The data-driven CFOWritten by:

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Artificial intelligence, machine learning and big data can all facilitate financial reporting and compliance, monitor market movements, track supply chain inefficiencies, enable smarter outsourcing, support workforce and talent management efforts, and predict future trends. When they fail, modern technologies can destroy entire businesses and their reputations.

The data-driven CFO

In today’s era, data and technology are increasingly central to the daily operations, and growth strategies, of businesses. Artificial intelligence, machine learning and big data can all facilitate financial reporting and compliance, monitor market movements, track supply chain inefficiencies, enable smarter outsourcing, support workforce and talent management efforts, and predict future trends. When they fail, modern technologies can destroy entire businesses and their reputations: most notable are the hacks and privacy breaches that are increasingly a top worry about executives across the C-suite.

Moreover, more data do not always mean better data. Flawed information can lead to catastrophic decisions or faulty models. For instance, Google’s flu tracker project was once heralded as a new era in big data, but it turned out to be seriously flawed in its disease-tracking abilities compared with slower, but more accurate, data from the Centers for Disease Control and Prevention, according to the Financial Times.

“The difference today,” says Curtis Brown, CTO at New Jersey-based risk management firm Dunn & Bradstreet, “is that every modern business is not just using technology but increasingly realising that technology is central to their strategy and future growth.”

Challenges today include:

Battle for talent

Deepening role of technology

Corporate reporting in a 24/7 media age

The series covers the evolving role of the Chief Financial Officer from three vantage points: Chief Human Resources Officer, Chief Executive Officer and Chief Information Officer/Chief Technology Officer.

The insights are based on C-suite or senior management interviews, desk research, business literature and interviews with analysts and covers a range of sectors: natural resources, technology, consumer goods, financial services, ICT and automotive – interlinked trends including the deepening role of technology in business, the battle for talent, the challenges of corporate reporting in a 24/7 media age, trade-offs around organisational structures (in-sourcing/out-sourcing) and between operational expenditure for today versus capital expenditure for tomorrow.

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The data-driven CFO

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Cloud and mobile tools, along with algorithm-based analytics, have driven a process of technological deepening, says Zorawar Biri Singh, the CTO of Cisco. “Everything is going digital and if you are not digital you are basically not competitive,” he says. “If you are a tire manufacturer or you sell coffee or you are an entertainment business you are essentially a technology company first and foremost,” Singh says. “That impacts how CEOs and CFOs should be thinking about their business.”

It is a view shared by Edmond Mesrobian, the CTO at Tesco, a global grocer. “More and more companies are realising that they are data-driven. Without world class data systems analytics, you’re actually flying the business blind.”

Little wonder that, worldwide, one in five CIOs now report directly to CFOs, according to research firm Gartner, and CFOs are responsible for authorising one-quarter of IT investments.1 It means CFOs must develop greater understanding of both emerging technologies and of their C-suite counterparts – the CIO and CTOs. “Everything is going digital and if you

are not digital you are basically not competitive. That impacts how CEOs and CFOs should be thinking about their business.”

Zorawar Biri Singh, CTO of Cisco

1 in 5 CIOs now report to a CFO1

1. Gartner research 2011

The data-driven CFO

The most obvious impact of new technologies on the CFO is on ‘closing the books’, or finishing the quarterly accounts, for which speed and getting right is a virtue for companies of all different sizes, in terms of revenue or staff numbers. Companies that report first shape the message and the narrative, says Michael Golz, CIO , Americas at SAP America. Business units at GE have set the bar high by using a suite of advanced technologies to close their quarterly books in a single day in some departments, says Jim Fowler, the firm’s CIO.

“We’re trying to change from this old vast architecture where everything happens at the end of the month or end of the quarter to a real time culture, where transactions are posted in real time and transfers are done in real time so that you get a better view of what is happening in the industry,” he says.

Data and technology are also telling CFOs more about the company’s production, supply chains and efficiencies. “As we start to see more data coming off the machines that we sell to our customers, like aircraft engines and locomotives, we are starting to understand how that data isn’t a back room activity.

