New research shows that the United States is on the verge of a productivity boom that could add at least $2 trillion to the gross domestic product (GDP) over the next decade. What’s more, CFOs are poised to be critical drivers of this transformation.
Blockchain, artificial intelligence (AI), machine learning, cognitive computing, intelligent process automation, and the Internet of Things (IoT) are just some of the technology advances that will accelerate growth, wages, and living standards worldwide, according to Intelligence Finance: How CFOs Can Lead the Coming Productivity Boom.
The report’s author, Dr. Michael Mandel, senior fellow at the Mack Institute for Innovation Management at the Wharton School, writes that cloud services are the delivery mechanism for these new technologies. He argues that the low costs and easy availability of cloud services are putting these new, advanced technologies and industry best practices within easy grasp of any company—which will, in turn, boost productivity across multiple industries.
CFOs have always managed a vast amount of their organizations’ most critical data and processes, but several factors are converging to open new leadership opportunities with enterprise-wide impact:
New emerging technologies fall squarely into the charter of the finance function. For example, blockchain (distributed ledger technology) promises to revolutionize the management of financial assets, supply chains, healthcare networks, and other value chains; machine learning is beginning to automate many routine finance tasks, from fraud detection and internal audits, to more complex back-office processes. This makes CFOs the natural champions of cloud services to drive productivity gains not only with their departments but across their entire organizations.
Cloud and emerging technologies free up finance to be more strategic. As technology automation replaces manual work, CFOs and their teams will have more time and resources to further the higher, more mission-focused goals of their organizations.
For example, New-Jersey based community bank ConnectOne Bank has an efficiency ratio of about 40%, compared to a national average of around 60%. That makes it one of the most efficient banks in the country, a fact that ConnectOne CEO Frank Sorrentino attributes to the bank’s use of cloud technology. “Bankers ask me all the time, ‘How are you running that business, at that size, with that growth rate, with that reputation and with that level of service with as few people as you have?’ We are living in a cloud-based world. And as far as I am concerned, there is no better place to be.”
Oracle ERP and EPM Cloud helped ConnectOne Bank to cut seven days from monthly closing and saved weeks on regulatory and U.S. Securities and Exchange Commission reporting. The cloud sped up audits by 10%, saving ConnectOne Bank thousands of dollars annually in auditor fees. And shifting to the cloud eliminated the need to build and maintain a data center—ultimately ramping up scalability and allowing ConnectOne Bank to continue operating a lean IT team as its business continues to grow.
Equally important, the Oracle Cloud provides a direct conduit for ConnectOne Bank to keep up with regulatory and technological changes. As regulations and accounting standards get updated and changed, “then all the software is automatically upgraded,” says Neil Martucci, senior vice president and controller at ConnectOne Bank. “You cannot rely on one person reading about it to make all the necessary changes to the bank.”
CFOs are becoming co-pilots of the business. The CFO role is undergoing historic transformation. CEOs and boards are increasingly turning to CFOs to drive strategy and ensure value creation in the digital age.
In the Intelligent Finance research, Oracle CEO Safra Catz observes that CFOs are embracing their new role as strategic change agents:
“Interestingly, the finance people are often leading the charge of change. You might think that they would be saying, ‘Whoa, I know my existing job, I prefer it the way it was.’ But when I speak publicly about this, it’s the finance people in the audience who are saying, ‘When can we get started?’ They want to help their companies. They can’t wait to start. All of a sudden, they realize that there are modern tools they can use to really help the business.”
Cloud-enabled emerging technologies will give the CFO a much broader view of what’s going on across the organization and whether the appropriate metrics are being met—both financial and non-financial metrics alike.
In his research, Dr. Mandel concludes that a modern, well-functioning cloud platform will be critical to success in the coming years because it enables organizations to “seamlessly add new capabilities and make it much easier for good managers to embrace the future.”
One company that is becoming more future-ready through the cloud is The Wonderful Company, a consumer brands business specializing in healthy foods and beverages. The company has grown via multiple acquisitions, and as the number of retail brands in its portfolio grew, so did the number of ERP systems in operation. This made it impossible to get quick answers to basic questions such as how much product was being sold to certain customers. But the company made a transformative change by moving its multiple systems to a single, cloud-based ERP.
“We’re standardizing the accounting processes and finance processes across the organization,” says Shannon Castellanos, vice president of finance for Wonderful. “The technology itself and the improvement in process will, without question, improve the efficiency within my group. ‘Dramatically’ would be a word that I would use.”
In addition to providing better operational visibility and higher process efficiency, cloud services will enable Wonderful to be better able to keep up with industry leaders. As in other industries, digitalization is disrupting consumer-goods supply chains, so companies like Wonderful must be ready for that disruption.
Dr. Mandel reports that such disruption will be ongoing over the next 10 years. “Every company in the distribution chain—makers and marketers of consumer products, trucking companies, retailers—will need to be ready to change the way they do business.”
Needless to say, the need for change due to digital disruption is not limited to the retail and consumer package goods industry. In the research report, Mandel illustrates how, over the past decade, the productivity gap between the top performers and everyone else seems to be widening: “The winners just keep pulling ahead, driven by better technology, better management, and better talent.”
New cloud-enabled capabilities put the CFO in the right position to advocate for the future. “By implementing a broad array of cloud services, digital technologies, and industry best practices, CFOs can help their enterprises keep pace with industry and global leaders, not just today but in the future,” Mandel writes. These dynamic benefits will be especially important over the next few years; indeed, as global best practices evolve, a modern, well-functioning cloud platform will seamlessly add new capabilities and make it much easier for companies to embrace the future with optimism.