Tag Archives: CFO

Making Financial Transformation Reality: Hear from Deloitte and eBay at Informatica World

The need for transformation has reached the tipping point

shutterstock_228267580 - CopyFor more and more companies, the need for financial transformation has already reached a tipping point. Innovation Enterprise says a major driver for this is “the pressure on finance departments to become more strategic”. This has caused financial departments to embark “on transformational processes to bring the (finance) function in line with the needs of today’s business environment. Much of this has to do with the streamlining of IT processes and automating repetitive tasks that aid execution”.

At the same time, CFOs tell us that they want to improve the quality of financial and performance insights obtained from the data they produce. Gartner confirmed this by asking CFOs to identify where they see the need for technology improvement. Top areas for CFOs were Business Intelligence (BI), Analytics, and Performance Management. Gartner claims the organizations that it has talked to “are still struggling to make progress with BI and analytics”. And while many IT organizations have made initial investments here, they have tended to be, according to Gartner, tactically focused and therefore, have not addressing more fundamental issues including data quality and data consistency.

Gartner claims these issues have required CFOs and finance teams to work closely with BI specialists within the IT organization. Often quarterly reporting or profitability analysis requires manual pulls of data. Most finance departments are saddled with legacy environments. And the supporting processes for these systems remain difficult, manual, and time intensive. When I worked at very large computer manufacturer, we had to give the finance team at least 2 months to input product changes into the financial system. Clearly, once you move from the general ledger or general ledgers in more complex organizations, you find that much of what takes place within finance is still a manual process. According to a recent study, an amazing “51% of CFO survey respondents say that their collecting, storing, and retrieving financial and performance data at their company is primarily a manual and/or spreadsheet-based exercise” (The Intelligent Finance Organization, KPMG, page 16).

AnalysisFinancial transformations need to yield more effective and efficient organizations

For those that are not in finance, this must be a shocker. But it should come as no shock that many financial organizations are undertaking timely and expensive financial transformations at this time. The goal for these transformations should not necessarily to replace their ERP and other financial systems but instead to improve their overall financial effectiveness and efficiency.

On the effectiveness side, CFOs tell us that they want to improve the quality and timeliness of data that they create so they can take on a more strategic role in the enterprise. I have already shared about how CFOs have a data trust issue.

On the efficiency side, CFOs want to create more efficient financial business processes. So what is holding them back in being more efficient? In most cases, it is the complexity of managing existing legacy financial and business systems and ensuring that everything is in synch between them. What financial organizations have told us is that they do not want to replace their legacy systems but they want instead to replace how they manage these systems so they can get the “head room” needed to be more efficient. What they want specifically is the ability to eliminate the complexity of these systems daily care and feeding.

Fshutterstock_228186214 - Copyinancial transformations should aim at improving supporting financial processes

A financial transformation project, therefore, should aim at improving the supporting financial processes and automate as much as possible around the financial processes that surround the general ledger. When asked what has driven these financial processes to become so cumbersome to manage, we have been told business change—reorganization, new businesses, acquisitions, new products, and new business process. It is managing the change to the financial structures, financial metadata, and hierarchies.

In talking with financial departments, we have heard that many components of the process are completely manual.  Every change, for example, has to be managed across enterprises geographies, FP&A systems, accounting systems, and more than one business systems. It is a huge job making everything synch if done manually. One company that we talked said they needed for all of this not to be manual. Another said, automating from a single version of truth would be extremely valuable. Right now, we connect to multiple systems and it is difficult to maintain consistency between each source of truth. A number of things do not always tie together—“I admit it we have system inconsistencies”.

Financial departments are asking for a master of everything that touches financial systems including their SaaS systems. This capability would make the management of changes entire automated and over time system dampen out inconsistencies completely. For most medium to large organizations, this is a big deal. At the same time, they need the ability to test, schedule, and then recast financial results easily due to planned business change. So much of this today is managed in spreadsheets. With automation, financial departments want as well the ability to eliminate manual notifications and review processes for changes to entities and the general ledger. As well they want traceability and tractability for all changes made. One finance department said that they need an audit trail for their management of changes made. They said just think about the effort to maintain hierarchies that go into the expense report system alone. It easily touches as many as 20 systems. Finally, they said it would nice to have transparency to state before a change. This organization said that it is going to become more important to maintain lineage analysis for audit trail.

Do you want to hear more

Deloitte and eBay will jointly present on the solution that they have put together for financial transformation on Tuesday the 12th at 2:40 p.m. in Las Vegas at Informatica World. Their presentation will include their vision for Financial Transformation. As well it will include how to put together a data led approach, their design decisions, and their leading practices. Finally, they will discuss how they built their solution to manage SAP data on top of the Informatica MDM solution.

Related links

Solution Brief:

Master Data Management

CFO Solutions Page

Related Blogs

CFOs Move to Chief Profitability Officer

CFOs Discuss Their Technology Priorities

The CFO Viewpoint upon Data

How CFOs can change the conversation with their CIO?

New type of CFO represents a potent CIO ally

Competing on Analytics

The Business Case for Better Data Connectivity

Twitter: @MylesSuer

Share
Posted in 5 Sales Plays | Tagged , , , | Leave a comment

Does a Better Order to Cash Process Start with Better Customer Data?

