Senior Consultant, IBM Center for Applied Insights
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When you are in the business of developing (hopefully) provocative, data-driven thought leadership, every topic or issue can seem like it is undergoing rapid, fundamental transformation. Things are faster. Things are more complex. Things are being disrupted. When setting out earlier this year to take a look at how the role of finance and the CFO is changing, I had to make sure that I wasn’t going to fall into that pattern without due cause.
There are plenty of articles, reports and other quips saying that CFOs can’t just keep the books anymore. Protecting the bottom line isn’t enough. The value that they provide needs to change. Finance leaders have to be more creative, more innovative, and more strategic, yet still maintain operational discipline and efficiency.
Is this true? Are there finance leaders who are doing things differently and succeeding because of their efforts? After research, analysis, study and conversation, I have to say that this is real, and it comes down to those who can manage three areas that are accelerating concurrently and reinforcing one another.
Accelerating technological change…
With economic uncertainty and tightening business and technology cycles it is hard to stay at the cusp of change, let alone get ahead of it. A recent article on the Forbes blog, “4 Ways Technology Is Transforming Business Strategy”, does a nice job explaining why technology is disrupting strategy. Since technology (mainly IT, but also in other areas) doesn’t change in a nice linear way, it’s dramatically reducing the shelf life of business models. The pace of change is out of whack, coming in fits and spurts, and making the job of finance executives, who like things nice and predictable, very difficult. But technology is not just a challenge; it’s also an opportunity to give CFOs and other finance practitioners new tools.
Accelerating strategic change…
Traditionally a functional role, finance has always been responsible for efficient financial operations, ensuring compliance, providing trusted information and managing cash and capital. However, things are getting harder and harder with stability and predictability becoming a thing of the past when it comes to markets, competition, and customers. What can CFOs do about this strategic shift?
In the article, “Think Functionally, Act Strategically”, the author discusses how functional roles, like finance, have to change to meet accelerating strategic change. They have to balance the basic business capabilities and competitive necessities of the past with differentiating capabilities of the future. It is not just about using the current capabilities and processes of the organization anymore – CFOs have to co-create the strategy, the tools, the processes and the implementation plans with the rest of the business.
By embracing and riding technology and strategic acceleration, CFOs can potentially unlock performance gains. We decided to go back and re-examine the results from IBM’s 2010 Global CFO Study, extend the work, and see how organizations were performing financially that were pushing their efficiency and analytical capabilities. You can read the approach and details in the report, but looking at financial measures like revenue and EBITDA, we found that those enterprises that are excelling at efficiency and insight are outperforming financially through all phases of the economic cycle. We hypothesize that this is opening them to new strategic possibilities – evolving into what we call “performance accelerators” (see graphic below).
CFOs and others in the finance function can help manage the acceleration of technology, strategy and performance. By using their current capabilities and developing new tools and processes, they can act as headlights, the gas, the breaks and the navigation system for their organization. We can’t analytically prove the existence of “performance accelerators” yet, but with further research we expect to show that strategic, growth-driven CFOs are seeing accelerating performance benefits.
To learn more visit IBM’s Finance page and read the Smarter Planet blog post “An Inflection Point for CFOs: The Need to Anticipate Change”