Digital strategy, IT strategy, data strategy, chief digital officers, chief information officers, chief technology officers or chief data officers. Confused? I know I am
We need the clarity of thinking chief financial officers (CFOs) bring to the executive team. As one CFO told me: “People bombard me with technology investment requests. I bring it back to some basic questions. How will the technology provide value to the customer or improve operational effectiveness? How does it fit with our strategy? What’s the return on investment? How long will it take to implement? What are the risks?”
So how can CFOs help their organisations come to terms with digital? In research we have undertaken at the Institute of Chartered Accountants in England and Wales (ICAEW), it is clear CFOs play a key role in developing business strategy.
CFOs must drive conversations around digital strategy
They are well aware that these strategies must incorporate an understanding of how digital is driving the market and impacting competitive advantage. Clearly the underlying trend to factor in is that individuals and organisations can increasingly interpret and act on the world through digital means, be it through asking Alexa or using sensors to gather data for predictive maintenance.
However, the way this will play out varies from company to company. Therefore CFOs drive conversations across the organisation to gain a common understanding of what is important, the business impact and the actions to be taken.
Such conversations may consider the tension between maintaining technological consistency and standardisation versus responding quickly to opportunities and market needs, which often results in fragmented systems. CFOs can help to ensure an appropriate balance, where fragmentation is only introduced for very good business reasons and ongoing simplification is kept on the agenda.
For example, acquisitions or the need for new customer functionality may interfere with getting everything on to one instance of an enterprise resource planning system. But CFOs will ensure the long-term goal is maintained given the benefits in terms of process efficiency, automation, data analysis and control.
CFOs must have an overview of how digital technology can truly add value
Maintaining a strategic approach requires management commitment, perseverance and discipline, all areas where CFOs can lead by example. This might include supporting a chief information officer we spoke to who said: “If you haven’t fired someone for undermining the technology strategy then it is unlikely to be effective.” This is clearly an extreme, but most of us have probably seen individual departments invest in technologies outside guidelines because they overestimate the specific gains for their unit and underestimate the problems for the organisation as a whole.
For example, using different robotic process automation software will reduce an organisation’s ability to scale up, negotiate licence fees and reuse code. Data governance is another important area where CFOs can help ensure the necessary management structures and policies, with clearly defined data ownership responsibilities, are put in place.
Of course, CFOs cannot do all this on their own. Finding a business-savvy C-suite technology expert to work with will make life significantly easier. Moreover, CFOs also improve the chances of succeeding in the digital era by championing digital skills across the organisation. At ICAEW, we have recognised the importance of this through our Finance in a Digital World e-learning initiative.
Overall we see CFOs using their critical thinking skills to help organisations cut through the hype surrounding new technologies and focus on a clear digital strategy that drives business performance.