Improving Ordeshutterstock_227713873 - Copyr to Cash matters regardless of market cycle

Order to Cash (OTC) matters to today’s CFOs and their financial teams even as CFOs move themselves from an expense and cost reduction footing to a manage growth footing. As the business process concerned with receiving and processing customer sales, having a well-functioning OTC process is not only about preserving cash, but it is also about improving the working capital delivered to the bottom line. This is something which is necessitated by successful growth strategies. Specifically, OTC helps to provide the cash flow needed to quicken collections and improve working capital turnover.

This drives concrete improvements to finance metrics including Days Sales Outstanding (a measure of the average number of days that a company takes to collect revenue after a sale has been made) and the overall cost of collections. It should be clear that a poorly running order to cash process can create tangible business issues. These include but are not limited to the following:

  • Accuracy of purchase orders
  • Accuracy of invoices
  • Volume of customer disputes
  • Incorrect application of payment terms
  • Approval of inappropriate orders
  • Errors in order fulfillment

CFOs tell us that it is critical that they make sure that “good cash management is occurring in compliance with regulation”. It is important as well to recognize that OTC cuts across many of the primary activities of the business value chain—especially those that related to sales, marketing, and services.

How do you improve your order to cash process?

So how do financial leader go about improving OTC? They can clearly start by looking at the entire OTC process from quote order, process order, fulfill order, invoice customer, receive and apply cash, and manage credit and collections. The below diagram shows the specific touch points where the process can be improved—each of these should be looked at for process or technology improvement.

customer data OTC Process

However, the starting point is where the most concrete action can be taken. Fixing customer data fixes the data that is used by each succeeding process improvement area. This is where a single, connected view of customer can be established. This improves the OTC process by doing the following:

  1. Fixes your customer data
  2. Establishes the right relationships between customers
  3. Establishes tax and statutory registrations and credit limits
  4. Prevents penalties for delivering tax documents to the wrong placeCustomer Data Mastering (CDM) does this in the following way. It provides a single view of customers, 360 degree view of relationships as well as a complete view of integrative customer relationships including interactions and transactions.

CDM matters to the CFO and the Business as a whole

customer dataIt turns out that CDM does not just matter to OTC and the finance organization. It matters as well to the corporate value chain by impacting the following primary activities including outbound logics, marketing and sales, and service. Specifically, CDM accomplishes the following:

  • It reduces costs by reducing invoicing and billing inaccuracies, customer disputes, mailing unconsolidated statements, sending duplicate mail, and dealing with returned mail
  • Increases revenue by boosting marketing effectiveness at segmenting customer for more personalized offers
  • Increases revenue by boosting sales effectiveness by making more relevant cross-sell and up-sell offers
  • Reduces costs by boosting call center effectiveness by resolving customer issues more quickly
  • Improves customer satisfaction, customer loyalty and retention because employees are empowered with complete customer information to deliver great customer experiences across channels and touch points

Parting remarks

So as we have discussed, today’s CFOs are finding that they need to become more and more growth oriented. This transition is made more effective with a well function OTC process. While OTC impacts other elements of the business too, the starting point for fixing OTC is customer data mastering because it fixes elements of the data portion of this process.

Solution Brief:

Master Data Management

Related Blogs

CFOs Move to Chief Profitability Officer

CFOs Discuss Their Technology Priorities

The CFO Viewpoint upon Data

How CFOs can change the conversation with their CIO?

New type of CFO represents a potent CIO ally

Competing on Analytics

The Business Case for Better Data Connectivity

Twitter@MylesSuer

Share
Posted in Business Impact / Benefits, Master Data Management | Tagged , | Leave a comment

Financial Transformation is Really About Fixing the Business

clean data

Clean Data

According to Strategy and Business, the “CFO role is expanding to include being the company’s premier champion of strategic discipline.” It is no wonder that financial transformations are so much in vogue these days. According to The Conference Board, 81% of the companies that it surveyed are involved in a major financial transformation initiative. However, only 27% of these firms claim that they had achieved the benefits that were defined within their business case. Of the reasons for failure, the most interesting is thinking the transformation would be some kind of big bang. The problem is this type of thinking is unrealistic for today’s hyper competitive business environment. Financial strategy today needs be an enabler of business strategy. This means that it needs to be able to support the increasingly shorter duration of business strategy.

Financial Transformation needs to Enable Business Agility

Financial Transformation

Financial Transformation needs to Enable Business Agility

I have discovered the same thing in my discussions with IT organizations. In other words, enabling business strategies increasingly need to be built with a notion of agility. This means for financial strategies that they to need to first and foremost make organizations more agile and enable more continuous business change. Think about the impact of an organization that has as part of its strategy inorganic acquisition. This all means that thinking that a multi-year ERP implementations will on it’s own deliver financial transformation alone is unrealistic.

While it is absolutely fair to determine what at the manual tasks financial teams can eliminate, it does not make sense to think that they are done once an ERP implementation is completed. Recently, I was talking with a large accounting consulting and integration firm, they let me know that they really liked doing large ERP implementations and re-implementations, but they also knew that they would soon break under the weight of financial and business change unless flexibility was built in from the start. Financial transformation must start by creating business flexibility and agility to work in today’s business environment.

Does Your Close Process Get in the Way?

