In today's fast‑moving and data‑rich environment, CFOs have never had a better opportunity to increase their influence by impacting business outcomes. Rather than playing their traditional role of dwelling on financial checks and balances on the corporate periphery, financial executives can move up the organizational ladder by harnessing new technologies and next-generation business models that focus on customer-facing strategies.
Data and analytics are the new drivers of business performance, and competitive advantage is now built on making meaning from Code HalosTM,1 the digital data that surrounds, people, processes, organizations and devices. According to our primary research, companies that use business analytics realized an 8.4% increase in revenues and an 8.1% improvement in cost reduction in the past year.2
Intelligent process automation (IPA) is another area that's leading to increased business value. We define IPA as sophisticated software that not only helps businesses automate processes but also gathers data along the way and uses artificial intelligence and machine learning to improve how work gets done.
All of these trends — Code Halos, analytics and IPA — put the finance function in the right place at the right time. As the custodian of data needed for investment decisions and cost management, finance is better equipped than any other business area to measure and manage corporate performance, establish metrics and promote data awareness across the organization.
Today's Finance Operating Model: Competing on Code
The new role for finance is centered on strategic business partnership, organizational efficiency, business agility and insight. The finance function also needs to design a robust operating model that can adapt to new demands, quickly allocate budgets for growth in new markets or new products and react promptly to a competitor's move. However, unless the finance department gets its core functions to run smoothly, there's little scope for taking on more strategic responsibilities. A survey from KPMG found that more than 40% of businesses still manage contextual activities such as payroll, accounts payable and receivable and transactional purchasing in-house rather than via shared‑services, offshore or sourced models.4 This approach starves resources that could be used for more strategic endeavors.
For example, finance organizations saddled with non‑differentiating responsibilities have precious little time and energy to optimize work and, through analytics, deliver better business outcomes or power IPA tools and techniques to reduce costs and free time for more strategic initiatives.
Finance can harness the explosion in the volume and variety of data sources and the power of analytics engines to turn raw operational data into actionable intelligence. The resulting insights can drive key knowledge‑based initiatives that measure and manage corporate performance, promote metrics and data awareness and use early indicators to spot and avoid the damage of "black swan" events.
We recommend the following questions to help finance identify top priorities:
Is the finance function measured and rewarded for the shareholder value delivered or for the cost of the work it performs?
Are processes currently scoped or paid for based on the number of people delivering the process or by outcomes?
Is the finance organization maximizing the potential of technologies in its processes?
How can changes in operating models capitalize innovations and investments in new technologies?
Does the finance organization have access to best‑of‑breed financial support and specialist advice?
Does the organization have access to data analytics to inform and drive business decisions?
Finance's New Operating Model
Our recent study on digital business processes revealed that 73% of core business processes will need to be modernized in the next three years.5 To do so, companies need to focus on both efficiency and innovation, concurrently. To meet the challenge of this dual mandate — cutting costs and generating growth — CFOs need a new approach. We propose an operating model that changes the way the finance function sources capabilities, partners with providers and delivers technology to its teams.
To transform the finance function, CFOs should embrace:
Meaning‑making through integrated analytics tools: Data‑based insights made in real-time can inform risk management, as well as predictive and operational metrics.
Enabling technologies: Integrated platforms based on social, mobile, analytics and cloud technologies (the SMAC Stack) can provide a common view of the organization.
Intelligent process automation: Sophisticated software that automates knowledge processes and helps humans work smarter, enabling greater agility, accuracy and speed‑to‑market.
Agile processes: Processes need to be redesigned to adapt quickly to ever‑changing needs.
Modernized enterprise information platforms: Businesses need to refocus on their foundational platforms to ensure enterprise‑wide data accuracy, global reporting and compliance harmonization.
The new approach to sourcing process capabilities should include:
Asset‑light, hybrid process delivery models optimized for capability and cost.
Consolidation or sourcing of end‑to‑end functions, allowing for process automation, technology upgrades, business process as a service (BPaaS) platforms and a utility-based pricing model.
An increased onshore business process services (BPS) presence via rebadging (asset monetization) and location decisions that balance capability with costs.
Global models with captive centers of excellence and sourced transactional processes.
Outcome‑ or utility‑based pricing models.
Lastly, finance requires new thinking around IT investment. CFOs should consider asset‑light approaches that emphasize platform solutions, minimize Cap‑Ex in favor of Op‑Ex spending and can be flexed depending on demand.
Start Today, by Imagining Smart Changes Needed Tomorrow
To begin the finance function transformation, CFOs should conduct an audit of the data already held by the organization and benchmark existing process performance (using industry or peer group data) to evaluate current performance and identify areas for process improvement. This will help identify where change is most urgently needed.
For a more detailed contrast between traditional operating models and the inevitable future of the CFO's office, read our whitepaper Revitalizing Finance [PDF]. Visit Cognizant's Finance and Accounting practice for more insights.
1 To learn more about Code Halos, read Code Halos: How the Digital Lives of People, Things and Organizations Are Changing the Rules of Business, by Malcolm Frank, Paul Roehrig and Ben Pring, John Wiley & Sons, April 2014, www.wiley.com/WileyCDA/WileyTitle/productCd-1118862074.html.
2 "The Value of Signal (and the Cost of Noise)," Cognizant Technology Solutions, October 2013,www.cognizant.com/InsightsWhitepapers/The-Value-of-Signal-and-the-Cost-of-Noise-The-New-Economics-of-Meaning-Making.pdf.
3 "The Robot and I: How New Digital Technologies Are Making Smart People and Businesses Smarter by Automating Rote Work," Cognizant Technology Solutions, January 2015,http://www.cognizant.com/InsightsWhitepapers/the-robot-and-I-how-new-digital-technologies-are-making-smart-people-and-businesses-smarter-codex1193.pdf.
4 "The State of Services & Outsourcing in 2014," KPMG and HfS Research, May/June 2014, https://www.kpmg-institutes.com/.
5 "The New Process Genome: Recoding Business Process Work to Thrive in the Modern Digital Economy," Cognizant Technology Solutions, October 2013, www.cognizant.com/InsightsWhitepapers/The-New-Process-Genome-Recoding-Business-Process-Work-to-Thrive-in-the-Modern-Digital-Economy.pdf.