CFO Study: Strategic Intelligence

The pandemic underscored the CFO role as more essential than ever. In fact, CEOs cite the CFO and the Chief Operating Officer (COO) as their most crucial C-suite partners over the next 3 years, according to the IBV 2021 CEO Study. CFOs concur, with the COO role selected first and the CFO role selected second.

What’s more, CEOs and CFOs are aligned on the top priorities for the organization, both ranking improved efficiency and improved customer experience at the top of their to-do lists, followed closely by improved business-model innovation. These priorities match well with the decision-support areas that CFOs told us their finance organizations were most effective in: identifying enterprise cost reduction opportunities, managing enterprise risk, evaluating organic growth opportunities, optimizing pricing, and responding to changes in strategy/business model.

According to our recent IBV “Digital acceleration” report, enterprises recognize the necessity and opportunity to transform—both to address their priorities and make the right strategic choices. In fact, 60 percent of executives plan to accelerate their enterprises’ digital transformations to reinvent and improve business.

The CFO is uniquely situated to influence the organization’s digital transformation: setting the financial baseline, building the business case, helping to determine the value of each initiative, and tracking benefit realization. Nearly three-quarters of CFOs we surveyed confirm that they play a key role in transformation across the enterprise.

Not surprisingly, CFOs identify their top responsibilities for enterprise digital transformation as financial-related: managing the budget and obtaining financing. Yet, CFO responsibilities extend beyond budget and finance. More than 4 in 10 say they are tasked with nurturing a corporate culture that embraces all things digital.

CFOs and finance provide the means and discipline to help their enterprises with strategy. This includes embracing and implementing new technologies and advanced analytics; using ecosystems and open innovation to drive new business models; and collaborating within the C-suite and across partners to develop metrics and tactics and align on them as they evolve.

Success requires laser-like focus on developing and executing enterprise strategy supported by C-suite collaboration and AI-identified key performance indicators (KPIs). This means disentangling CFOs from competing priorities, such as primary or shared ownership of enterprise digital transformation efforts. The best outcomes—emphasizing decision making and translating decisions into actions—emerge when finance leaders support and influence transformation, rather than own it.

CFO insights accelerate cost containment, guide capital investment in new opportunities, unlock new revenue streams, and iteratively steer the enterprise’s strategic direction. The 4 archetypes differ in their effectiveness at decision-support activities.

Our data strongly implies that the varying levels of effectiveness can be associated with higher implementation levels of AI in these decision-support areas. 30% more Strategic Advisors have implemented AI for evaluating organic growth opportunities than the next highest archetype.

Making it easier to access, integrate, and evaluate data helps decision making by clarifying where and how to advance value creation. Modernizing finance IT and data capabilities makes achieving those objectives possible. Cloud core enterprise resource planning (ERP) allows finance to access data remotely and store large amounts of data. Empowered finance staffs can use data visualization tools to dive into data, process information faster, and take advantage of insights to improve performance.

A standardized data architecture provides transparency surrounding data and makes it a lot easier to apply AI to a data set at scale. Rather than discussing whether data is correct, finance can, instead, make decisions using that data.

Intelligent workflows help build new value and enable new processes to operate smoothly. To enhance decision making, both investing in and building out intelligent workflows are priorities. These span process mining, advanced analytics and, of course, AI—all of which allow greater monitoring and reporting in real time, and thus better, faster, real-time decision making.

In fact, 60% of Strategic Advisors and 53% of Deliberate Deciders already report using real-time tracking of standardized performance metrics, compared to only a third of Action Architects and a quarter of Constrained Operators. An up-to-date picture of the enterprise’s position shows progress on strategy execution and shifts in supply, demand, materials, and products.

Benchmarks can showcase gaps in financial and operational performance that can be adjusted quickly. While the Deliberate Deciders have this real-time data, they don’t appear to be taking advantage of it with their lower effectiveness at speedy decision making. By contrast, the lack of real-time data doesn’t stop Action Architects from making decisions and taking actions.