time, accessible anytime and anywhere.

Additionally, staff efficiency improved through elimination of manual processes across entities and requests for follow up and analysis. Moving internal systems to the cloud is just one possible step toward digital transformation.

Youth and Family Not-for-Profit

A non-profit organization focused on working with schools, youth, families, and communities to create opportunities to challenge systemic racism and oppression needed help to find a document-sharing and storage solution for its largely remote workforce.

The group's consultants suggested that migrating their systems to the Microsoft Office 365 suite of products would best fit their needs. At the beginning of the project, email was the only service being used on Office 365 with Outlook. By making the move to Office 365, the organization was now introduced to cloud computing.

Along with Office 365, the organization added on Microsoft’s SharePoint and OneDrive for Business as a user-friendly way to store and save documents that, thanks to cloud computing, can be accessed by remote employees anywhere and anytime. Even better – the organization was able to have access to all of Office 365 – not just email – for almost the same cost they had previously been paying.

With the migration to cloud computing, employees no longer needed to go through the hassle of accessing the network drive and connecting to a VPN to access needed documents.

Given the number of items being shared through the cloud, security was a focal point for the organization. Email and documents are now safely stored within the Microsoft Office 365 cloud.

With Exchange Online Protection, the organization now has the ability to filter out emails that contain malware, spam, and phishing attempts. Any documents being worked on are encrypted at the Microsoft datacenter. The organization also has the ability to see who accessed and shared files within an audit log to ensure that all documents are being shared appropriately.

With the power of cloud computing, the organization is now able to better serve its mission and remote workforce.

“When you’re finished changing, you’re finished.” – Benjamin Franklin

Organization leaders and companies of all sizes are contemplating the impact of digital transformation on their industry, market, organization, and staff by exploring the boundaries of traditional definitions. This includes the role of the chief financial officer (CFO).

At its core, the function of the CFO is based largely around data. Traditionally it’s financial data. In a digital world where data is the fuel of progress, the value of all data should be measured and realized. The CFO is in a primary position to leverage the full value of that data, and should be focused on expanding the function of the finance organization into the digital realm. Recognizing the value of data and its return on investment (ROI) needs to be measured and one essential question needs to be asked: Is the office of the CFO bringing its full value to bear?

Additional questions need to be addressed as well, including:

  • Is someone from the finance office involved in the IT decision-making process?
  • Is finance bringing cost-saving measures to the product or service lifecycle?
  • Is the full value of data, employees, vendors, and customers being extracted?
  • Are capital investments viewed as a long-term approach to fundamentally evolve the business?
  • What is the total cost of ownership of your legacy systems?
  • Would it impact the organization to move IT expenses from capital expenditures (CAPEX) to operating expenses (OPEX)?
  • Andrew McAfee and Erik Brynjolfsson, Co-Directors of the MIT Initiative on the Digital Economy, describe this opportunity and report that “companies in the top third of their industry in the use of data-driven decision making were, on average, 5% more productive and 6% more profitable than their competitors.”

Digitized Financial Dashboards

Digitized financial dashboards are tools that allow data to come to life and can be essential to the success of the CFO by providing right-time, right-place, data-driven decision making. They allow for digital financial statements that provide brilliant and comprehensive overviews and a drill-down into a specific areas with a click or touch from the task worker to the boardroom. They allow for automated workflows of routine, time-consuming, and task-based work so organizations can make the right investments or divestments. These are basic tools in today’s digital world. If you’re not using them, it’s likely that your competitors are, and you’re playing at a disadvantage.

The modern CFO requires modern tools, but even more importantly, a modern way of thinking. Your competition is global, and more and more of the competition is disrupting the rules of the game and fundamentally shifting the market. Elon Musk went from PayPal to Tesla to SpaceX. Amazon went from a bookstore to an everything store to a media company to a cloud services provider. Traditional industries like eyeglasses and mattress sales are being disrupted by companies that are "born in the cloud." Agility needs to become a core competency in the culture of every organization if it is to survive the fourth industrial revolution.

Digital Transformation Yields Results

The good news is digital transformation is a journey that yields results – estimates include an increase in revenue of 3% and a reduction in costs of 3.6%. Out of more than 2000 companies recently surveyed, more than 50% expect ROI in less than two years and more than 90% expect ROI in five.

But more important than that, the market is demanding digital services and digital response times. If you are analog (doing things “the way they’ve always been done”) and your competition is digital, they will benefit from better, faster decisions and a more engaged customer base yielding in a bigger share of the market. Analog companies unwilling to change will go the way of Kodak, Blockbuster, and others that failed to adapt.

The urgency in the need for CFOs to adapt to this digital transformation is spelled out clearly in a recent study by Adaptive Insights, which shows that while CFOs have a goal to double the time that their teams spend on strategic tasks by 2020, they don’t appear to be making the necessary progress. By mid-year 2016, CFOs reported that their teams were spending 18% of their time on strategy, and the latest survey shows this has dipped slightly to 17%; if CFOs intend to meet their goal, the survey makes it clear: “They can’t afford to take small steps backward or even accept the status quo – especially with report volumes on the rise.”

What’s more, the survey also found that 43% of CFOs believe big data and analytics will have the single biggest effect on their future role. This is a game-changing time and companies are going to want to stay ahead of the curve. Here in New England we led the first industrial revolution through a communication of natural resources, geographic location, and an unparalleled work ethic. There is no reason we can’t rise again, but we have to be willing to change and embrace the new rules of the game.

Many companies have already started their digital transformations with the CFOs leading the way, recognizing this is a financial decision. Investments in modern business tools needs to be measured and realized. Culture change is a mandatory requirement that can – and perhaps should – start with the ones tasked with bottom line results.