These days, wherever a CFO goes and whatever he or she is doing, it seems technology is always part of the picture. And we don’t mean spreadsheets.
Software for ERP, A/P and A/R systems, budgeting, planning and forecasting, treasury management system, analytics, governance, risk and compliance, software-as-a-service for sales, marketing and HR, in-memory computing, business intelligence – you name it, the CFO is being lobbied by vendors to invest in and use them, egged on by business units, IT and sometimes members of the finance team itself.
When an innovation is flagged as potentially disruptive to the entire industry, as Uber is doing with the taxi business and Airbnb with hotels, the CFO should give it his full attention
So we think it is useful for the CFO to step back a bit and get a bird’s eye view of the technology tools and platforms currently available and what’s coming up – and find ways to think about them in an organized manner.
One useful approach to make sense of and prioritize the helter-skelter of new technologies is to put them into three buckets:
- those that enable the business
- those that enhance the performance of the business
- those that serve as new engines for the business
This is what V.S. Parthasarathy of US$5.8-billion-in-revenues Mahindra & Mahindra suggested in the recent CFO Innovation Asia Forum in Singapore. He is Group CFO, Group CIO and President (Group Finance and M&A) at the Indian automotive-and-services conglomerate and was honored last year as one of the winners in the CFO Innovation CFO of the Year Awards.
Enable, Enhance, Engine
If a department needs new computers, the request would be processed expeditiously because finance knows that computers are basic enablers of the business, said Partha. You cannot survive without computers. Finance typically does not spend too much time making a decision on enablers.
If the technology is claimed to be able to enhance a process, such as robots on the factory floor, for example, finance will look at the business case very seriously. Anything that can potentially enhance the bottom line must always be considered and prioritized. Finance will take a longer time to study and decide.
What if the technology is portrayed as a new engine of growth for the company, such as implementing a system that will allow a sharing-economy type service like Uber or Airbnb? Finance, along with the rest of the business, will assess whether this is a disruptive force that could upend the entire industry, and therefore makes the business, in its current incarnation, unsustainable in the long run.
By placing the technologies in these three buckets, finance is able to prioritize and allocate appropriate time and resources to each proposal. Some technologies can be argued to belong to more than bucket, in which case that is probably a sign that they deserve a closer look.
And when an innovation is flagged as potentially disruptive to the entire industry, as Uber is doing with the taxi business and Airbnb with hotels, the CFO should give it his full attention. Failing to do so could put the enterprise at risk of extinction.
What are some of these new technologies? In an interview with CFO Journal, Matt Schwenderman, principal and leader of the Performance Management Technology practice at Deloitte Consulting LLP, groups them under two headings.
Under the category he calls “enabling innovations,” meaning technologies that can improve what finance is already doing today, Schwenderman includes:
- in-memory computing
In the second bucket he dubs “disruptive innovations,” which are technologies that do not yet directly affect finance, but promise to fundamentally change the way business is done, Schwenderman includes:
- Big Data
- predictive and cognitive analytics
- social media and crowdsourcing
It makes sense to focus on the items in the first group because “these are innovations that many finance organizations have long been asking for to help them achieve things like lower cost of ownership and better performance from their systems,” argues Schwenderman.
“Now that they are readily available, CFOs should consider how to make use of them in their organization today,” he adds.
“Don’t just be the one who signs the checks”
But finance chiefs should not disregard the items in the second group. “These technologies may not impact the way finance operates today, but they could greatly influence and even change the way finance operates three to five years from now,” says Schwenderman.
“CFOs who find ways to derive value from employing these technology innovations are likely to become positioned as leaders in their organization and their company, using the innovations to drive performance within the finance function and to enable new ways to team with and enhance the business.”
What CFOs Can Do
One size does not fit all, of course, so what one CFO would consider as a basic enabler for the business might be regarded by another CFO as a technology more akin to an engine – and one that may not be relevant to the company at this time.
The key is to be clear in which bucket the technology belongs, based on a credible assessment made possible by finance and others in the organization, including the CIO.
“The conversation with the CIO can start with the question, ‘How can each of these technologies fit into and support the company’s financial and business strategies?’,” Schwenderman suggests. “Alternatively, CFOs can ask themselves, “What would the business outcome be if I could do X?” and then collaborate with the CIO to help achieve that outcome.”
Don’t forget that “many privacy and security risks are constantly changing due to the introduction of new technologies and greater access to increased data sources,” he adds. “CFOs should ask questions to understand these potential risks and ascertain that the data is being managed responsibly.”
The experience of other CFOs could help, says James Bourke, a partner with US technology firm WithumSmith+Brown, who spoke to CGMA Magazine. “Other CFOs often can provide answers even when vendors cannot.”
These CFOs need not be in the same industry or use the same technologies, he adds. The objective is to share and gain exposures to a wide range of viewpoints and approaches. “It helps them get out of their world,” says Bourke.
“Don’t just be the one who signs the checks,” counsels Paul McDonald, senior executive director for executive recruiter Robert Half in the US, who also spike to CGMA Magazine. Understand how technology affects the finance function and the organization, and learn about other innovations to know what the options are.
The deluge of new technologies, software and tools shows no signs of abating. For the CFO and the rest of the finance team, every little bit helps.
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