Financial Transformation

Best Practices

But achieving better financial agility and profitability improvement capabilities is often limited by the timeliness, trustworthiness of data. This why CFOs say that they spend so much of their time on the close process. According to the MIT CFO Summit Survey, nearly half of the organizations surveyed are feeling pressure from senior leadership to become more data driven and analytical. Data clearly limits the finance function ability to guide corporate executives, business-unit managers, and sales and marketing functions in ways to ensures business profitable and growth.

Financial Transformations Need to Fit Business Strategy

Financial Transformations

Financial Transformations Need to Fit Business Strategy

At the same time, it cannot be stressed enough that successful financial transformations need to be designed to fit with the company’s larger business strategy. The Conference Board suggests financial organizations should put real emphasis upon transformations that grow the business. Jonathan Brynes at the MIT Sloan School has suggested “the most important issue facing most managers …is making more money from their existing businesses without costly new initiatives”. In Brynes’ cross industry research, he found that 30% or higher of each company’s businesses are unprofitable. Brynes claims these business losses are offset by what are “islands of high profitability”. The root cause of this issue he asserts is the inability of current financial and management control systems to surface profitability problems and opportunities for investment to accelerate growth. For this reason, financial transformations should as a business goal make it easier to evaluate business profitability.

In a survey from CFO magazine, they found that nearly all the survey respondents said their companies are striving to improve profitability over the next year. 87% said their companies needed to analyze financial and performance data much more quickly if they were to meet business targets. However, only 12% said their finance organizations can respond to requests for financial reports and analysis from business managers in real or near-real time. At the same time, business managers are expecting finance staff to be able to tell the story behind the numbers — to integrate financial and operational data in ways that get at the drivers of improvement.

We Are Talking About More than Financial Decision Making

This means not just worrying about financial decision making, but ensuring that the right questions and the right insights are being provided for the business. As Geoffrey Moore has indicated economies of scale and market clout are no longer the formidable barriers to entry that they once were. The allocation of resources must be focused on a company’s most distinctive business capabilities—those things that provide the enterprise its “right to win”. To be a strategic, CFOs need to become a critical champion of the capabilities system, making sure it gets the investment and consideration it needs. This accentuates your ongoing role as a voice of reason in M&A—favoring acquisitions that fit well with the company’s capabilities system, and recommending divestitures of products and services that don’t.

Parting Remarks

Today, the CFO role is being transformed to increasingly be a catalyst for change. This involves increasingly helping companies focus upon the business capabilities that drive value. CFOs are uniquely positioned to take on this challenge. They are the company leader that combines strategic insight with a line of sight into business execution. Moreover, unlike other change agents, CFOs have the power of the purse. However, to do this their financial transformations need to ensure business agility and improve their and the businesses ability to get and use data.

Related links:

CFOs Move to Chief Profitability Officer

CFOs Discuss Their Technology Priorities

The CFO Viewpoint upon Data

How CFOs can change the conversation with their CIO?

New type of CFO represents a potent CIO ally

Competing on Analytics

The Business Case for Better Data Connectivity

Twitter: @MylesSuer

Share
Posted in B2B, Banking & Capital Markets | Tagged , | Leave a comment

Is it the CDO or CAO or Someone Else?

Frank-Friedman-199x300A month ago, I shared that Frank Friedman believes CFOs are “the logical choice to own analytics and put them to work to serve the organization’s needs”. Even though many CFOs are increasingly taking on what could be considered an internal CEO or COO role, many readers protested my post which focused on reviewing Frank Friedman’s argument. At the same time, CIOs have been very clear with me that they do not want to personally become their company’s data steward. So the question becomes should companies be creating a CDO or CAO role to lead this important function? And if yes, how common are these two roles anyway?

Data analyticsRegardless of eventual ownership, extracting value out of data is becoming a critical business capability. It is clear that data scientists should not be shoe horned into the traditional business analyst role. Data Scientists have the unique ability to derive mathematical models “for the extraction of knowledge from data “(Data Science for Business, Foster Provost, 2013, pg 2). For this reason, Thomas Davenport claims that data scientists need to be able to network across an entire business and be able to work at the intersection of business goals, constraints, processes, available data and analytical possibilities. Given this, many organizations today are starting to experiment with the notion of having either a chief data officers (CDOs) or chief analytics officers (CAOs). The open questions is should an enterprise have a CDO or a CAO or both? And as important in the end, it is important to determine where should each of these roles report in the organization?

Data policy versus business questions

Data analyticsIn my opinion, it is the critical to first look into the substance of each role before making a decision with regards to the above question. The CDO should be about ensuring that information is properly secured, stored, transmitted or destroyed.  This includes, according to COBIT 5, that there are effective security and controls over information systems. To do this, procedures need to be defined and implemented to ensure the integrity and consistency of information stored in databases, data warehouses, and data archives. According to COBIT 5, data governance requires the following four elements:

  • Clear information ownership
  • Timely, correct information
  • Clear enterprise architecture and efficiency
  • Compliance and security

Data analyticsTo me, these four elements should be the essence of the CDO role. Having said this, the CAO is related but very different in terms of the nature of the role and the business skills require. The CRISP model points out just how different the two roles are. According to CRISP, the CAO role should be focused upon business understanding, data understanding, data preparation, data modeling, and data evaluation. As such the CAO is focused upon using data to solve business problems while the CDO is about protecting data as a business critical asset. I was living in in Silicon Valley during the “Internet Bust”. I remember seeing very few job descriptions and few job descriptions that existed said that they wanted a developer who could also act as a product manager and do some marketing as a part time activity. This of course made no sense. I feel the same way about the idea of combining the CDO and CAO. One is about compliance and protecting data and the other is about solving business problems with data. Peanut butter and chocolate may work in a Reese’s cup but it will not work here—the orientations are too different.

So which business leader should own the CDO and CAO?

Clearly, having two more C’s in the C-Suite creates a more crowded list of corporate officers. Some have even said that this will extended what is called senior executive bloat. And what of course how do these new roles work with and impact the CIO? The answer depends on organization’s culture, of course. However, where there isn’t an executive staff office, I suggest that these roles go to different places. Clearly, many companies already have their CIO function already reporting to finance. Where this is the case, it is important determine whether a COO function is in place. The COO clearly could own the CDO and CAO functions because they have a significant role in improving process processes and capabilities. Where there isn’t a COO function and the CIO reports to the CEO, I think you could have the CDO report to the CIO even though CIOs say they do not want to be a data steward. This could be a third function in parallel the VP of Ops and VP of Apps. And in this case, I would put the CAO report to one of the following:  the CFO, Strategy, or IT. Again this all depends on current organizational structure and corporate culture. Regardless of where it reports, the important thing is to focus the CAO on an enterprise analytics capability.

Related Blogs

Should we still be calling it Big Data?

Is Big Data Destined To Become Small And Vertical?

Big Data Why?

What is big data and why should your business care?

Author Twitter: @MylesSuer

Share
Posted in Big Data, CIO | Tagged , , , , , , | 2 Comments

CFO Checklist to Owning Enterprise Analytics

Frank-FriedmanLast month, the CEO of Deloitte said that CFOs are “the logical choice to own analytics and put them to work to serve the organization’s needs”. In my discussions with CFOs, they have expressed similar opinions.  Given this, the question becomes what does a CFO need to do to be effective leader of their company’s analytics agenda? To answer this, I took a look at what Tom Davenport suggests in his book “Analytics at Work”. In this book, Tom suggests that an analytical leader need to do the following twelve things to be effective:

12 Ways to Be an Effective Analytics Leader

1)      Develop their people skills. This is not just about managing analytical people which has its own challenges. It is, also, about CFOs establishing the “the credibility and trust needed when analytics produce insights that effectively debunk currently accepted wisdom”.
2)      Push for fact based decision making. You need to, as a former boss of mine like to say, become the lightening rod and in this case, set the expectation that people will make decisions based upon data and analysis.
3)      Hire and retain smart people. You need to provide a stimulating and supportive work environment for analysts and give them credit when they do something great.
4)      Be the analytical example. You need to lead by example. This means you need to use data and analysis in making your own decisions
5)      Signup for improved results. You need to commit to driving improvements in a select group of business processes by using analytics. Pick something meaningful ike reducing the cost of customer acquisition or optimizing your company’s supply chain management.
6)      Teach the organization how to use analytic methods. Guide employees and other stakeholders into using more rigorous thinking and decision making.
7)      Set strategies and performance expectations. Analytics and fact-based decisions cannot happen in a vacuum. They need strategies and goals that analytics help achieve.
8)      Look for leverage points. Look for the business problems where analytics can make a real difference. Look for places where a small improvement in a process driven by analytics can make a big difference.
9)      Demonstrate persistence. Work doggedly and persistently to apply analytics to decision making, business processes, culture, and business strategy.
10)   Build an analytics ecosystem with your CIO. Build an ecosystem consisting of other business leaders, employees, external analytics suppliers, and business partners. Use them to help you institutionalize analytics at your company.
11)    Apply analytics on more than one front. No single initiative will make the company more successful—no single analytics initiative will do so either.
12)   Know the limits to analytics. Know when it is appropriate to use intuition instead of analytics. As a professor of mine once said not all elements of business strategy can be solved by using statistics or analytics. You should know where and when analytics are appropriate.

Data AnalyticsFollowing these twelve items will help strategic oriented CFOs lead the analytics agenda at their companies. As I indicated in “Who Owns the Analytics Agenda?”, CFOs already typically act as data validators at their firms, but taking this next step matters to their enterprise because “if we want to make better decisions and take the right actions, we have use analytics” (Analytics at Work, Tom Davenport, Harvard Business Review Press, page 1). Given this, CFOs really need to get analytics right. The CFOs that I have talked to say they already “rely on data and analytics and they need them to be timely and accurate”.

One CFO, in fact, said that data is potentially the only competitive advantage left for his firm”. And while implementing the data side of this depends on the CIO. It is clear from the CFOs that I have talked to that they believe a strong business relationship with their CIO is critical to the success of their business.

Enterprise DataSo the question remains are you ready as a financial leader to lead on the analytics agenda? If you are and you want to learn more about setting the analytics agenda, please consider yourself invited to webinar that I am doing with the CFO of RoseRyan in January.

The Webinar is entitled “Analytics and Data for the Strategic CFO”. And by clicking this link you can register to attend. See you there.

