CFO challenge: Fix what is there or build something new?
Today’s CFOs face difficult challenges and key questions, especially when they first arrive into the job. They will be keen to make a strong impression and hit the ground running so they will likely begin by assessing the current state of affairs at a multi-national.
Once they develop a broad understanding of the business, then they will attempt to become more granular and detailed. At this point, they will begin to have detailed discussions with key business unit leaders along with C-Suite executives like the CEO and CIO.
They will be keen to learn what level of investment is available to them in order to make the kind of significant changes that can result in either new or improved revenue streams for the business. At some point in this process, they are likely to come to a conclusion around what needs to be done- one key question they will face will be the decision to fix or improve what already exists or rip up the playbook and start again, by going out and building something completely new.
In this article, we will look at some of the factors that will influence this decision and discuss some possible approaches available to a CFO who is looking to get this crucial decision right the first time around.
Evaluate what is there
CFOs are not reckless by nature and the role has traditionally been occupied by a somewhat prudent individual who tends to secure the role as a result of a background that includes impressive risk management decisions. This person is unlikely to move swiftly into a huge decision without first evaluating what is currently at their disposal within a multinational.
It may turn out to be the case that a major revolution in terms of investment, technology or global approach is not what is needed. Instead, it could be more a case of evolution in terms of tweaking and improving what is already there, leveraging existing technology people and processes and stretching things so that they go a little further and generate a little more revenue.
A CFO will start this evaluation by gathering as much data as possible. Things they will likely look at include:
The CFO will analyze all of this information In order to grasp where the company is currently at in terms of its development and market penetration , and also where it wants to be in terms of future growth, revenue streams, brand and innovation. With all of this information in place, the CFO may well find themselves in a position to state clearly and categorically that the tools, finances, research, people and technology are all in place to drive growth and meet strategic goals and mandates. If this is the case, the CFO will work with other C-Suite executives to develop a strategy and action plan that can deliver on company goals using existing resources.
Alternatively, the CFO will discover that the multinational is not best positioned to achieve its targets with what currently exists. Then the strategic plan changes and becomes about what needs to be done in order to change this position.
Bridging the gap
If the evaluation carried out reveals significant gaps in people, process, finance or technology-then the CFO is faced with a different kind of challenge, the challenge of building something new and convincing the company as a whole that this is the right thing to do. Inevitably, more risk will be associated with this approach as building something new requires major investment as well as buy-in and commitment from all stakeholders across the business.
This does not mean that it is the wrong thing to do, in fact, being afraid to make this bold decision can turn out to be even more costly in the long run. In terms of business growth and revenue generation, stagnation at a multinational can be just as bad as going backwards. Forward momentum needs to be achieved, maintained in the short-term and sustained in the long term. Strategy, finances and commitment are needed to make this happen.
In the modern digital economy, it is almost inevitable that bridging the gap will require technology innovation supported by the necessary investment to make this a reality. The CFO will recommend to the leadership team that such an investment is important and necessary. They will be able to point out the advantages of this approach as well as how close competitors have done something similar with positive results.
The overall goal maybe to allocate significant financial investment towards something like a digital transformation across several key business units and drivers within the multinational. The result of this is that business-critical units become equipped with the necessary technology to do their jobs and deliver products to the market quicker and more efficiently. This can be a crucial step in meeting those strategic goals.
Build for growth
All of this points to a growing trend within multinational companies across the globe i.e. CFOs becoming strategic with technology and prioritizing technology investment in all strategies designed to deliver long-term, sustainable growth. Previously, this may have been a case of a CFO stepping out of their comfort zone but these days it is becoming a pre-requisite that any CFO’s comfort zone involves awareness around technology innovation and digital disruption.
Building for growth simply cannot happen if the finance department and IT department operate as silos and view each other as independent forces within an organization. Such methodology and thinking belongs to the past as many of the key successes visible in the marketplace today have at their core, a strong alignment and strategic synergy between finance and IT.
The CFO knows that technology is vital and that their support will be required in the form of a bold investment if that is what is needed. The head of IT or the company CIO similarly knows that they need to have a strong relationship with the CFO if they are to deliver on their targets. A partnership and strong alliance between these key company people may not have been so prevalent in the past, but today it is commonplace.
If the decision is made to build something new, the CFO will work with technology specialists within the organization to establish what level of funding is needed and what kind of technology advancement such funding will result in. If the answers they receive indicate that the technology aligns positively with the current IT strategy, business growth objectives and general market trends -then they are likely to release investment to build something new with an aim of achieving long term growth and ROI value.
Whether a CFO decides to fix what is already there or build something entirely new, technology will play a significant role in either way. It is likely that either a complete digital transformation will take place, or a lesser, more staggered form of digital upgrade will happen. Innovative digital tools exist today to accommodate either decision -a selection of individual tools that increase efficiency while adding a bit more flexibility to existing software might be the way forward and the CFO can look to make quick, short-term investments here.
If a major overhaul is needed, then the CFO will look at investing in a digital platform, one that integrates seamlessly with several other pieces of software within the ecosystem of the multinational. Dated or legacy software can then be phased out over time or removed immediately in favor of the more innovative digital platform. There is more work required here and more investment, but it may prove to be the smarter decision in the long run. It all depends on what the research and analysis carried out by the CFO reveals to be the best course of action.
One way or another, innovative digital tools will be part of the CFO strategy and the company plan to deliver on growth objectives. The sooner the CFO is ready to make a call on whether to build something new or improve what already exists, the sooner a coherent road map can be developed for this plan. Then the process can move forward from developing a strategy, towards executing it.
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