How CFOs can drive digital transformation to increase business agility

CFOs can drive digital transformation

Andy Wright, Consultant in our Technology Practice, discusses the key takeaways from our recent CFO roundtable event with guest speaker Jonathan Smare, Finance Lead of Enterprise Transformation at Amazon Web Services  

Over the past few months, we have been hosting a series of virtual roundtable events with executives in the technology sector to share thoughts and ideas on what is happening currently and the future of the space.

Recently, we were joined by Jonathan Smare, Finance Lead of Enterprise Transformation at Amazon Web Services, as a guest speaker to discuss how CFOs can drive digital transformation to increase business agility. Jonathan himself has held CFO roles at Cisco and HP, and in his current position at AWS he works with CFOs and executives around the world on business transformation strategies, focusing on the combination of culture, people and technology.

Here are the key insights shared and discussed at the event:

Why being an agile organisation is now more important than ever

The Covid-19 pandemic has accelerated many aspects of change and transformation.  Many estimates suggest that five years of change has been forced to happen in five weeks. But this level of change has been urgent for a long period of time; market disruption due to digital transformation was already prevalent pre-Covid. During the discussion, Jonathan quoted the research showing that since 2000, 52% of companies in the S&P 500 have either gone bankrupt, been acquired, or ceased to exist as a result of digital disruption and, further to this, the resulting prediction is that 75% of  its current members are expected to disappear by 2027, likely being replaced with many of the ‘digital disruptors’. It is undeniable how agility has become the key to a successful, thriving organisation.

Jonathan went on to say: “We are seeing business leaders now wake up to the importance of being agile and digital-first. They are recognising the value not only to their workforce, their efficiency and their products/services, but their actual market value.” The agile, innovative, digital and data-driven companies attract valuation premiums higher than all others. Even as we have seen the market drop as a result of the global economic impact of the pandemic, these companies are bouncing back quickest, and in some cases to even higher levels than before.

Organisations of 20th Century vs 21st Century

We are seeing companies really start to embrace a new focus and become more clued into how business has changed coming into the 21st century. Jonathan compared old and new business models, looking at working practices and growth avenues. He explained that last century, organisations were focused on operational excellence and were designed to scale with stability and predictability. Looking at where we are now, 20 years into the 21st century, the focus is on customer centricity, innovation and reinvention.

We are in a state of constant flux, largely due to the speed of technological advancement, where organisations cannot rely on a slow and steady approach but have to be able to pivot rapidly, and experiment in order to continue on the growth path.

Digital transformation

In order to become an agile, digital enterprise of the new age, organisations must consistently look to transform. However, this is clearly easier said than done - enterprises have spent a staggering $1.3 trillion on digital transformation, yet around $0.9tn of this hasn’t delivered the desired results.

Jonathan advised that organisations should only “build what differentiates you – for instance a first-class customer experience, or product – and buy everything else that doesn’t need customisation”. He went on to say that, “technology companies really need to utilise partnerships and ecosystems in order to be truly agile”. These ecosystems can include tapping into external support when needed, such as the flexible resource of interim managers, or on-demand cloud technology.

The CFO’s role in transformation

Traditionally, the agile mantra of “failing fast” could be seen as contrary to the culture of the CFO. However, it has become increasingly critical senior leaders across the board drive change and experimentation. We are beginning to see this ‘traditional’ CFO evolve, not only becoming comfortable with a rapid pace of change but being the driving force behind it.

One CEO, a former CFO, on the call highlighted how the core capabilities and characteristics of the role are essential to driving change. He spoke of how finance people tend to underestimate their ability to drive change – not just technologically, but in people, culture, digital and technical aspects.  As the right-hand of the chief executive, they must be front and centre in the change programme, acting as a sound counterbalance to the CEO. Jonathan highlighted that “transformation should be a competency, built into an organisation, not a destination”, and the CFO is fundamental in achieving this.

The CFO holds great responsibility – not only do they run the finance function, the cornerstone of every business, but they are highly influential across the entire organisation. Jonathan told us that, “in order to champion transformation, a CFO needs to lead by example”. For the finance function, automation has become increasingly important. Jonathan explained that the use of technology to carry out compliance and risk management frees up the team to deliver high-value activities. He used the example of near-time/real-time reporting which can help companies change their strategy based on market changes, removing the rigidity of an annual calendar to enable more flexibility and agility.

We also discussed the importance of the CFO being a data steward. Jonathan suggested the use of predictive analytics to turn data into an asset, as an example. An increased focus on data, and all the technological opportunities data collection brings (such as AI and machine learning), will reshape the function. Inevitably, there will be need for expertise to embed this change – both the technical skills (the hiring of data scientists) as well as personal qualities (specifically influencing and change management skills). This must be embraced by the CFO.

The wider role that a CFO can play was also clear from our discussion.  As mentioned, leading by example with digital transformation within the finance function is key; being the prime mover of transformation for one function can ultimately spur on others to follow suit.  However, there were many examples of how a finance executive can deliver real value outside of finance, for instance with sales, marketing and procurement.

The future of the finance function

Finally, there was a discussion around the finance function of the future. We focused primarily on how many organisations have come to realise their existing infrastructure is not fit for purpose for the ‘new normal’ – particularly with the rise of remote working. This means many are grappling with how to sustainably support a more remote workforce in the longer term. Conversely, many are seeing this as an opportunity to tap into a broader, diverse talent pool, particularly if location could be less of an inhibitor. Adding this opportunity into the broad consensus around finance functions needing to become more automated, data-driven and focused on high-value work, one thing is clear: going forward, finance functions could look very different and play an even more crucial role in the success of the 21st century enterprise.

For more information please contact Andy Wright.


Bob Menlove at 23/07/2020 13:25 said:

Excellent article - In my experience, Boards can sometimes standoff from driving technology in real time and CFOs are well placed to evaluate and monitor so the organisation gets value for money. Agile needs to become more customer driven as product can take a "we think" approach. Partnering and locating staff over a broader geography are key.

Iain Bubb at 30/07/2020 12:20 said:

Great Insight - In delivering financial advice to the organisation, CFO's must balance its three key priorities: cost reduction, compliance requirements and efficient operations. They are in an ideal position to start transformation since many of the processes that they are involved in - including revenue, payment, month-end, and audit/accounts - are within their direct sphere of influence and thus provide an opportunity for Process Automation that would provide immediate financial impact as well as improvement to the quality of service to their customers.

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