Making finance the growth engine of your business

A series of articles looking at everyday challenges CFOs are facing and how finance functions can embrace the change and thrive on opprtunity. The articles are written in collaboration with PwC, the ACCA and Jens Madrian - CFO, Reactive Technologies

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CFO imperatives

Work with senior business colleagues to identify the strategy that your organisation needs to develop to succeed in a digital world and the integral part that finance can play in this.

Create a more forward looking model that helps the finance function to be more connected to the business, the formulation of business strategy and shareholder value creation.

Identify measures of business success that allow you to track progress and gauge whether you are helping the organisation grow and creating competitive advantage.

Build a finance team that contains the skills, experience and cultural qualities needed to drive growth and create competitive advantage – based on your organisation’s collective needs.

Constantly look to explore and adopt new technologies to help you transform how finance operates.

In this series of articles on the digital CFO we have highlighted how digitalisation is reshaping the global economy: transforming channels to market and customer bases, dramatically changing product and service line profitability, and lowering barriers to entry. It is a disruptive force allowing others to enter markets and challenge the status quo – creating new and previously unimagined competition as well as opportunity. Digitalisation means we live in a time of rapidly changing risks and opportunities and no organisation can expect to be unaffected.

Organisations need to respond quickly to events, taking decisions based on forward-thinking analysis and insights drawn from comprehensive data analytics. Finance teams need to help their organisations not only manage downside risks, but also be more proactive in capitalising on the new opportunities created by the evolving risk landscape – and develop the right sense of urgency in doing so. Leading finance teams are already adopting cloud-based services, robotic process automation (RPA), collaborative tools and other technologies, as well as adopting new ways of working and exploring the possibilities of artificial intelligence (AI). In doing so they seek both to improve their operational efficiency and to move towards providing real business insight to decision-makers in the business, moving finance from being commentators on commercial performance to actually playing an active role in driving performance and establishing the direction of the organisation as it sets out to pursue new growth opportunities.

“Digitalisation doesn’t necessarily mean that finance needs to change everything. Its core raison d’être of supporting the business to achieve its strategy hasn’t changed. But doing that successfully in the digital environment may require a culture shift. How do you fundamentally change the culture of the finance organisation? It’s hard, but it starts at the top with the CFO.”

Jamie Lyon, ACCA

But being a truly ‘digital’ CFO requires more than embracing technology per se. Your business strategy is the starting point from which all discussions about digital and technology in the broadest sense should stem. Begin with what the business does and who it serves – then think about the process, technology, data, people and other assets needed to be successful.

In this concluding article, we bring these concepts together while addressing a final but fundamental question: how can CFOs and their finance teams help their businesses to grow and create competitive advantage?

Work with senior business colleagues to identify the strategy that your organisation needs to develop to succeed in a digital world and the integral part that finance can play in this.

As a CFO, you need to be taking a leading role in your organisation to ensure it thrives in this digital world. Discussions about the role of finance will be underpinned by the strategic goals of the business, encompassing all the facets of digital that can help the organisation grow and create strategic advantage.

For some CFOs and other C-suite executives this may require a shift – one that moves away from seeing technology as providing all the answers to business problems: technology helps, but it’s how your people use the technology and interact with it that makes the real difference.

Finding new ways to use and analyse data could be one area of discussion. The potential for rapid, accurate data gathering and processing is transforming business operations. Finance teams need to work with the business to identify opportunities for more effective data analysis. This starts with understanding what kinds of analysis business colleagues require: what they want to achieve by it and what insights they need to support their decision making.

CFOs may also be challenged to reassess their own traditional finance culture – which may be one that prioritises the reporting of historic data over forward-looking, dynamic forecasts, and which is risk averse when it comes to assessing commercial opportunities. If such a culture is to become more focused on activities that support future value creation, CFOs need to create the time, space and atmosphere for this to happen. This could mean automating more standardised processes and routine activities to free up time for more complex analysis. From a more subtle perspective, it could mean creating an environment where it is OK to fail – where it is understood that valid, risk-based analysis could still lead to some decisions that do not ultimately deliver the value anticipated.

Changing culture starts at the top – with the CFO and other members of the executive team. If the CFO is seen to be forward-looking, excited by digital opportunities in all their forms, other members of the finance team will be more encouraged to do so too.

Create a more forward looking model that helps the finance function to be more connected to the business, the formulation of business strategy and shareholder value creation.

Nurturing an appropriate finance culture is vital, but so is creating the right finance model within which finance people operate and with which people outside finance interact. For a CFO seeking to play a leading role in value creation, the right model is likely to be one where finance is highly connected to the business.

