As we discovered in our recent paper "The exponential CFO”, the emergence of digital technology offers an unprecedented opportunity for the CFO to become more strategic. This makes sense - the digital world requires not only decision-makers that understand its impact, but also embrace it in their own decision-making.
In practice this means having a handle on the wealth of data now available to the organisation - internal and external, financial and otherwise - and being able to leverage the analytical capabilities that now exist to understand it and use it in decision-making. Linking customer behaviours to sales figures, for example, or the data coming from sensors to manufacturing productivity.
The digitally enabled CFO cannot exist in isolation. It would not make sense to have such an enhanced role overseeing a finance department that still operates in a traditional, ‘analog’ manner. Rather, the whole department - or specific elements of it - needs also to look at how it can benefit from the financial insights digitalisation can bring.
The transition to digital may not be straightforward, as it affects not only systems and processes but also working practices, skills mix and even human psychology. In addition, existing organisations do not have the green-field opportunities and minimal overheads of the new breed of platform-only companies. Expecting a manufacturer or pharmaceutical firm to operate as a 100-person startup is unrealistic.
However, all finance functions can augment their operations by seeing digital as an integral part of what they do. This means understanding the digital elements of the business as a whole, not just in terms of what it is trying to do right now with digital, but what it could do, if the right technologies were in place - and most important the benefits and costs of each.
It means adopting digital technologies, not just within the confines of the finance department but also integrating with external information that can help guide financial insights and decision making. And finally, it means adopting a digital-first attitude, creating an environment in which new insights can be acted upon immediately, rather than used to explain past business performance alone.
Above all, digital finance means putting the data-generated insight into the hands of the right people, in such a way that they are empowered to do something with it. Information is power in the digital world: technology investments will be wasted if the finance department is still expected to operate as ledger managers, rather than curators of financial expertise.
Read the related paper "The exponential CFO" here