From closing the books to writing the business plan

New technology helps the CFO by:

Revealing information on the company’s efficiency

Finishing the quarterly accounts

Making decision on the workforce

The data-driven CFO

It’s actually at the core of our commercial strategy for growth,” says Jim Fowler. GE, for instance, committed to remove US$1 billion from IT costs by 2020. This does not focus on cost-slashing, says Fowler. It relies instead on extracting knowledge from enterprise data, supply chain data and customer data to generate high-quality sales leads, raise productivity and trim production time.

A third impact of technology on the CFO relates to decisions about organisational structures and the workforce. Data can help CFOs gain a rounded perspective on the costs, benefits and overall structure of the workforce, and human resource reporting and tracking is increasingly detailed in annual reporting documents. Data can also shape decisions about the balance between what to keep in-house and what to outsource.

CFOs have prominent voices, and often deciding ones, about such questions as the staff size. They need to make outsourcing decisions in which available technologies are a fundamental consideration: what types of functions can now be farmed out, which are best kept in house? “The CFO is central to what we call ‘right sourcing’,” says Mr Brown of Dun & Bradstreet. Which key functions should Dun & Bradstreet own in-house and what could better be outsourced? “The CFO and CTO are constantly talking about that balance today.” he continued. Crucially, a company must ensure it has the highest quality data on its workforce and organisation, on which to make sound decisions. Flawed informatoin could lead to poor decision-making.

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Data can help CFOs gain:

Better outsourcing decisions

Perspective on the workforce’ cost

“The CFO is central to what we call ‘right sourcing’.... the CFO and CTO are constantly talking about that balance today.”

Curtis Brown, CTO at Dunn & Bradstreet

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“They’re embracing technology, learning its methods and seeing it in a completely different light, as a revenue driver and an enabler of customer service and innovation. It’s just remarkably different.”

Curtis Brown, CTO at Dunn & Bradstreet

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The data-driven CFO

The ubiquity of technology means CTOs or CIOs, rather than simply putting in requests for new investments to the CFO, are now working together to ensure technologies support the whole business. “It’s much more of a co-design of the analytics capability rather than the traditional ‘order taker’ relationship that we used to have,” says Michael Golz, CIO Americas at SAP America. These days, a more iterative process is coming into play.

Data provided by a company’s technologies can shape the business plans and strategies that CFOs are writing. “The CFOs of today have taken on a much more strategic role,” says Edmond Mesrobian at Tesco. “We are in a lot of meetings where we talk about business strategy, not just the financial side. We talk about where we are going as a company.” Mesrobian and his finance counterpart regularly co-present data-driven business plans. “We work together on our annual plans, figure out where we want to be, ask what are we trying to achieve from a technology perspective, and, therefore what is the financial model that we want to accommodate that?”

Curtis Brown at Dunn & Bradstreet also believes CFOs can widen their perspective and spot ways that technology can support organisational objectives. “They need to see not just that we are hitting our financial targets,” he says. “They have to become strategic partners in understanding the value of a [technology] program and whether that program is achieving not just financial milestones but functional and learning-related business objectives.”

All of this might be intimidating for some CFOs, though, who have to learn quickly. “You are seeing it dawn on them that technology is actually driving a huge amount of what underpins [the] business,” says Brown.

Co-design

CFOs can widen their perspective and spot ways for technology to support organisational objectives

“They’re embracing technology, learning its methods and seeing it in a completely different light, as a revenue driver and an enabler of customer service and innovation. It’s just remarkably different.”

But they will need help – and CTOs or CIOs must provide it, even at the most elite institutions. “My job is to make sure that the CFO has the tools that he and his whole financial community at Harvard need to be able to do their jobs,” says Anne Margulies, Harvard University’s CIO. “We’re making investments now in analytic tools and the CFO and I are glued at the hip.”

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About The Economist Intelligence Unit

The Economist Intelligence Unit is the world leader in global business intelligence. It is the business-to-business arm of The Economist Group, which publishes The Economist newspaper. The Economist Intelligence Unit helps executives make better decisions by providing timely, reliable and impartial analysis on worldwide market trends and business strategies. More information can be found at www.eiu.com or www.twitter.com/theeiu.

About the Series

Together with the Economist Intelligence Unit, ADP has sponsored this series of articles to guide you through the challenges shaping the role of the CFO. Find out how ADP can help you link financial and human capital, data and technology together contact us on:

800-225-5237

www.adp.com

@ADP

www.linkedin.com/company/adp

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