MODERNIZATION OF FINANCE – AN EVOLVING ROLE: DRIVING SUSTAINABLE VALUE CREATION
The value of a company is determined by the value it creates from its customers*. Part of that value comes from optimizing the supply chain while providing a robust product and services portfolio that keeps pace with customer needs. That’s why it is important that companies take a ‘customer first approach’ in their digital transformation instead of too much focus on technology only.
Organizations now appoint CFOs with this mighty task. But how can CFOs meet their reporting requirements and simultaneously add value as a business partner and strategic advisor? CFOs have to be everywhere all at once.
But where there’s a will… or a modernized CPM solution… there’s a way.
The CFO can enable the Marketing & Sales department to better target customers by understanding:
- A customer’s life-time value;
- The characteristics of high value customers;
- How to segment the market to grow current customers and to attract new customers;
- The offerings they should provide to retain and attract high value customers;
- The product and services portfolio that will provide the most value for each customer segment;
- How to reduce financial risk when acquiring new customers.
The question is, how can CFOs transform massive volumes of data to find the answers?
The answer? A single data-point model.
Digital leaders are looking at data through a new lens. Data needs to be structured for analysis, including external (e.g. market) data and new metrics. A single data-point model combines operational and financial data with analytical resolution. A single data-point model not only helps CFOs acquire the insights they need, but it enables them to produce insights and determine actionable information. Using an analytics-based performance management* platform, CFOs can generate the insights they need to successfully act as a strategic advisor to the business. With the power of a single data-point model, CFOs can produce analysis that will add value to business decisions and directly impact operational and financial results.
Imagine reaching a state where compliance and strategy may be steered from one single platform unifying both financial and management accounting data. A solution that would enable Marketing & Sales to optimize value from customers, reduce new customer acquisition risk, provide the most value to customers with the right product and services offering? I know this idea is not new. Past approaches included activity-based costing (ABC), value-based management, balanced scorecard, strategy maps, integrated business planning, etc. as methodologies to be used. Also, analytical capabilities via specialized software were already available for decision support in the past.
So, what is really new, if you look back 10 years?
Today, software and hardware are coming together to allow for quick data consumption and manipulation in an intuitive manner. Ready-made platforms are accelerating digital and finance transformation by shortening implementation time and providing built-in experience. CCH Tagetik on SAP HANA is a perfect example of a unified platform that can deal with large amounts of data for (predictive) analytics at a granular level in a single data-point model and makes this available in an easy to use way for all users in finance and operations. A unified platform provides instant, intuitive access to data for fact-based customer life-time value management. Modern technology using one unified platform makes it easier to implement e.g. value-based management. In the past activity-based costing and profitability projects often failed due to complex models and processes using systems not built for this purpose. New technology simplifies integration, creation of business drivers etc. and takes out the complexity that made many ABC projects failing in the past. The CFO Office can now act as a data steward to provide validated and auditable data, when an information-centric data hub is in place for value focused activities. Based on new technology the CFO Office will become the forward-looking business partner for Marketing & Sales providing more trustable data.
This platform acts as a unified umbrella allowing individual contributors to add to the overall decision-making synergy. Finance will guard the quality of the data and IT will guard the instant availability of the data. Individual contributors are able to provide forward-looking value to their business partners when navigating and exploring the data with new analytical technologies and methodologies applied. Risks can be reduced with predictive analytics when acquiring new customers or launching new products and services.
Critical success factor
Every company needs to make sure that the current staff gains the knowledge and skills to grow into this evolving role for the CFO office. They need to make sure that the usage of new technology goes hand-in-hand with the development of people for a customer first approach.
Although modernization already provides benefits to improve financial processes and compliance with new and changing regulations, you can derive more value from your modernization initiative by supporting Marketing & Sales driving sustainable value creation. Also, by aligning strategy with execution, you’ll develop better insights into risks. Therefore, I’ve updated the figure shared in the blogpost, The journey to Finance Modernization, to reflect the change in the objectives for Modern Finance offices.
Please let me know what you think of this at firstname.lastname@example.org
* Gary Cokins from Analytics-Based Performance Management LLC (USA). Analytics-based performance management is the integration of multiple methodologies with each embedded with business analytics, such as segmentation analysis and especially predictive analytics to achieve the strategy and to make better decisions with actionable information to improve operational and financial results.