Tomorrow’s competitive advantage will be driven by the ability to identify, consume, produce, and govern the complex information inside and outside the company’s walls
Due to the historical focus on tra saction cycles, the finance and accounting departments have the best access to organizational data. And though finance has traditionally brokered an understanding of performance, the function also manages the transactional data that tracks performance throughout the organization. So who better than financial executives to organize the data, make it ready for mining and translate it to significant value? CFOs are in a prime position to create a data-driven intelligent enterprise. By taking charge of data governance and business analytics, CFOs are the best suited to identify opportunities for value and apply stronger discipline throughout the entire organization.
With the widespread availability of data in many businesses, we have reached a point where leading organisations significantly leverage the power of analytics in the most important decisions affecting their business. Whether it relates to customer, service delivery, product development, asset utilization or other operational areas, data is being used to discover hidden patterns underlying performance in specific areas, and influence decisions that yield the maximum impact for the business.
As the member of the C-suite that sits on most of the data in the organisation, the CFO needs to evolve beyond the finance function to identify value across the broader enterprise, providing insights to help the rest of the organization improve performance and manage risk along various dimensions of the business. CFOs have access to a wealth of data from ERP systems, line-of-business applications, and management reporting tools. Armed with this keen understanding, CFOs are sitting on a goldmine of information that, with the right management and analytics, can be translated into performance insight and meaningful value that produces more accurate decisions on customers, service delivery, product development and other business enablers. In essence, the CFO can see the bigger picture, make truer forecasts, and pave a clearer path to value—by partnering with the business units to improve strategy, operations, IT, supply chain, sales, and marketing, while deploying capital more intelligently.
A key differentiating role for the CFO is driving the connection between operational and financial performance. For example, a common manufacturing priority is managing the efficiency of plant utilization and capacity. But plant throughput also has direct ties to revenue forecasts, and the CFO can integrate manufacturing analytics to drive the connection. It comes down to identifying a wider variety of levers for managing overall business performance. With expanded influence as the steward of information management, CFOs can go beyond finance to identify opportunities for growth and cost savings across regions, functions, and the enterprise as a whole.
Leading enterprises use business analytics to accelerate business performance. They manage corporate data as a differentiating asset, with a focus on both horizontal and vertical integration of enterprise resource planning (ERP) systems, operational data stores, data warehouses and appliances, reporting systems, analytic engines, and more. These organizations evaluate business intelligence as a corporate competency—with discipline around people, process, and technology—and they embed analytics as a strategic tool for smart business decisions. They no longer see analytics as just a series of reports with different views; they instead speak of multiple dimensions and data cubes. They think in hierarchies, and they insist on clear metadata ownership and management as part of generating, managing, and utilising analytic tools.
It is the CFO who is leading this renewed focus on performance and risk management, and the CFO is demanding the right information at the right time to realize sustainable value. For example, some CFOs are working with business units to more effectively deploy capital. Others are reducing the cost and delay of financing by freeing up working capital and deploying it more efficiently. Specifically, CFOs are leveraging business analytics to invest in the right growth areas and influencing strategic decisions based on analytics including product profitability, customer profitability, fraud analytics, working capital management and tax intelligence among others.
When information takes center stage, it can help organizations make better fact based decisions and create better processes. However, creating this new intelligent business model can be a significant change journey. An effective information-driven approach should apply historical, current, and predictive analytics to give organizations a 360-degree view of their data. This view enables a focus on business outcomes and measurable value. More organizations are also incorporating customer analytics, including customer sentiment (which stems from external data), and they’re integrating these risk indicators as part of the holistic view of business performance.
While the data itself is an asset, the real opportunity is turning that data into value—in the form of growth, cost savings, and other benefits across the organization. CFOs can help the company harness its data in a program that includes data governance analytics, benchmarking, reporting, leading practices, and intimate knowledge of the business strategy.
Data analytics can improve decision-making throughout the business, helping organizations unlock value by:
• Identifying new market opportunities
• Improving responsiveness to customers, based on a greater understanding of their needs and satisfaction with products and services
• Increasing strategic relevance of the workforce by understanding employees’ motivations and aspirations
• Improving financial discipline and integrating business performance across operations, supply chain, manufacturing and logistics
• Identifying better ways of measuring and managing risk.
• Optimizing operational performance through transparent fact based analysis
As organisations roll out initiatives to enhance the value of their business, the use of data (internal or external) and analytics will go a long way in enhancing the value of decisions, and more importantly ensure that the organisation is deploying its resources to its most productive areas.
This article is an excerpt from our Thought Leadership document "CFO Outlook SUrvey 2017" . Click here to download the publication.
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