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The reason we think CFOs and their associated CXO teams need to get a really good sense of where the value is in digital-analytics transformation is to get more thoughtful about resource allocation. In such a situation, the CFO should initiate a fact-driven discussion in which executives assess the need to redesign the company’s operating model or radically improve its cost position. To provide a fact base, the CFO conducted a systematic appraisal of baseline performance. The finance department’s to-do list is shifting, and so is the role of the CFO. 0000599086 00000 n The master plan sets out the transformation’s initiatives as well as their sequencing and resource requirements. Furthermore, 44 percent of CFO The CFO’s Vital Role in Corporate Transformation. The CFO’s performance, like all members of the executive team, is measured against the success of these company-wide initiatives and plays a proactive role in driving progress. To support the plan’s development, the CFO assesses the quality of proposed initiatives and their contribution to value creation. This includes exploring the critical connection points between finance and IT that can help their departments better meet business goals. 0000002994 00000 n According to a BCG analysis, 52% of large public companies in Europe and North America announced transformations in 2016, a 42% increase compared with 2006. During solution development and implementation, the CFO should assess the transformation through a value lens, especially if it is not meeting expectations for impact and project teams are not able to make course corrections to get it on track. 0 0000560863 00000 n IT leaders’ top priority … The need for an activist CFO has become clear as companies increasingly consider transformations to be an essential part of their efforts to adapt to fast-changing markets and outperform their peers. endobj To help CFOs address the challenges of action-oriented performance management, we offer guidance on how to ensure that transformations produce value. Ask any CEO and nine times out of ten, you will get this answer: I want a CFO that is able to contribute in a significant manner to the corporate strategy. 408 0 obj 0000543623 00000 n To facilitate frequent performance reviews and rapid course corrections, the company implemented a governance structure that enabled the CEO, the CFO, and the chief human resources officer to actively manage the improvement portfolio. endobj If you are thinking deep on some of these <]/Prev 1231922 It will show you how technology such as artificial intelligence and automation can help you take your finance team and your role to the next level. 日時 2019年5月29日(水)15:00-17:00(開場14:30~) 会場 Galleria 商. Tokyo 東京都千代田区丸の内3-1-1 国際ビル1F 主催 一般社団法人日本CFO協会 協賛 BOARD Japan株式会社 定員 30名 対象 CFOおよび経営企画・経理 (TSR is the annual percentage return to owners, which comes from capital gains plus any dividends. These programs were initiated to bring about long term and persistent changes. 0000584282 00000 n Finance Function Excellence, The CFO has shifted expectations, processes and tools to best align her team’s performance to … Successful digital transformation within the enterprise requires collaboration between CFOs and CIOs. They also need to define metrics for tracking and evaluating the impact of these changes from the perspective of value creation. In this analysis, we compared TSR growth with that of the S&P 500 or a relevant industry index.). In defining the master plan for a global industrial company’s transformation, the CFO collaborated with the CEO to prioritize 50 improvement topics. The Seven Habits of Highly Effective Digital Enterprises This entails clarifying the baseline performance, determining the right metrics for assessing value creation, and setting top-down targets. 0000584697 00000 n %���� Our research and CFO Transition Labs™ have helped us identify seven major risk categories that can impede transformations. In the role of chief performance officer, the CFO ensures a successful transition from the definition of the master plan to the execution of it. Operations, 2018-01-26  In an early phase, the CFO can step up to a greater role if the company lacks transparency into baseline performance or initiatives’ progress or has not adequately prioritized improvement projects or established clear accountabilities. On the basis of our experience working with firms across industries, we believe CFOs have a vital role to play in helping companies establish and achieve a transformation’s objectives for value creation. <>/Outlines 125 0 R>> A year of resolution: Qualcomm CFO talks 5G, COVID-19 and digital transformation Akash Palkhiwala, CFO of Qualcomm, says COVID-19 has accelerated the adoption of … To maintain a relentless focus on value creation, CFOs must play an important role in each phase of a transformation. Recognizing the challenge, the CFO framed a case for change to convince the organization that cost reduction was necessary to maintain the current rates of growth and profitability over the long term. 409 0 obj They organized the topics into approximately ten work streams and then sequenced the work streams so that those enabling other improvements were undertaken first, followed by the highest-impact initiatives. 0000002700 00000 n If we break it down to simple terms: we have a strategy, we plan on how the strategy will be deployed, we report on an actual outcome, we analyse the outcome, and hopefully we further analyse to provide some indications of future outcomes. Finally, the fourth role CFOs can play in digital transformation is in transforming their own department. 0000001189 00000 n In defining the master plan for a global industrial company’s transformation, the CFO collaborated with the CEO to prioritize 50 improvement topics. 0000599333 00000 n <> endstream To ensure transparency into performance, the CFO must collaborate with other company leaders to foster a culture of truthfulness in assessing and reporting on progress. 