As the tsunami of “digital transformation” crashes over the world how does a CFO harness and channel it into the boardroom? How does a CFO develop a digital mindset?
When I was a young man, I read books borrowed from the library. I took photos 24 or 36 at a time and posted prints to my family and friends in an envelope with a stamp. I referred to the trusty but dated Encyclopaedia Britannica when I needed answers to the unknown. Nowadays Amazon, Facebook and Google instantly service all these needs, and more, in the palm of my hand without any significant demands on my time and very modest demands on my funds. They do it so successfully and for so many people that they have become some of the most profitable IT businesses in the world. Indeed they have caused significant disruption too, and in some cases the demise of long standing but less innovative household names. And this all from people attuned to the digital mindset over the last 15 years.
First I’d like to clear up a deceptively common and dangerous definition. In my view, digital transformation is not about marketing over the internet, e-commerce websites, inbound and outbound social media engagement, corporate online reputation and the like. That is just backwash and I think companies that limit their transformation to those shallow waters will quickly get left behind and struggle to catch up or quite possibly become irrelevant.
For me, digital transformation means developing new innovative revenue sources from re-architecting, reconfiguring and recombining what the business currently does. Equally importantly, it includes strategies and methods to protect the current revenue streams from disruptive, digital marauders. And let’s be real, almost everything is being digitised.
Typically digital transformation involves turning a product-focussed outcome to a service-focussed one; evolving the revenue model from one off to usage based; developing recurrence and identifying stickiness; restructuring the sales, service and support layers to underpin the go-to-market strategy; and introducing innovation to identify and attract new clients into the fold.
Digital transformation needs to both save the business and grow it.
Not much to ask really.
Typically these may be seen as the remit of marketing or product and operations executives, but surely there are critical roles that the CFO can play in this business transformation? Absolutely.
Here are my top 10 steps for a CFO seeking to catch the wave of the digital mindset.
- Be fanatical about clean data through quality capture and review processes.
- Turn data into prediction by putting trustworthy data and advanced tools into the hands of your peers.
- Model and forecast across a broad spectrum of scenarios.
- Close periods faster to help the executive make more timely decisions.
- Apply extra rigour and discipline to new product line sales forecasts which have no historical basis supporting them.
- Forensically assess the impact of proposed product innovations on the economic imperatives and processes – and scrutinise whether to offer flavours other than “vanilla”.
- Identify hidden digital (data) assets, and how they can be mined and leveraged.
- Interpret the levers of the business in new and innovative ways.
- Identify ways to realign and recombine operations in pursuit of new revenue or savings.
- Be alert to evolution within your industry that could be an emerging digital threat.
Over the coming months, I’ll be looking at each of these steps in more detail.
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