How a CFO Can Assist in a Tech Transformation
Many people are talking about digitisation and tech transformation. The pace of change and the desire to create value-adding technology solutions for customers and employees is high and growing. Are you a CFO who wants to contribute?
Deloitte argues that tech transformation is about becoming a digital company that develops all aspects of its business model, usually with the help of technology. This is a fairly broad view and places some pressure on wide-ranging innovation work within the business - a pressure that many companies and not least their CFOs feel.
In 2018, 18 percent of companies in a survey from McKinsey had transformed their digital teams and IT teams into a unified operational model or developed a fully digital model, and by 2020 that number was a third. If the pace continues, almost half of the companies surveyed will be working in this way by the end of 2022.
Achieving a well-functioning tech transformation at your company is of paramount importance in order to streamline, cut costs, compete, and drive growth.
MIT Sloan Management Review underscores that customer and user experience, operational processes and business models are key areas when it comes to promoting tech transformation.
For a CFO, the transformation is often characterised by the interface with business area managers and the IT department and by providing support in various ways, acting as a guide, sounding board, and helping to build a strong tech organisation.
Historically, business area managers have not always regarded CFOs as an ally when it comes to innovation. Digital transformation and innovation involve a lot about reallocating resources towards the right initiatives that create value, and here the CFO is often a "gatekeeper".
The CFO who wants to be a partner in the transformation should therefore help create a positive feeling around the change work and view innovation as something that is mostly required to strengthen the business.
For instance, a CFO and experts from the finance department could then instead get involved earlier in the process and support initiatives with data. Both for decision-making and for follow-up and evaluation. The conditions for making the right priorities and validating progress then increase significantly, and joint assessments are simplified.
5 Concrete Ways for a CFO to Facilitate a Tech Transformation
According to McKinsey, a CFO can facilitate tech transformation in five concrete ways:
1. Incorporate Innovation Goals into the Company's Growth Plans
A CFO often plays a central role in linking strategy to reality. The goals and key performance indicators set in relation to growth in the planning should be influenced by the CFO by allowing business area managers room for innovation projects and providing them with a framework to work within.
2. Identify and Validate Unproven Assumptions About an Innovation Project
Make room for (a reasonable number of) pilot projects that can be linked to the digital transformation or to innovation in planning and budgeting work. A hypothesis needs to be tested against reality in order to be measurable and followed up.
Instead of focusing primarily on costs; create mechanisms that support the development of innovation projects (for example, by producing data) and provide support for the organisational change that the IT department may need to undergo. That being said, not all ideas are good and not all change is beneficial.
3. Quicker Budget Process
Often, the reality (and external environment) within digital transformation and innovation is faster than what the budget accounts for. Review how this can be resolved and let it be a way for finance and business to meet. Allocate resources to initiatives that are heading in the right direction and continually have a dialogue about goal achievement.
4. Establish Measures Specific to Innovation Projects
How progress is measured and reported can be a source of frustration in the relationship between the CFO and managers within the transformation work, where managers' often detailed multi-year revenue forecasts do not fit the organisation's normal forecast processes.
To counteract this, a CFO can set more specific performance indicators and reporting processes for projects alongside more traditional measures such as ROI.
Having few, important, shared, and long-term goals is crucial when reporting on innovation projects.
5. Enhance Competence and Empower the Finance Department
Rotate staff in the finance department so they can understand the business and operations better. This creates contact points towards different business areas and technology, and understanding of needs and value linked to the tech transformation is heightened.
It may also be possible to engage employees by giving bonuses to those who come up with ideas in line with the change one wants to achieve. This cultivates a culture that encourages the willingness to contribute and raise ideas from the daily life that employees see differently from the boss.
10-minute video demo of Hypergenes solution: