Technological advances are disrupting the status quo and creating huge turbulences. Businesses are converging and unforeseen competitors are emerging. It is all about creating disruption and staying ahead of the curve, which is rising at a rapid pace. And amid all this change, CFOs still need to create profits for their enterprises, writes Leslie Moodley, managing partner Global Business Services, IBM South Africa.
- Focus on value: an interview with IBM South Africa's new CFO Sandra Atkins-Sadler
- This guest article was first published in the June edition of CFO Magazine. Read it. Advertise.
In the recent IBM global C-suite study, CFOs identify the collapsing of barriers and industry convergence as the single biggest trend transforming the business arena. It is both a blessing and a curse. While it offers a fantastic growth opportunity for enterprises to cross over into other products and services and provide customers with an overall experience, it also means competitors crossing over into your space, seizing your core business functions, invading your opportunities, threatening the very foundation on which the enterprise is built.
Are CFOs ready for this disruption?
An alarming 47 percent of CFOs are bracing themselves for an influx of new entrants from other markets. They acknowledge that technologies such as cloud computing, mobile computing, Internet of things (IoT) and cognitive computing along with other emerging technologies will have a particularly big impact on their businesses over the next three to five years.
Digitalisation has changed the way in which enterprises interact with customers, with 80% of CFOs expecting digital forms of interaction rather than face to face.
The challenge therein lies in partnerships or formed alliances with companies that have the digital competence to drive business revenue. However, this is not without financial implications and resource requirements as new systems need to be adopted for information and systems to be integrated. Many are concerned that their teams aren't quite ready to weather this disruption.
What can CFOs do about this?
The study identifies a group of CFOs dubbed as Performance Accelerators. These are people particularly adept at producing business insights and who have robust infrastructures, with common standards, data definitions, finance process and planning platforms. They combine all of these strengths together with superior analytical powers.
These Performance Accelerators are delving in, and getting involved in shaping their organisation's strategy and influencing the innovative approach that needs to be adopted. Those who focus solely on numbers will find themselves left in the dark.
In order to thrive in a highly competitive environment, it is crucial for a CFO to integrate financial planning along with strategic and operational planning.
The opportunity for an organisation often lies in its relationship with its customers and in the customer's experiences. At the end of the day, the 'customer is king' cliché remains a critical business value. Although this might seem like a CMO's function, customer satisfaction has a direct impact on revenues. Therefore, it is also important to understand and assess the feasibility of new trends and technologies within the organisational context, viewed from a value perspective rather than the cost it initially entails.
Integrate, analyse and adapt
Analytics are crucial to accurately gauge how an organisation is faring. Subjecting the combination of financial, operational and external information to rigorous analysis will empower CFOs to address business complexities such as revenue growth, risk, the potential of a specific customer base and how to optimise capital expenditure for a better ROI. The performance accelerators who had the foresight to integrate information and resources are already reaping the benefits. They are also able to leverage predictive analytics to plan for the future, forecast revenues and manage risk. This is particularly relevant during the current economic uncertainty.
The reality is that most CFOs know that they need to prepare for a pervasively disruptive future, filled with technological advances which blur the distinctions between industries and increase competition. Therefore, they need to take a long term view and constantly analyse industry trends and the competitive landscape.
This is where cognitive computing plays a crucial role, with 37 percent of the respondents singling it out as the technology most likely to transform their enterprises over the next three years. Cognitive systems can be used, for example, to identify which customers are likely to spend the most and be the most loyal, and to predict which deals have the best chance of being closed. That, in turn, allows an enterprise to direct its marketing more precisely, produce reliable cash flow projections and adjust its expenditures as required.
Performance Accelerators, likewise, apply predictive analytics to evaluate opportunities for stimulating organic and acquisitive growth. One obvious area is the identification of new products and services with promising revenue streams. But the vast majority of Performance Accelerators also use analytics to assess mergers and acquisitions and refine their firms' pricing and promotional strategies.
Essentially, in order to ensure that they are not blind sided by competitive disruption and lose their market share, CFOs need to invest in technologies that will enable them to integrate data from different sources.
Good data analysis will produce richer, more predictive insights, enabling more efficient capital allocation. They need to emphasise the importance of developing talent - with both financial skills and business acumen required to promote a closer partnership with the operating units, and create scalable delivery models to expedite turnaround times for analysing information.