0000001558 00000 n “What the CFO 3.0 research shows is that digital transformation is not a tech issue per se. The CFO needs to be a trusted adviser not only to the CEO, but also to the Board and to the rest of the management team. 0000583322 00000 n BCG research has also found that value creation is highly correlated with margin expansion. Stephens, who has served as CFO since joining Barnes Group in January 2009, will continue in that role until December 31, 2020 to assist in a smooth transition. CFOs increasingly find themselves in the thick of transformation efforts, whether they involve overhauling the finance function, reshaping the business model, or reimagining other functions. While many digital transformation project fail, there’s still hope if an organisation can ensure that six critical success factors are in place, said Boston Consulting Group recently. The main differentiator between first-quartile and second-quartile TSR performance was margin change, followed by sales growth, multiple change, and dividend yield. Furthermore, the assessment results helped the CFO explain the transformation’s objectives to investors during the company’s Capital Markets Day event. The CFO is the second-most-common leader, after the CEO, identified as initiating a transformation. In this expanded role, CFOs promote value creation by serving as strategic advisors to business leaders, overseeing performance across the organization, and communicating a persuasive equity story to investors. 0000583431 00000 n We analyzed the sources of value creation for a sample of more than 700 large public companies in Europe and North America from 2011 through 2016. By challenging business line leaders about value creation opportunities, the CFO helps the company develop a value-oriented vision for its target operating model. So, then, how does the CFO engage in this Digital Transformation journey?The role of the CFO today is no longer confined to “keeping the books in good order” or as I like to say “running the trains on time”. >> 0000583891 00000 n trailer Understanding the sources of value creation is only the starting point. startxref CFO transformation Over the past twenty years a significant number of transformation programs have evolved that focus on systems, tools and processes in order to improve business performance. 0000598317 00000 n Digital transformation in finance is reshaping the role of the CFO like never before. The transparency enabled by a culture of truthfulness provides the basis for the forward-looking decisions required to design and execute a successful transformation. 0000598514 00000 n The role of today’s CFO is changing. 0000543134 00000 n By building on the existing review structure, the CFO ensures a strong connection between the transformation and ongoing business performance and avoids creating an additional layer of performance management. If a transformation is already under way, the CFO should be alert for inflection points that could be opportunities to significantly influence the program’s impact. In fact, I partner closely with our CIO, Chris Bedi , to ensure that ServiceNow prioritizes and funds digital transformation programs that increase customer success, unlock productivity, and drive ROI. <. 0000599194 00000 n 0000600017 00000 n While […] To help teams manage performance, the CFO selectively adds milestone-oriented KPIs to the review structure, ensuring transparency into achievement of the initiatives. In other types of transformations (for example, moving from traditional automobile manufacturing to developing digitally-equipped and driverless vehicles) there may be new risks that emerge, such as cyberthreats and data privacy breaches. In the past decade, it has become commonplace to see companies launch a transformation—a comprehensive change in strategy, operating model, organization, people, or processes. Today’s CFOs are expanding their roles beyond traditional financial-reporting responsibilities to become proactive custodians of shareholder value. Fortunately, today’s CFO is in a unique position to address such issues by supporting transformations on three essential fronts: CFOs’ new leadership role in corporate transformations, especially those that fo-cus on operational improvements, is a further advance in the development of their responsibilities from backward-looking reporting to forward-looking strategic support. 0000018981 00000 n 0000003104 00000 n 0000600292 00000 n Indeed, among recently launched transformations, only one in four has succeeded in creating shareholder value above the industry average. <> %PDF-1.5 We advise those that do so to take what we call a “machine-first” approach. It’s a business process issue, and this is where the CFO is becoming integrally involved,” Goldstuck added. In addition, the CFO designs the governance for the transformation, aiming to provide insight into the development and maturity of projects and promote accountability. %%EOF Implementing transformations and evaluating the return on investment has become increasingly complex, however. The greater scope of responsibilities makes CFOs uniquely well positioned to understand the sources of value, set fact-based improvement targets, optimize resource allocation, and ensure accountability for results. 0000542866 00000 n 0000599360 00000 n In finance transformations, CFOs have a strong chance of identifying and managing related risks. According to Sage ’s recently commissioned CFO 3.0 research, based on a survey of more than 300 South African financial decision-makers and CFOs, the role of the CFO has changed dramatically in recent years. For many companies, operational-improvement initiatives aimed at reducing the cost base are the most effective way to increase margins. To assess whether transformations are creating value, we compared the growth of the total shareholder return (TSR) of transforming companies with that of their respective industry. 0000550639 00000 n What changes in a transformation— and why it matters to CFOs. All rights reserved. Boston Consulting Group is an Equal Opportunity Employer. In the first phase, the CFO identifies the sources of value creation and establishes improvement objectives. (See Exhibit 1.) Several situations present opportunities for CFOs to emphasize the importance of performance transparency and demonstrate how the finance function can play a forward-looking role in driving a transformation’s success. 