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Going the "last mile" in Finance with David Axson
Delaney Turner 270003RQ8K Delaney.Turner@ca.ibm.com | | Tags:  business_analytics finance_forum finance
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David Axson is the author of From Data to Decisions – Best Practices in Planning and Management Reporting (Wiley 2003), Best Practices in Planning and Performance Management (Wiley 2007) and The Management Mythbuster (Wiley 2010).
He's also the keynote speaker at more than 20 of this year's IBM Finance Forum events. I had the chance to talk to him last week and on the eve of tomorrow's kickoff event in San Jose, we look back at his 2007 interview and ahead to Finance priorities in 2011.
Let's go back in time for a bit to look at some of your observations from March 2007. It was only three years ago, but already it seems like a lifetime. You said: The major change now is a ready acceptance from CEOs and CFOs that business as usual is no longer acceptable. They're having to create more flexible and more adaptive risk-aware performance management practices that can accommodate the reality of their current environment. That sounds great. It’s a solution that any CFO would want. So how well did they do? Is finance any more flexible? Are CFOs any more risk–aware?
It’s pretty interesting, because I wouldn’t take back a word of what I said. But we were at the beginning of the journey at that point. And we’ve almost taken a two to three year time out. Not long after that interview the cracks began to emerge, particularly in the housing market here in the U.S. As we went through 2008 things began to get bleaker and bleaker until that fateful day on September 15 when Lehman Brothers filed for bankruptcy. So I don’t think we’ve made a lot of progress on that route, and therefore, if there was any doubt that this was important three years later, it’s gone. Everyone knows that we need to do this.
In that same interview, you said: Perhaps the biggest change is that we're now seeing systems and technology that can deliver the things we've been asking for for a long time – real time information, rich analytical toolsets, the ability to share collaborate on information as you go through a planning and decision-making process. It's our fault if we don't leverage it fully. Has finance taken advantage of these new tools? If not, why not?
Again, it was a time out. When the crisis happened, the usual actions took place. Projects were frozen, budgets were cut and basically it was “all hands to the pump” just getting the job done – restructuring businesses, cutting costs, trying to get expenses back in line with falling revenues.
Quite frankly that was the right reaction. We were dealing with an environment that wasn’t quite unprecedented, and with government stimuli and bailouts happening all around the world there was real tension in the system about whether it would hold together or not. Finance has had to do a lot of dirty work during the last three years.
The interesting thing is that during those years, the pace of technology development hadn’t slowed. The tools now are richer and certainly more cost-effective, so the opportunity is still there. There’s never been a better time to make the business case. If you go to a your CEO and say “Let me explain to you what happened to our business over the past three years and what the implications are for our finance team.” If you can make the case for investing in tools that help you better forecast, better manage risk and do it with shorter cycle times so you can integrate your analytics into your decision-making process, that’s a very compelling and powerful case to make today.
The beauty of the toolsets is that you can apply them where the pain is greatest and deploy them more broadly from there. A lot of the companies I’ve been speaking to in preparation for IBM Finance Forum are delivering tangible value from their implementations in 90 days. That makes it easier to sell the change and also to build momentum so you can deploy more broadly as you push them out and start to think about global implementations.
Let’s look at Finance in 2011. Depending on who you talk to you there are some flickers of a recovery in the global economy. What is Finance going to be asked to deliver, and if you’re a CFO, how will your performance be evaluated?
The basics haven’t changed. Integrity and accuracy are still paramount. Some flaws were exposed in some systems and processes over the last few years, so ensuring integrity and accuracy for internal and external consumption remains job one. But that’s the price of admission. Doing that alone won’t make you a great CFO.
Beyond that, risk management and analytics are the becoming the two principal differentiators for finance organizations that are really contributing successfully. Outside of the financial services sector, where you typically have a chief risk officer, in most other organizations that position is largely an add-on to the CFO’s role. So the ability to understand your risk profile – and I’m not just talking about financial risk, but reputational risk, technology risk, risk of business interruption – the CFO is on the hook for assuring you have the right risk management and mitigation strategy in place.
The second major component is analytics. The window for making profit is increasingly transitory. We’re dealing with a global market that responds far more quickly than it has in the past. Companies need to identify those profit opportunities in very short order and very quickly translate that into execution. So the ability for Finance to craft insightful analysis and more importantly ensure that it’s acted upon will be the key.
You write about Finance needing to go the “last mile.” Can you explain the concept?
We’ve accomplished quite a bit in Finance over the last 20 years. Productivity has skyrocketed. Costs have come down dramatically and we can now support much larger organizations with finance teams that are the same size as they were 20 years ago. A lot of that has been due to retooling infrastructure. But what we haven’t yet done is go the last mile – in telecom that’s a euphemism for the network connection to your home or office – and that’s really the point of tension. There’s a phenomenal capacity out there, but without going that last mile, your ability to benefit from it is really limited.
Finance has done the same thing. We’ve now got a pretty solid infrastructure in place. We’ve done a lot of the heavy lifting around integration of sub-ledger and transaction processing systems with ledgers, we’ve built data warehouses. A lot of that heavy technology is in place. But if you ask the average finance professional how their job has changed, they’ll tell you that back then they used Lotus 1-2-3 and now they use Microsoft Excel.
The potential to go that last mile – to really drive insight around analytics and risk management - is the biggest opportunity that’s out there. There’s a compelling reason why it needs to happen so we can be much more agile and responsive to react to changes in the marketplace. I don’t think there’s anyone out there who would say they expect their business to become more predictable and less risky over the next five years.
Find an IBM Finance Forum event in North America (European dates & registration coming soon)