A recent study by KPMG found that less than half of CEOs from high-performing organizations think their finance functions are doing a good job in exploring and implementing new technology.
Not all CFOs are responsible for the entire IT function, but they will all be required to assess the strategic imperative of each technology investment. And some are finding that their requests to build out underlying functions to support the inevitable digital investment are being rebuffed. But as organisations rush to spruce up their digital credentials and customer-facing front-end technology, CEO’s are ignoring the pleas of their CFO’s for back-office investment, at their peril.
Since the economic crisis the role of the CFO has changed. Having been given strategic and crisis management responsibilities when companies were floundering financially, they have retained, and in some cases, expanded their influence at the executive table.
With new responsibilities come new tensions though. The relationship between a CFO and a CEO requires a dose of healthy friction to begin with. Adding a shifting job role exacerbates these tensions, especially when budgets are tight (and they’re always tight).
Organisations recognise that they have to invest in their customer experience. This covers the full gamut of online, social and mobile technology that will stave off the start-ups at the door. But when the CFO, who has a unique insight into the machinations of the back office function, wants to apportion some technology spend on the things no one actually sees, they are often being fobbed off.
No one is disputing the imperative of keeping up with what customers’ expect in order to retain their custom, but a narrow focus can be counterproductive.
However much is invested in improving product mix, web sales, social network interaction and mobile apps, companies need the back office capability to support it. This includes delivery logistics, the integrity of invoice data and all the processes in between. CFOs who manage these ‘invisible’ functions know this but the message isn’t always getting through.
It may not be that CFOs aren’t doing a good job of exploring and implementing new technology, but that the technology they propose isn’t part of a CEO’s digital vision. As keepers of the company purse CFOs are only trying to protect profits. A McKinsey report into the bottom-line impact of digital transformation found that digital sales could add an average 20% to an organization’s bottom line over the next five years, whereas cost savings from internal digital improvements could average 36%.
The winners are those that can “translate operational improvements across the full value chain, combined with innovative operating models, into better, cheaper, more customized products, faster service, and an improved customer experience.”
If CEOs remain focused on the customer prize, they risk losing any digital advantage to out-dated internal processes. Perhaps its time for some CEOs to stop complaining about CFO’s lack of technological innovation and recognise that finance systems innovation is an essential and complementary part of any organisation’s digital strategy.