0000003778 00000 n At a financial services company, the CFO supported business leaders in conducting hands-on performance reviews in which they took a forward-looking perspective on the potential benefits of a transformation they were undertaking. 0000598584 00000 n xref Although the CFO gave leaders latitude to find the right way to execute the transformation, she also strictly enforced accountability and quickly took action in response to poor performance. 408 44 0000002572 00000 n For example, an energy company reinforced the function by creating a master data system that provided a single source of truth, improving cost allocation and building skills to continually assess performance and competency gaps. CFOs may need to consider funding a transformation differently, for … From start-ups to S$30 mil SMEs, you are our focus. While continuing to serve as the financial face of their organization, CFOs are evolving to become digital transformation leaders within their companies, leaders that can bring an international perspective, a strong understanding of operations, and the ability to drive value through the use of data and analytics. Moreover, many of these companies are launching transformations in rapid succession: 73% announced two rounds of cost restructuring combined with reorganization or downsizing within two years. Simplification in digital solutions and IT will be a gamechanger to make the company leaner and truly fit for the digital world. In one instance, the CFO of a US retail chain determined that the company would need to improve its margins in order to continue enjoying profitable growth. The CFO also fostered stakeholder alignment—first by working closely with the executive team and top management and then by communicating the case for change and the improvement initiatives to the broader organization. CFO 3.0: Digital transformation beyond financial management is a new guide that looks at the evolution of the chief financial officer. There is a strong case for a transformation if the company is struggling to meet shareholder expectations. Partner & Director, Center for CFO Excellence, Managing Director & Senior Partner; Global Leader, Center for CFO Excellence. Enabling Execution. 0000000015 00000 n The assessment took into account the development of costs over time as well as the maturity of existing improvement initiatives and their potential impact. 0000573805 00000 n Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. Earlier in her career, she held CFO positions at Walmart International and GameStop, among other For example, the CFO can support a new CEO or other new members of the executive team in understanding the company’s cost structure, performance development, and ongoing improvement initiatives. However, a significant mindset shift would be required to motivate the organization to pursue margin-improving initiatives: executives and employees were proud of the company’s historically strong performance, and benchmarks still indicated relatively low costs. In the increasingly digital world, the typical capital allocation process can stifle a transformation. 0000010354 00000 n Defining the Master Plan. In addition, it produced detailed information on how the company creates value, giving the CFO a foundation for constructively challenging business leaders, identifying performance gaps, and proposing ways to close them. In addition, the CFO designs the governance for the transformation, aiming to provide insight into the development and maturity of projects and promote accountability. 0000001361 00000 n By leading the efforts to create transparency and apply a value lens, CFOs can help guide their companies to more substantial and enduring performance improvements. endobj 0000590849 00000 n 0000002739 00000 n They are both renowned business leaders with extensive international experience in driving business transformation. Automation and digital transformation continue to progress, reducing costs, improving productivity and allowing employees to leverage critical This article was originally published by Financial Director on November 12, 2019. Only 24% of transforming companies experienced greater TSR growth than their industries over both the short term (one year) and the long term (five or more years). I think one roadblock to transformation is the business functions around strategy, report, plan, and analyse. 0000551550 00000 n 0000572993 00000 n In our survey, 60% of the finance executives said they will devote at least 20% of their finance budgets to digitally transforming the function. In addition, the CFO designs the governance for the transformation, aiming to provide insight into the development and maturity of projects and promote accountability. Our research finds, though, that many transformations do not create shareholder value. These insights help executives identify the most important value drivers and determine whether a transformation is needed. And they must ensure that investors understand how the transformation will boost the company’s TSR. The reviews set clear expectations regarding the corrective actions that would be taken if progress fell short of targets. By Shishir Agarwal, Ketil Gjerstad, Håvard Kalland, Matthias Krühler, Marc Rodt, Alexander Roos, Teemu Ruska, and James Tucker. BCG was the pioneer in business strategy when it was founded in 1963. CFO 3.0: Beyond finance To fully understand this shift from CFO 1.0 to CFO 3.0, Sage commissioned a study, CFO 3.0 – Digital transformation beyond financial management, that helped us to identify the opportunities and (See Exhibit 3.). 0000002138 00000 n The CFO adopts the forward-looking perspective taken by investors and proactively applies insights to reallocate resources and take corrective actions. 0000572842 00000 n For example, three-quarters of the companies we studied are investing in digital technology, a field in which they are still building the operational and financial expertise required to develop a business case for investments. These critical factors can reverse the odds of success from 30% to 80%, the company pointed out. 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