Related Blogs

CFOs Move to Chief Profitability Officer
CFOs Discuss Their Technology Priorities
The CFO Viewpoint upon Data
How CFOs can change the conversation with their CIO?
New type of CFO represents a potent CIO ally
Competing on Analytics
The Business Case for Better Data Connectivity

Twitter: @MylesSuer

Share
Posted in Business/IT Collaboration, CIO, Data Governance | Tagged , , , , | Leave a comment

CFO Rising: CFO’s Show They Are Increasingly Business Oriented

The Rising CFO is Increasingly Business Oriented

CFO risingAt the CFO Rising West Conference on October 30th and 31st, there were sessions on managing capital expenditures, completing an IPO, and even managing margin and cash flow. However, the keynote presenters did not spend much of time on these topics. Instead, they focused on how CFOs need to help their firms execute better. Here is a quick summary of the suggestions made from CFOs in broadcasting, consumer goods, retail, healthcare, and medical devices.

The Modern CFO is Strategic

CFO risingThe Broadcasting CFO started his talk by saying he was not at the conference to share why CFOs need to move from being “bean counters to strategic advisors”. He said “let’s face it the modern CFO is a strategic CFO”. Agreeing with this viewpoint, the Consumer Goods CFO said that finance organizations have a major role to play in business transformation. He said that finance after all is the place to drive corporate improvement as well as business productivity and business efficiency.

CFOs Talked About Their Business’ Issues

CFO risingThe Retailer CFO talked like he was a marketing person. He said retail today is all about driving a multichannel customer experience. To do this, finance increasingly needs to provide real business value. He said, therefore, that data is critical to the retailer’s ability to serve customers better. He claimed that customers are changing how they buy, what they want to buy, and when they want to buy. We are being disrupted and it is better to understand and respond to these trends. We are trying, therefore, to build a better model of ecommerce.

Meanwhile, the Medical Devices CFO said that as a supplier to medical device vendors “what we do is compete with our customers engineering staffs”. And the Consumer Goods CFO added the importance of finance driving sustained business transformation.

CFOs Want To Improve Their Business’ Ability To Execute

CFO risingThe Medical Devices CFO said CFOs need to look for “earlier execution points”. They need to look for the drivers of behavior change. As a key element of this, he suggested that CFOs need to develop “early warning indicators”. He said CFOs need to actively look at the ability to achieve objectives. With sales, we need to ask what deals do we have in the pipe? At what size are these deals? And at what success rate will these deals be closed? Only with this information, can the CFO derive an expected company growth rate. He then asked CFOs in the room to identify themselves. With their hands in the air, he asked them are they helping to create a company that executes or not. He laid down the gauntlet for the CFOs in the room by then asserting that if you are not creating a company that executes then are going to be looking at cutting costs sooner rather than later.

The retailer CFO agreed with this CFO. He said today we need to focus on how to win a market. We need to be asking business questions including:

  • How should we deploy resources to deliver against our firm’s value proposition?
  • How do we know when we win?

CFOs Claim Ownership For Enterprise Performance Measurement

Data AnalysisThe Retail CFO said that finance needs to own “the facts for the organization”—the metrics and KPIs. This is how he claims CFOs will earn their seat at the CEOs table. He said in the past the CFO have tended to be stoic, but this now needs to change.

The Medical Devices CFO agreed and said enterprises shouldn’t be tracking 150 things—they need to pare it down to 12-15 things. They need to answer with what you measure—who, what, and when. He said in an execution culture people need to know the targets. They need measurable goals. And he asserted that business metrics are needed over financial metrics. The Consumer Goods CFO agreed by saying financial measures alone would find that “a house is on fire after half the house had already burned down”. The Healthcare CFO picked up on this idea and talked about the importance of finance driving value scorecards and monthly benchmarks of performance improvement. The broadcaster CFO went further and suggested the CFO’s role is one of a value optimizer.

CFOs Own The Data and Drive a Fact-based, Strategic Company Culture

FixThe Retail CFOs discussed the need to drive a culture of insight. This means that data absolutely matters to the CFO. Now, he honestly admits that finance organizations have not used data well enough but he claims finance needs to make the time to truly become data centric. He said I do not consider myself a data expert, but finance needs to own “enterprise data and the integrity of this data”. He said as well that finance needs to ensure there are no data silos. He summarized by saying finance needs to use data to make sure that resources are focused on the right things; decisions are based on facts; and metrics are simple and understandable. “In finance, we need use data to increasingly drive business outcomes”.

CFOs Need to Drive a Culture That Executes for Today and the Future

Honestly, I never thought that I would hear this from a group of CFOs. The Retail CFO said we need to ensure that the big ideas do not get lost. We need to speed-up the prosecuting of business activities. We need to drive more exponential things (this means we need to position our assets and resources) and we need, at the same time, to drive the linear things which can drive a 1% improvement in execution or a 1% reduction in cost. Meanwhile, our Medical Device CFO discussed the present value, for example, of a liability for rework, lawsuits, and warranty costs. He said that finance leaders need to ensure things are done right today so the business doesn’t have problems a year from today. “If you give doing it right the first time a priority, you can reduce warranty reserve and this can directly impact corporate operating income”.

CFOs need to lead on ethics and compliance

The Medical Devices CFO said that CFOs, also, need to have high ethics and drive compliance. The Retail CFO discussed how finance needs to make the business transparent. Finance needs to be transparent about what is working and what is not working. The role of the CFO, at the same time, needs to ensure the integrity of the organization. The Broadcaster CFO asserted the same thing by saying that CFOs need to take a stakeholder approach to how they do business.

