In the digital age, CFOs know that business is anything but usual. When companies like Uber and Airbnb suddenly emerge to dramatically disrupt mature industries, every company should be wondering if their sector is next.
Even if your business hasn’t felt the heat of a disruptive concept, the amazing success of native-digital companies is changing the way all companies are being valued.
Tangible assets such as property and equipment are given much less weight. Instead, shareholders are increasingly placing their investment bets on business models that are enabled or extended by digital technologies. Valuations also are rising on a growing list of intangible assets such as brand value and intellectual capital.
Many companies, often after persistent prodding by their CFOs, are responding quickly to this change. General Electric, for example, is making significant shifts in its business model to create meaningful value outside of the manufacturing plant. Along with a jet engine, GE customers can also buy a range of digital services to help their customers get the most value from their purchases.
We see this in the automotive sector too, with more and more companies exploring connected-car strategies. The goal isn’t simply to gather information about a car’s performance. Automakers are striving to drive their revenue by creating a better experience for the customer. Let’s face it: technology is no longer just a business enabler, it is the business.
Whether you are GE or a smaller company, these investments are material and will have a big impact on future margins and business valuations. Every CFO must play a strategic role in guiding digital transformation, but this requires a significant change in job responsibilities and skills.
In my role at Oracle, I’m working with many companies that are striving to extend their business and boost value with digital innovations. And increasingly, the most effective change agents within these companies are the CFOs.
CFOs have always been the stewards of corporate value. Their financial acumen and understanding of how enterprises are valued give them the expertise to comprehend the long-term implications of different business models and investments.
Equally important, finance teams generally have insight into every business unit within an enterprise and a unique understanding of how they intersect. That enables them to create or strengthen connections across all functions necessary to drive a complete end-to-end transformation of a company’s operations.
Finally, today’s CFOs have greater oversight of IT strategy and related investments, which gives them a better understanding of how digital technologies—dashboards and analytics, mobile apps, social collaboration, and the cloud—can be used to create new value.
Yet even with all the qualifications mentioned above, taking on that leadership role is sometimes challenging for finance professionals. In many companies, finance is viewed primarily as a reporting and governance function, maintaining controls and reporting on what happened to the business. Even CFOs lament that their teams often lack some of the functional expertise and persuasive skills necessary to lead businesses in the digital age.
A big part of the problem is that many finance teams are still saddled with manual reporting and control processes. If your finance team is spending all their time pulling data into spreadsheets from multiple sources, assembling reports, or checking transactions for control violations, there is very little time left for them to think about business strategy.
The finance executives we see as true co-pilots for the business—meaning that they’re sitting side-by-side with the CEO to guide the enterprise toward opportunities—are investing in digital technologies that automatically flag control exceptions, provide real-time dashboards for reporting and forecasting, provide access to mobile, on-the-go finance systems, and speed up collaboration and workflow through modern social tools. With these enabling technologies, CFOs are delivering substantially more value than ever before.
Supported by powerful, cloud-based finance solutions, modern finance teams are looking more like investment banks, using data and algorithms to predict business opportunities. More than ever, finance teams can help the business identify future sources of growth, revenue and margin, and then develop the budget, strategies and capital allocation plans to achieve their goals.
Digital technologies, and the higher levels of automation that come with them, can also free up finance team members to partner with individual lines of business, helping guide the LOBs towards data-driven decisions. By embedding team members in business units to truly understand the nuances of the market, CFOs are working hand-in-hand with department chiefs to drive their own “industry-disrupting” initiatives.
At Oracle, we’re excited that our own cutting-edge technologies are enabling forward-thinking CFOs to lead their companies to digital excellence. If you’re interested in being a change agent for digital transformation, we’re here to help.
For more on digital transformation, download the FEI research paper, Modern Finance in the Digital Age.