In my last posting, I highlighted an insight from IBM’s latest CFO study, “Pushing the Frontiers,” where we surveyed more than 576 CFOs worldwide. A number of important trends emerged, particularly as we compared their priorities today to those they cited in 2005. In the same survey, we identified a group of CFOs, who we call the “Performance Accelerators”- these are the CFO’s who generate 70 percent more revenue and profit over the past three years than their peers. Also 60 percent are more likely to use data analytics to identify new product opportunity. They also shared how they achieved this – by implementing enterprise-wide information standards, driving the integration of information across the enterprise and generating deep business insight.
Performance Accelerators are also better at managing risk and spotting new revenue sources. We all know about risk – it’s in the CFO’s DNA…but generating revenue? This may not be something that we think as being in the CFO’s primary domain.
To generate deep business insights, there are three key components needed – a platform, talent and capability (which includes process, and policy). Many Performance Accelerator CFO’s have already put common planning platforms in place. They are far more likely to create a robust planning and forecasting process, and develop the analytical skills in their teams to truly partner with other areas of the business. Performance Accelerators combine internal data such as income, expense, balance sheet, data) and external data such as economic indicators, liquidity factors, FX, inflation data to produce these insights.
The result – Performance Accelerators are more effective at conducting various forms of analysis. They’re better at tracking and forecasting supply chain financial data, for example; ability to plan and predict resource capacity; and the ability to conduct industry and competitor analysis. Strong emphasis on analytics along with better analytical talent to partner with the business helps Performance Accelerators excel at scenario planning. They are good at working with colleagues to create timely, reliable forecasts to steer the business and are skilled at evaluating proposals from other parts of the organization. And, they are effective at assessing market trends and using predictive modeling to determine the best course of action for the enterprise.
I am sharing here 6 things for aspiring Performance Accelerator CFO’s to do:
- Data is a natural resource – use the financial and operational data you’ve integrated to unearth new sources of value. Evaluate the marketplace and incorporate information from social media sources to identify new revenue streams and opportunities for business model innovation.
- Hit the Speed Dial – it is all about speed – the faster you analyze the information you collect; the faster decisions you make.
- Merge to Surge – integrate financial and operational data to get a deeper understanding of complex questions such as how much does it costs to serve individual customers, who are the most profitable customers and what else can you offer them to generate sustainable increases in profit.
- Consolidate and conquer – model the strategic and financial implications of any opportunities, select the best options (bearing the risks in mind when you evaluate them) and develop a roadmap. Then align your capital and other resources accordingly, and find partners to help you, where necessary or appropriate.
- Read the Signs – use advanced analytical techniques to predict future trends and prescribe the best course of action. It’s impossible to be sure what tomorrow will bring, but analyzing all the variables provides a much clearer picture of the range of future possibilities – and your resulting options.
- Encourage analytical acumen – foster the skills required to analyze integrated cross-functional financial and non-financial data. Some of these skills may sit outside the finance department – or, indeed, your entire enterprise – so you may need to look further afield.
Performance Accelerators therefore spend significantly more time than their peers on a wide range of activities, particularly forging an infrastructure to capitalize on big data, handling acquisitions and divestitures and developing new business models. They are more willing to enter new arenas, and more competent when they do so. They are effective at demand planning and forecasting product/service development. And, also get actively involved in developing new products and services. Performance Accelerators use their skills with big data to help their enterprises expand into new product areas. And almost half of Performance Accelerators told us that they are using a risk management system that is driven by an automated or analytic tool, and use analytic to track revenue growth and opportunity.
As a CFO are you using analytical techniques to predict future trends? Are you thinking of the different models that can help you focus on mergers and acquisitions, new business growth and new product opportunity? I look forward to your comments and thoughts.
Check out the detailed findings and how you stack up to Performance Accelerators – http://www-935.ibm.com/services/us/en/c-suite/csuitestudy2013/cfo-infographic.html – and test how well you are tracking with the latest CFO imperatives.