Final remarks

In whole, CFOs at CFO Rising are showing the way forward for the modern CFOs. This CFO is all about the data to drive present and future performance, ethics and compliance, and business transparency. This is a big change from the historical controller approach and mentality. I once asked a boss about what I needed to be promoted to a Vice President; my boss said that I needed to move from a technical specialist to a business person. Today’s CFOs clearly show that they are a business person first.

Related links

Solution Brief: The Intelligent Data Platform

Related Blogs
CFOs Move to Chief Profitability Officer
CFOs Discuss Their Technology Priorities
The CFO Viewpoint upon Data
How CFOs can change the conversation with their CIO?
New type of CFO represents a potent CIO ally
Competing on Analytics
The Business Case for Better Data Connectivity
Twitter: @MylesSuer

Share
Posted in Data Quality, General, Governance, Risk and Compliance, Healthcare | Tagged , , , | Leave a comment

Gambling With Your Customer’s Financial Data

CIOs and CFOs both dig data security

Financial dataIn my discussions with CIOs over the last couple of months, I asked them about the importance of a series of topics. All of them placed data security at the top of their IT priority list. Even their CFO counterparts, with whom they do not always see eye to eye, said they were very concerned about the business risk for corporate data. These CFOs said that they touch, as a part of owning business risk, security — especially from hacking. One CFO said that he worried, as well, about the impact of data security for compliance issues, including HIPAA and SOX. Another said this: “The security of data is becoming more and more important. The auditors are going after this. CFOs, for this reason, are really worried about getting hacked. This is a whole new direction, but some of the highly publicized recent hacks have scared a lot of folks and they combined represent to many of us a watershed event.”

Editor of CFO Magazine

According to David W. Owens the editor of CFO Magazine, even if you are using “secure” storage, such as internal drives and private clouds, the access to these areas can be anything but secure. Practically any employee can be carrying around sensitive financial and performance data in his or her pocket, at any time.” Obviously, new forms of data access have created new forms of data risk.

Are some retailers really leaving the keys in the ignition?

If I only hadGiven the like mind set from CIOs and CFOs, I was shocked to learn that some of the recently hacked retailers had been using outdated security software, which may have given hackers easier access company payment data systems. Most amazingly, some retailers had not even encrypted their customer payment data. Because of this, hackers were able to hide on the network for months and steal payment data, as customers continued to use their credit cards at the company’s point of sale locations.

Why weren’t these transactions encrypted or masked? In my 1998 financial information start-up, we encrypted our databases to protect against hacks of our customers’ personal financial data. One answer came from a discussion with a Fortune 100 Insurance CIO. This CIO said “CIO’s/CTO’s/CISO’s struggle with selling the value of these investment because the C Suite is only interested in hearing about investments with a direct impact on business outcomes and benefits”.

Enterprise security drives enterprise brand today

Brand ValueSo how should leaders better argue the business case for security investments? I want to suggest that the value of IT is its “brand promise”. For retailers, in particular, if a past purchase decision creates a perceived personal data security risk, IT becomes a liability to their corporations brand equity and potentially creates a negative impact on future sales. Increasingly how these factors are managed either supports or not the value of a company’s brand.

My message is this: Spend whatever it takes to protect your brand equity; Otherwise a security issue will become a revenue issue.

In sum, this means organizations that want to differentiate themselves and avoid becoming a brand liability need to further invest in their data centric security strategy and of course, encryption. The game is no longer just about securing particular applications. IT organizations need to take a data centric approach to securing customer data and other types of enterprise data. Enterprise level data governance rules needs to be a requirement. A data centric approach can mitigate business risk by helping organizations to understand where sensitive data is and to protect it in motion and at rest. 

Related links

Solutions: Enterprise Level Data Security
The State of Data Centric Security
How Is The CIO Role Starting To Change?
The CFO viewpoint on data
CFOs discuss their technology priorities
Twitter: @MylesSuer

 

 

Share
Posted in CIO, Data Governance, Data masking, Data Security, Retail | Tagged , , , , , , , | Leave a comment

CFO Move to Chief Profitability Officer

30% or higher of each company’s businesses are unprofitable

cfoAccording to Jonathan Brynes at the MIT Sloan School, “the most important issue facing most managers …is making more money from their existing businesses without costly new initiatives”. In Brynes’ cross industry research, he found that 30% or higher of each company’s businesses are unprofitable. Brynes claims these business losses are offset by what are “islands of high profitability”. The root cause of this issue is asserted to be the inability of current financial and management control systems to surface profitability problems and opportunities. Why is this the case? Byrnes believes that management budgetary guidance by its very nature assumes the continuation of the status quo. For this reason, the response to management asking for a revenue increase is to increase revenues for businesses that are profitable and unprofitable. Given this, “the areas of embedded unprofitability remain embedded and largely invisible”. At the same time to be completely fair, it should be recognized that it takes significant labor to accurately and completely put together a complete picture on direct and indirect costs.

The CFO needs to become the point person on profitability issues

cfo

Byrnes believes, nevertheless, that CFOs need to become the corporate point person for surfacing profitability issues. They, in fact, should act as the leader of a new and important role, the chief profitability officer. This may seem like an odd suggestion since virtually every CFO if asked would view profitability as a core element of their job. But Byrnes believes that CFOs need to move beyond broad, departmental performance measures and build profitability management processes into their companies’ core management activities. This task requires the CFO to determine two things.

