How CIOs and the finance function can help companies turn the art of the possible into the science of the achievable

Michael YadgarBy Michael Yadgar, Partner, SAP Leader Americas, Advisory, Ernst & Young LLP.

According to a Constellation Research survey, digital disruption destroyed 52% of Fortune 500 companies from 2000 to 2014. They ceased to exist through bankruptcy, consolidation or acquisition. FinTech, medtech, cartech, mediatech, the internet of things (IoT) — these are only a few of the disruptive trends and technologies that have impacted companies once thought of as industry titans.

Mighty banks are competing with peer-to-peer lending. Hospitals have to contend with retail-style clinics and savvy consumer demands for personalized care. Taxis are having to make way for car sharing and cab-hailing apps. Cable companies are scrambling to adapt to on-demand streaming video before they find themselves outdated alongside video retailers. Unleashing the power of digital technology, big data and analytics, and even IoT can fundamentally transform everything from operating models to cultures to entire enterprises. This is especially true for the finance function, which finds itself needing to adopt an increasing level of agility in predicting and responding to these new competitors.

For CFOs, the key to turning the art of the possible into the science of the achievable can lie in improving the opportunities provided by the proliferation of data and technology. Armed with these tools, CFOs may be able to transform the finance function into an efficient, agile unit capable of anticipating, addressing and responding to business needs as fast as they arise. But to be successful, CFOs need their CIO colleagues to help them achieve this vision:

  1. Transform the finance function: CFOs begin by transforming their own function. This includes strategically aligning the finance strategy to the business, operating cost-effectively and taking advantage of today’s technology so that they have the agility to react to both internal and external factors before or as they arise. This also means forging an alliance with the CIO and the IT function. In today’s climate, finance transformation and IT transformation go hand in hand. A true collaboration between the CFO and the CIO could create an opportunity to reduce the cost of finance and improve agility.
  2. Undertake a process review: CFOs will want to undertake a thorough review of all underlying processes. Many companies have updated their technology, but haven’t improved processes to take full advantage of the new platforms. In addition, merger and acquisition activities may have created multiple complex processes that impede agility. The finance function, in particular, continues to use manual processes that are prone to human error and slow access to data that can otherwise potentially be available in nanoseconds. Let’s take the close process as an example. Traditionally, finance needs anywhere from 7 to 20 days to consolidate and close the books after month-end. However, the function can often be hampered by too many databases and too many complex closing rules. By streamlining the processes to take advantage of an ERP platform, such as SAP S/4 HANA with its in-memory technology, the finance function could potentially reduce month-end close from 20 days to 2 hours, freeing up valuable finance resources to concentrate on vital business needs. CIOs working together with their finance colleagues to assess the right technology to support this, could be instrumental in implementing these.
  3. Employ big data and analytics: Many companies are sitting on a wealth of data but have no strategic idea how to use it. Collaborating with the CIO and the IT function, CFOs can help the company leverage big data and analytics capabilities along with new technology platform capabilities to help interconnect internal and external data platforms. This can combine data mining with historical internal figures to assist the business in developing more accurate planning cycles, benchmarking against competitors, identifying and proactively addressing disruptive trends, and making smarter investment decisions.
  4. Innovate, innovate and innovate: If the demise of once-great companies has taught others anything, it’s that digital disruption is real and unavoidable. The question for companies is not whether they should make a move, but when. For any number of understandable reasons, companies, particularly large companies, can be very risk-averse. They many not want to be pioneers. But if they want to survive, they must innovate at least some parts of their business to remain competitive. Agile finance functions can greatly enhance their companies’ ability to innovate.

With the right technology to harness a company’s data, the right processes in place to interpret it and a consistent means to measure and report, CFOs can play a vital role in helping their companies navigate the increasingly disruptive trends shaking the foundations of today’s business environment. With the CIO’s collaboration, they will have a strong partner at their side to turn the art of the possible into the science of the achievable.

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