Connectivity depends on finance teams having a deep understanding of business strategy, customer needs, risks and associated opportunities. It’s also likely to require more concrete progress towards establishing finance as a real business partner. Although the concept of the finance function as business partner is well established, few finance functions have actually achieved it in reality. They may have done so superficially – perhaps adopting a new name or changing the organisation structurally – but this won’t necessarily have delivered the desired added value. The digital wave now hitting businesses in every sector creates a new imperative for action.

Enhanced connectivity may require improved systems and processes, including tools for more effective communication between finance and the business. It may mean using existing systems and processes more effectively – placing a new emphasis on value creation, opportunity assessment or risk-based analysis. It might mean spending more time on exploring what the numbers mean, rather than just reporting them. Finance teams could, for example, be encouraged to broaden their perspective by analysing competitor data or pricing strategies, and external research reports on core markets.

Identify measures of business success that allow you to track progress and gauge whether you are helping the organisation grow and creating competitive advantage.

“Achieving growth and creating competitive advantage has to be the core driver of any business. If finance doesn’t play a role in that, it becomes just a back office function. If finance wants to remain relevant and valued by the business, it needs to break out from the back office mentality. Finance teams with the right people with the right skills and the right mind-set can add real value. CFOs need to rethink the value that finance brings, its role within the organisation and how it undertakes this role.”

Brian Furness, finance global consulting leader, PwC

In this digital world where rapid change is the norm, businesses need measures that support the real-time assessment of current strategies. They also need measures that are forward looking, providing insights into how current actions could have an impact on future value creation.

 

Determining the most appropriate measures will be a matter for individual organisations and will require conversations across the business. What is the information that decision-makers really value when deciding between investment options or alternative growth plans? CFOs should be initiating these conversations, confident in the finance team’s ability to analyse data and turn it into insightful information in a short timeframe. If new systems for capturing and analysing data are required, the business case for them should be considered.

 

By identifying and then providing the information the business really wants, those measures supporting strategic value, finance teams can demonstrate that they are adding value to the business. This is important, because the inability to demonstrate the value finance brings has historically been, at times, a blocker to collaboration with the business.

 

Finance teams may also need to become more comfortable with data that could contain some inaccuracies – within reasonable tolerance levels. When rapid responses and proactive decision-making are important, using the data you have now may be more useful than using absolutely accurate data in six months’ time. Some of this data may feel less ‘tangible’ than traditional financial metrics – but finance functions need to be willing to embrace them if these are seen to be providing value to the business.

Identify measures of business success that allow you to track progress and gauge whether you are helping the organisation grow and creating competitive advantage.

In this digital world where rapid change is the norm, businesses need measures that support the real-time assessment of current strategies. They also need measures that are forward looking, providing insights into how current actions could have an impact on future value creation.

Determining the most appropriate measures will be a matter for individual organisations and will require conversations across the business. What is the information that decision-makers really value when deciding between investment options or alternative growth plans? CFOs should be initiating these conversations, confident in the finance team’s ability to analyse data and turn it into insightful information in a short timeframe. If new systems for capturing and analysing data are required, the business case for them should be considered.

By identifying and then providing the information the business really wants, those measures supporting strategic value, finance teams can demonstrate that they are adding value to the business. This is important, because the inability to demonstrate the value finance brings has historically been, at times, a blocker to collaboration with the business.

Finance teams may also need to become more comfortable with data that could contain some inaccuracies – within reasonable tolerance levels. When rapid responses and proactive decision-making are important, using the data you have now may be more useful than using absolutely accurate data in six months’ time. Some of this data may feel less ‘tangible’ than traditional financial metrics – but finance functions need to be willing to embrace them if these are seen to be providing value to the business.

Looking to the future

This is a time of opportunities – for organisations and CFOs. We see the CFO as somebody willing to seize those opportunities and help their business thrive. Some organisational, cultural, technology and people change may be required – and change can be challenging. Repositioning finance for success in a digital world may be at odds with a constant drive to cut costs: operational efficiencies achieved may need to be reinvested in other areas if the organisation is to unlock its potential. Nevertheless, by taking the lead in driving meaningful change based on insight and analysis – even to the top line – CFOs can look forward to achieving both personal and business success.

“CFOs can’t put their heads in the sand and wait for the digital storm to pass by. That storm will become the new norm. So finance needs to adapt. Finance professionals need to connect with this new reality and, under the leadership of your CFO, drive necessary change to become core supporters and challengers of the business – being a true and meaningful business partner.”

Jens Madrian, CFO/CCO, Reactive Technologies

Contact us

Brian J Furness

Global Consulting Finance Leader, Partner, PwC United Kingdom

Tel: +44 (0)20 7212 3917

Andrew McCorkell

Director, Finance Consulting , PwC United Kingdom

Tel: +44 (0)20 7213 1509

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