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CFOs: The digital kingdom begs for a strategic ruler Athena P. Reilly

CFOs - The Digital Kingdom Begs for a Strategic Ruler ......4 | CFOs: The digital kingdom begs for a strategic ruler Early movers making a shift are transcending traditional business

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Page 1: CFOs - The Digital Kingdom Begs for a Strategic Ruler ......4 | CFOs: The digital kingdom begs for a strategic ruler Early movers making a shift are transcending traditional business

CFOs: The digital kingdom begs for a strategic rulerAthena P. Reilly

Page 2: CFOs - The Digital Kingdom Begs for a Strategic Ruler ......4 | CFOs: The digital kingdom begs for a strategic ruler Early movers making a shift are transcending traditional business

" Tardiness often robs us opportunity, and the dispatch of our forces."

—Niccoló Machiavelli

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If the corporate environment is the modern-day equivalent of kingdoms of old, Machiavelli could have been speaking directly to today’s CFOs. Corporations are fast becoming data- and analytics-fueled digital kingdoms, yet they still beg for a ruler who takes charge. CFOs have been slow to move in this area, in which their skills could reign supreme.

Digitalization equips Finance to be more predictive and deliberate. Finance teams are best positioned as the source of analytic insight because they can connect market and operational data to financial outcomes. Yet, too many CFOs remain stuck in the role of Chief Bean Counter as compliance, control and accounting activities rule the day.

Meanwhile, the enterprise continues to wrestle with a morass of data, analytics immaturity and legacy technology. CFOs must get out from behind the desk, own the enterprise data and analytics agenda, and cut through confusion to drive unprecedented value.

The caveat, of course, is to heed Machiavelli’s cautionary statement and not be robbed of the chance presenting itself. This window of opportunity will not last long. CFOs must forego Finance’s usual cautious and incremental approach by acting now.

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A process-based mindset will not win CFOs the throneThe pace of the digital world means nearly all business efforts are focused on breaking new ground or quickly expanding existing products, categories or services. This situation has put the finance function under attack. According to an Accenture Strategy survey, more than 75 percent of CFOs believe they are not very well positioned to meet the needs of tomorrow’s digital business, requiring a significant change in how they work.¹ Many are stuck in a process mindset that does not translate into results in a digital world. The pivot required means foregoing process reengineering and developing an entirely new approach, focused on desired outcomes versus execution of tasks.

While digitalization merits best-friend status because it allows CFOs to do things previously not possible, it can also be described as a finance executive’s worst enemy because reinvention and retooling change nearly every role across the function.

More than 75 percent of CFOs believe they are not

very well positioned to meet the needs of tomorrow’s

digital business, requiring a significant

change in how they work.

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Early movers making a shift are transcending traditional business silos, leveraging increasingly sophisticated tools and analytic techniques to deliver finance services differently. The result is digitally enabled outcomes such as:

• Fully automated accounts payable processes with no manual interventions.

• Faster end-to-end transaction processing times for increased volumes of structured and unstructured data.

• Cognitive agents that provide comprehensive views on business performance.

• Promotion of real-time control and risk management through analytics.

• A lens toward cost reduction while giving equal time to promoting revenue growth and operational excellence.

• Market, operational and financial insights combined to deliver increased value across the organization.

While most CFOs discuss and acknowledge the need for digital transformation in Finance, less than half have developed a strong strategy and plan.² This is a missed opportunity. CFOs have the ability to automate 50 to 60 percent of the finance function, shifting data and analytics from being an occasional ancillary activity to a consistent routine.³ Advanced leaders are foregoing the process-centric mindset and delivery models. They see business challenges through a lens on today, and a lens on tomorrow. While considering their internal customer’s perspective, they not only determine how Finance adds value in a traditional sense, but also how Finance can leverage digital technologies to accentuate business value quickly.

CFOs have the ability to automate 50 to 60 percent of the finance function, shifting data and analytics from being an occasional ancillary activity to a consistent routine.

50% to

60%

$$$

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CFOs must lead the journey to digital ROI The vast majority of organizations are making significant digital investments but are not presenting a solid business case to Finance. In order for financial professionals to accurately approve and track benefits, certain protocols should be followed. It is up to the CFO and his or her team to create and enforce those with vigor. When they do not, their story usually ends up a cautionary tale.

