Digital disruption can mean glory or ruin, depending on what side of the equation your company sits. If you are a “digital native,” then your whole business concept is likely to be digital in nature, and your company by definition is a disruptor.
For those encumbered by legacy and bricks and mortar, it is a little trickier. Surviving and thriving depends on how well you can adapt to the new digital environment, and how successfully you can re-invent your processes.
According to a new study from Accenture, 24% of CFOs in large global organizations fear their company will cease to exist as a result of disruptive competition
For CFOs, e-commerce and procurement strategies are among those at the core of the issue – and they are becoming more complicated. E-commerce just doesn’t mean buying online through a website any more. In 2016, that is ancient technology.
Soon, for example, Indian consumers will be able to buy insurance on their smartphones, sold to them by third party providers.
In terms of procurement, the Internet of Things (IoT) is transforming logistics and the supply chain. Reams of data will be generated more than ever before with the proliferation of sensors in factory floors, workplaces and the home, and Internet-enabled and virtual-reality devices on one’s person, vehicle and other personal spaces.
And the postman is likely to be replaced with a drone or a driverless car, dispatched on its errand by an automatic message.
If the organization can tame the massive explosion of data which the IoT world will produce, then procurement will become more automated, smoother and cheaper. If the data remains in a mess of unstandardized numbers across different platforms, then the result will probably be less than successful.
When it comes to e-commerce, the already under siege Chief Marketing Officer (CMO) is probably spending more time with the CFO than ever before, swiftly followed by the CIO. CMOs are in the frontline, and many predict the role has changed forever into a “Chief Experience Officer” where it is experience, not products, that are being marketed.
This transformation needs to be understood in the CFO’s office, because digital marketing is now an intrinsic component of any e-commerce strategy.
Canadian retailer Lululemon is a star on Wall Street, and has posted a 17% jump in first quarter revenues. This surge is attributed largely to a digital marketing campaign promoting a new line of pants. E-commerce sales were up 18%.
Meanwhile, in Denver, a company which was once America’s largest sporting goods retailer, Sports Authority, is in Chapter 11 bankruptcy with debts of $1.1 billion. A key reason: too much reliance on expensive bricks and mortar stores.
According to a new study from Accenture, CFO Reality Check, taken from a survey of 216 CFOs of global organizations with revenues of US$1 billion or more, 24% of CFOs fear that their company will cease to exist as a result of disruptive competition.
In response, big investments are being made in mobility and in moving activities to the cloud. Further out, the big investment is forecast to be in robotics and big data analytics.
Accenture’s Aneel Delawalla puts it this way: “As CFOs roles evolve, from corporate bean counter to enterprise value architect, they will need to attack costs comprehensively and strategically in order to provide their companies a longer runway of financial viability and a differentiated competitive position.”
Another recent US research report, Finance in the Digital Age, found that nearly half of 160 finance and accounting executives surveyed – 48% – are not satisfied with the impact of digital technologies on their organization. Only 9% believe they have achieved optimal performance from their current processes.
The Genpact Research Institute/HfS Research study showed that while 76% of respondents agree that digital technologies are fundamentally changing the finance function, many companies are struggling to achieve real transformation.
Key obstacles cited to better performance of the finance function include lack of budget, slow process standardization, and difficulties in coordinating technology and business functions
The key obstacles cited to better performance of the finance function include lack of budget, slow process standardization, and difficulties in coordinating technology and business functions.
But, there’s little point in being too pessimistic. Here are some points for CFOs to ponder as they consider their approaches to e-commerce and procurement.
- Don’t stand still. Adapt. Drive the change in your organization so that it retains some control of its future
- Do a digital audit. How are you leveraging cloud and big data? What role is mobile playing both in e-commerce sales and procurement? Could that improve things, both in terms of cost and performance?
- When it comes to IT, think lean.
- Do you have a handle on social media and digital marketing, and the role they play in e-commerce?
- Ae you making the most of your relationships with partners, suppliers and collaborators? Could you benefit from aggregating data with them to produce better insights?
- Explore robotics, automation and the IoT, and think how you might best use them.
- Audit your brick-and-mortar strategy. Do you need so many stores, branches or offices?
- Accenture’s research report recommends a “gutsy, digital first” plan of action. Go through this process and understand what your organization would look like. You probably won’t implement it all, but it will give the company and finance function a fresh perspective.
About the Author
Lachlan Colquhoun is Research Editor at CFO Innovation.