In order to move forward, companies must recognize where they stand at the moment. Successful digitalization of a CFO strategy starts from measuring the current digital maturity level of a CFO function, since integrating digitalization into strategy should be based on findings of maturity assessment. The base elements of digital maturity are all equally important to CFO function’s digitalization and should always be analyzed together as a package.
Our CFO 4.0 blog series has reached its third part, where the analysis moves from three waves of digitalization to fundamentals affecting it: the five base elements of digital maturity. We call this combination of elements a digital foundation, and it consists of:
Taking each of the digital foundation’s elements into account when devising strategic goals and actions is key to ensure a sustainable development of digitalization within any company. As highlighted earlier, digitalization cannot be outsourced to any specific department or function because it impacts all parts of a company. Even though the elements of digital foundation are not presented in any order of importance, all transformation execution starts from the strategy.
The role of strategy in CFO 4.0 context is to incorporate digitalization into the CFO strategy and clearly concretize the needed actions and next steps in reaching the full potential of digitalization. CFOs need to be aware about the possible consequences of digitalization to their function, but they do not have to be professionals of each technology. Taking digitalization as a part of company strategy doesn’t necessarily have to be a firm-wide full transformation that shakes the traditions of a company, but a level of digitalization that serves your company the best needs to be considered. Implementing modern technologies into the CFO function without a holistic view of how these technologies align with the practices and direction of the whole company may lead to a splintered technology landscape or even a completely failed transformation. It is not the level of digitalization that is important, but the incorporation of digitalization into the company strategy.
Companies’ ability to execute transformations begins with strategy, but even the greatest strategy does not guarantee successful execution, if processes, communication and organizational structure don’t support the change
Our study1 showed, that the most important components in realizing the value of digital transformation in the CFO function are change management, business process transformation, organizational culture and management skills: all organizational topics. Companies’ ability to execute transformations begins with strategy, but even the greatest strategy does not guarantee successful execution, if processes, communication and organizational structure don’t support the change.
It is people who implement the strategy and put actions into practice, which is why the human aspect cannot be overlooked in the digital foundation. A digital-oriented organization culture, proper skillset and efficient communication are all human-related issues that should be addressed during any digital transformation, be it within the CFO function or elsewhere. We recognize the impact of change management in the implementation of any organizational transformation, and digital transformation in the CFO function is not an exception. A successful change strategy requires the engagement, motivation and participation of people and there are a number of tools and methods to do this.
Quite unsurprisingly, our CFO 4.0 survey showed that CFOs view digital technologies and capabilities as extremely important factors in their work. It is often assumed, at least subconsciously, that technology is the main driver of digital transformation, even though new technologies can also seed uncertainty. We consider technology as only one of the five most important elements – not solely the main driver. However, we must acknowledge that new technologies like RPA, advanced analytics and big data can represent direct improvements in the CFO function: reporting gets faster, forecasting more accurate, analysis more insightful and compliance effortless. In short, technology enables more efficient use of resources across the company, concretizing the value adding benefits of digitalization.
Finally, our foundation focuses on data. Proper utilization and management of data is the basis for digitalization, involving the harmonization of master data and related processes. Increasing data volumes and quality requirements demand companies to turn their focus on data related issues. Well-managed, coherent and trustworthy data is not just a corner stone for all finance processes, it is a prerequisite for digitalization.
The elements of a digital foundation represent our view of the success factors for digital transformations. Neither of the elements can champion any digital transformation by themselves, but together they form the means for success and a strong base for future development.