Recently, a large transportation company invested hundreds of millions of dollars in a next-generation technology platform. Its experience was typical of what we see in many companies. Despite creating a business case, the team was unable to effectively link their digital strategy and capital allocations processes with project execution and benefits realization. Significant scope changes and multiple vendor involvement also created inconsistencies. Not only were key stakeholders misaligned on the technology’s potential value creation, but it was unclear who was accountable to deliver subsequent results. These combined factors caused the company to struggle to effectively communicate with the board and demonstrate actual benefits realization.

This scenario might have been completely different had Finance taken the lead. When a global, multibillion-dollar hospitality company initiated a $500 million strategic growth plan, the Financial Planning and Analysis (FP&A) team was at its core. The FP&A team participated in weekly project management reviews, guiding overall strategic direction and ensuring cross-functional integration across the program.

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FP&A held team leads accountable for providing updates on the status of the business case. They tracked progress against planned benefits and communicated results to senior leaders and the board. Within 12 months of program launch, the company planned to exceed its initial financial targets. FP&A re-baselined and developed 20 percent stretch targets based on additional analysis and insights. This is a true success story by anyone’s measure.

However, billions of dollars are still collectively wasted every year when digital investments are not guided by true end-to-end transparency. It is not unusual for multiple independent initiatives to be in-flight across an organization, making it difficult to architect integrated solutions or optimize resource allocations. We see many companies fall prey to this common pitfall.

While 63 percent of CFOs believe they are best positioned to be the fact-based voice of reason, leading the journey to ROI, few are making it an integral part of their role.⁴ Forward-looking CFOs understand how digital enablement can enhance business value quickly. They position and enable their team to better leverage data and analytics so Finance becomes the definitive voice citing which digital investments deliver value.

While 63 percent of CFOs believe they are best positioned to be the fact-based voice of reason, leading the journey to ROI, few are making it an integral part of their role.

63%

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Finance owns most of the data businesses create, positioning the CFO to take on the activist persona.

Become an activist investor storming the castle wallsActivist investors have dramatically upped the pressure on corporate executives. These investors are deeply involved in governance and advocate for specific business strategies. Multiple studies have shown that activism succeeds in raising share prices and delivers multiyear improvements in operating performance.⁵

As companies redefine themselves digitally, CFOs should adopt an activist investor mindset within their own companies. They need to analyze the business through consistent, precise attention to financial metrics, challenging performance against a variety of measures: shareholder value, vulnerabilities in strategy, debt, capital structure and risk. CFOs should look to the health of their business and its exposures with an objective activist investor’s eye to identify necessary improvements.

The good news is, Finance owns most of the data businesses create, positioning the CFO to take on the activist persona. Using digital technologies, Finance can more easily put enterprise data to work to deliver right-time, financially valued forecasts of market disruptions, major changes in consumer or competitor behavior, or ROI tracking for new investments. CFOs can now act as an internal and external advisor that other leaders can rely on as a central source for key business information and its implications.

$

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Claiming the keys to the kingdomTaking the first few steps to claim the keys to the digital kingdom is vital for CFOs in companies of all sizes.

First, rethink. Don’t just reengineer. Stop looking at how things are done today and defining incremental change improvements. Define the outcomes Finance must deliver, and rethink how those are achieved.

Second, become the connector. Manage the journey to digital ROI by connecting financial planning and analysis, enterprise data management, and enterprise analytics teams to provide an end-to-end transparency that guides digital investments and decision making. Build a powerful trifecta through seamless integration.

And third, move beyond the role of strategic business advisor. While this traditional role still has a place, taking on the persona of an activist investor positions Finance to become an influential strategic force at the business core.

Delaying action results in missed opportunities for you, your team and your company. Speed mattered in Machiavelli’s 15th century world. In today’s 21st century world, it more than matters. It defines success.

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Contact the AuthorAthena P. [email protected]

Other ContributorDavid A.J. [email protected]

References1 Accenture Strategy Digital Finance Survey, March 2016.2 Ibid.3 Accenture Strategy estimates based on insights from client

experience.4 Accenture Strategy Digital Finance Survey, March 2016.5 Bill George and Jay W. Lorsch, “How to Outsmart Activist Investors,”

Harvard Business Review, May 2014.

About AccentureAccenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions—underpinned by the world’s largest delivery network—Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With approximately 375,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com.

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