As business within the San Francisco Bay Area and Silicon Valley become more global, regulated, competitive and digital, Chief Financial Officers (CFOs) can expect their role to continue to evolve. Many CFOs are still working towards understanding how to harness digital technologies to run and scale their organizations more effectively, control costs, improve cash flow and increase profitability.
Looking ahead, what will the CFO role of 2020 look like, and what different skills and traits might finance chiefs need to have in their skillset in order to excel?
First, CFOs will need to be digitally sophisticated and tech-savvy in order to leverage technological innovations — from the cloud to big data, data analytics, and visualization — to advance their finance strategy and the financial strategy’s ability to position the business for long-term success.
Internet entrepreneur and Silicon Valley venture capitalist Mark Andreesen famously quipped, “Software is eating the world.” Similarly, digital technology is fundamentally changing the way business is done and the way it provides value. Five years from now, a world-class finance organization may be defined by how well it uses innovative business tools and applications that leverage technologies like mobility, software-as-a-service (SaaS), data visualization, predictive and cognitive analytics, and even social media metrics. Understanding these business technologies will help identify and improve cost and cash flow inefficiencies, emerging business opportunities and sound the alarm when their organization is at risk. Through these expert financial and operational insights, an experienced CFO will help the company stop the bleeding, get back on track and become financially sound and profitable.
For example, with predictive analytics, a company’s CFO can forecast business results by modeling probable outcomes based on real-time inputs and variables rather than point-in-time assumptions of what the key drivers are. That means CFOs can produce revenue predictions based on customer-experience profiles and actual current demand instead of previous results and prior-year trends, as most companies still do today. Those are the types of business insights that would be of significant value to any company.
Already CFOs have troves of data at their fingertips to help address these and other complex questions. Five years from now, they’ll have even more — and better — ways to collect and store it. The challenge for CFOs is to transform that data into valuable and actionable strategic insights. To do so, CFOs will have to be more strategic in thinking about how they can help drive their organization’s own transformation to a more digitally oriented world. That includes developing the capital capacity and allocation plan to achieve digital strategic objectives, and identifying the metrics to measure the success of digital investments. That will likely require more focus on their roles as catalysts, as well as strategists.
CFOs can lead the way by first addressing several critical items. One is mapping out the issues and questions that CEOs and business owners of small, middle-market and large companies want technology and data analytics to help answer. Another is figuring out how to collect and house the data in a manner that is easily accessible. And, CEOs and business owners should refocus their financial talent agenda to bring into the organization CFOs who have the necessary skill sets to retrieve the data, interpret it, and use tools such as data visualization to transform the insights into a story that’s strategic and detailed, yet easily understood.
In 2020, a big differentiator separating highly successful CFOs from others will likely be the ability to operationalize and execute company strategy based on data-driven insights. Many CEOs and boards already expect the CFO to expand his or her role to that of strategic advisor on growing the organization, as well as serving as the steward of the bottom line. Come 2020, as that expectation increases, CFOs may need to bring a much more multidisciplinary skill set to the job as well as broader career experiences, from working overseas to holding positions in sales and marketing, and even running a business unit.
From a career development standpoint, that means people with primarily finance and accounting backgrounds or those coming directly from the controller’s office will need to acquire experiences and skills outside of finance in order to qualify for the CFO’s changing role.
While 2020 may seem a bit far off, the reality is that it’s less than 10 quarters away. It’s time to start preparing.