  1. Which product lines, customers, segments, and channels are unprofitable so investments can be reduced or even eliminated?
  2. Which product lines, customers, segments, and channels are the most profitable so management can determine whether to expand investments and supporting operations?

Why didn’t portfolio management solve this problem?

cfoNow as a strategy MBA, Byrnes’ suggestion leave me wondering why the analysis proposed by strategy consultants like Boston Consulting Group didn’t solve this problem a long time ago. After all portfolio analysis has at its core the notion that relative market share and growth rate will determine profitability and which businesses a firm should build share, hold share, harvest share, or divest share—i.e. reduce, eliminate, or expand investment. The truth is getting at these figures, especially profitability, is a time consuming effort.

KPMG finds 91% of CFOs are held back by financial and performance systems

KPMG

As financial and business systems have become more complex, it has become harder and harder to holistically analyze customer and product profitability because the relevant data is spread over a myriad of systems, technologies, and locations. For this reason, 91% of CFO respondents in a recent KPMG survey said that they want to improve the quality of their financial and performance insight from the data they produce. An amazing 51% of these CFOs, also, admitted that the “collection, storage, and retrieval financial and performance data at their company is primarily a manual and/or spreadsheet-based exercise”. Think about it — a majority of these CFOs teams time is spent collecting financial data rather than actively managing corporate profitability.

How do we fix things?

FixWhat is needed is a solution that allows financial teams to proactively produce trustworthy financial data from each and every financial system and then reliably combine and aggregate the data coming from multiple financial systems. Having accomplished this, the solution needs to allow financial organizations to slice and dice net profitability for product lines and customers.

This approach would not only allow financial organizations to cut their financial operational costs but more importantly drive better business profitability by surfacing profitability gaps. At the same time, it would enable financial organizations to assist business units in making more informed customer and product line investment decisions. If a product line or business is narrowly profitable and lacks a broader strategic context or ability to increase profitability by growing market share, it is a candidate for investment reduction or elimination.

Strategic CFOs need to start asking questions of their business counterparts starting with their justification for their investment strategy. Key to doing this involves consolidating reliable profitability data across customers, products, channel partners, suppliers. This would eliminate the time spent searching for and manually reconciling data in different formats across multiple systems. It should deliver ready analysis across locations, applications, channels, and departments.

Some parting thoughts

Strategic CFOs tell us they are trying to seize the opportunity “to be a business person versus a bean counting historically oriented CPA”. I believe a key element of this is seizing the opportunity to become the firm’s chief profitability officer. To do this well, CFOs need dependable data that can be sliced and diced by business dimensions. Armed with this information, CFOs can determine the most and least profitability, businesses, product lines, and customers. As well, they can come to the business table with the perspective to help guide their company’s success.

Related links
Solution Brief: The Intelligent Data Platform
Related Blogs
CFOs Discuss Their Technology Priorities
The CFO Viewpoint upon Data
How CFOs can change the conversation with their CIO?
New type of CFO represents a potent CIO ally
Competing on Analytics
The Business Case for Better Data Connectivity

Twitter: @MylesSuer

Share
Posted in Business Impact / Benefits, Business/IT Collaboration, CIO, Data Governance, Data Quality | Tagged , , , , , | Leave a comment

CFOs Discuss Their Technology Priorities

Recently, I had the opportunity to talk to a number of CFOs about their technology priorities. These discussions represent an opportunity for CIOs to hear what their most critical stakeholder considers important. The CFOs did not hesitate or need to think much about this question. They said three things make their priority list. They are better financial system reliability, better application integration, and better data security and governance. The top two match well with a recent KPMG study which found the biggest improvement finance executives want to see—cited by 91% of survey respondents—is in the quality of financial and performance insight obtained from the data they produce, followed closely by the finance and accounting organization’s ability to proactively analyze that information before it is stale or out of date”

TrustBetter financial system reliability

CFOs want to know that their systems work and are reliable. They want the data collected from their systems to be analyzed in a timely fashion. Importantly, CFOs say they are worried not only about the timeliness of accounting and financial data. This is because they increasingly need to manage upward with information.  For this reason, they want timely, accurate information produced for financial and business decision makers. Their goal is to drive out better enterprise decision making.

In manufacturing, for example, CFOs say they want data to span from the manufacturing systems to the distribution system. They want to be able to push a button and get a report. These CFOs complain today about the need to manually massage and integrate data from system after system before they get what they and their business decision makers want and need.

IntegrationBetter Application Integration

CFOs really feel the pain of systems not talking to each other. CFOs know firsthand that they have “disparate systems” and that too much manual integration is going on. For them, they see firsthand the difficulties in connecting data from the frontend to backend systems. They personally feel the large number of manual steps required to pull data. They want their consolidation of account information to be less manual and to be more timely. One CFO said that “he wants the integration of the right systems to provide the right information to be done so they have the right information to manage and make decisions at the right time”.

Data Security and Governance

securityCFOs, at the same time, say they have become more worried about data security and governance. Even though CFOs believe that security is the job of the CIO and their CISO, they have an important role to play in data governance. CFOs say they are really worried about getting hacked. One CFO told me that he needs to know that systems are always working properly. Security of data matters today to CFOs for two reasons. First, data has a clear material impact. Just take a look at the out of pocket and revenue losses coming from the breach at Target. Second, CFOs, which were already being audited for technology and system compliance, feel that their audit firms will be obligated to extend what they were doing in security and governance and go as a part of regular compliance audits. One CFO put it this way. “This is a whole new direction for us. Target scared a lot of folks and will be to many respects a watershed event for CFOs”.

Take aways

So the message here is that CFOs prioritize three technology objectives for their CIOs– better IT reliability, better application integration, and improved data security and governance. Each of these represents an opportunity to make the CFOs life easier but more important to enable them to take on a more strategic role. The CFOs, that we talked to, want to become one of the top three decision makers in the enterprise. Fixing these things for CFOs will enable CIOs to build a closer CFO and business relationships.

Related links

Solution Brief: The Intelligent Data Platform

Solution Brief: Secure at Source

Related Blogs

The CFO Viewpoint upon Data

How CFOs can change the conversation with their CIO?

New type of CFO represents a potent CIO ally

Competing on Analytics

The Business Case for Better Data Connectivity

Twitter: @MylesSuer

Share
Posted in CIO, Data Security, Governance, Risk and Compliance | Tagged , , , , , | Leave a comment

The CFO Viewpoint upon Data

According to the Financial Executives Institute, CFOs say their second highest priority this year is to harness business intelligence and big data. Their highest priority is to improve cash flow and working capital efficiency and effectiveness. This means CFOs highest two priorities are centered around data. At roughly the same time, KPMG has found in their survey of CFOs that 91% want to improve the quality of their financial and performance insight obtained from the data that they produce. Even more amazing 51% of CFO admitted that “collecting, storing, and retrieving financial and performance data at their company is primarily accomplished through a manual and/or spreadsheet-based exercise”. From our interviews of CFOs, we believe this number is much higher.

automationDigitization increasing but automation is limited for the finance department

Your question at this point—if you are not a CFO—should be how can this be the case? After all strategy consultants like Booz and Company, actively measure the degree of digitization and automation taking place in businesses by industry and these numbers year after year have shown a strong upward bias. How can the finance organization be digitized for data collection but still largely manual in its processes for putting together the figures that management and the market needs?
 
 
TrustCFOs do not trust their data

In our interviews of CFOs, one CFO answered this question bluntly by saying “If the systems suck, then you cannot trust the numbers when you get them.” And this reality truly limits CFOs in how they respond to their top priorities. Things like management of the P&L, Expense Management, Compliance, and Regulatory all are impacted by the CFOs data problem. Instead of doing a better job at these issues, CFOs and their teams remain largely focused on “getting the numbers right”. And even worse, the answering of business questions like how much revenue is this customer providing or how profitable this customer is, involves manual pulls of data today from more than one system. And yes, similar data issues exist in financial services organizations which close the books nightly.

ProblemCFOs share openly their data problem

The CFOs, that I have talked to, admit without hesitation that data is a big issue for them. These CFOs say that they worry about data from the source and the ability to do meaningful financial or managerial analysis. They say they need to rely on data in order to report but as important they need it to help drive synergies across businesses. This matters because CFOs say they want to move from being just “bean counters” to being participants in the strategy of their enterprises.

To succeed, CFOs say that they need timely, accurate data. However, they are the first to discuss how disparate systems get in their way. CFOs believe that making their lives easier starts with the systems that support them. What they believe is needed is real integration and consolidation of data. One CFO said what is needed this way, “we need the integration of the right systems to provide the right information so we can manage and make decisions at the right time”. CFOs clearly want to know that the accounting systems are working and reliable. At the same time, CFOs want, for example, a holistic view of customer. When asked why this isn’t a marketing activity, they say this is business issue that CFOs need to help manage. “We want to understand the customer across business units.  It is a finance objective because finance is responsible for business metrics and there are gaps in business metrics around customer. How much cross sell opportunities is the business as a whole pursuing?”

Chief Profitability Officers?                                               

Jonathan Brynes at the MIT Sloan School confirms this viewpoint is becoming a larger trend when he suggests that CFOs need to take on the function of “Chief Profitability Officers”. With this hat, CFOs, in his view, need to determine which product lines, customers, segments, and channels are the most and the least profitable. Once again, this requires that CFOs tackle their data problem to have relevant, holistic information.

CIOs remain responsible for data delivery

Data DeliveryCFOs believe that CIOs remain responsible for how data is delivered. CFOs, say that they need to lead in creating validated data and reports. Clearly, if data delivery remains a manual process, then the CFO will be severely limited in their ability to adequately support their new and strategic charter. Yet CFOs when asked if they see data as a competitive advantage say that “every CFO would view data done well as a competitive advantage”. Some CFOs even suggest that data is the last competitive advantage. This fits really well with the view of Davenport in “Competing on Analytics”. The question is how soon will CIOs and CFOs work together to get the finance organization out of its mess of manually massaging and consolidating financial and business data.

Related links

Solution Brief: The Intelligent Data Platform

Related Blogs

How CFOs can change the conversation with their CIO?

New type of CFO represents a potent CIO ally

Competing on Analytics

The Business Case for Better Data Connectivity

Is Big Data Destined To Become Small And Vertical?

What is big data and why should your business care?

Twitter: @MylesSuer

 

 

Share
Posted in Business/IT Collaboration, Enterprise Data Management, Governance, Risk and Compliance | Tagged , , , , , | 2 Comments