Finance Executive Insight

Management Issue
February 3, 2017

The Digitally Savvy CFO

By Nilly Essaides, Tom Willman and Allan Frank

Executive Summary
Digitally savvy CFOs know how to steer the finance function to operate effectively in the digital world. They carefully
select and adopt new technologies to revamp processes to better serve internal customers. They digitally transform
the finance function to help the company identify fresh sources of revenue, improve cash flow, reduce cost and
capitalize on new opportunities. CFOs and other senior finance executives who wish to become digitally savvy must:
1. Understand how digital transformation will affect their company and consequently the finance function.
2. Adapt to the changes reshaping their businesses and adopt new technologies to ready the finance organization to
support the company’s digital transformation.
3. Close the gap between finance’s existing capabilities and those necessary to thrive in the digital age.

The imperative for CFOs today is to define their digital strategy and align it with that of the enterprise and develop a
clear roadmap for change.

Understanding Digital Transformation

CFOs today often hear about the need to prepare for digital transformation. However, there
is a lack of clarity about what that means in practical terms.1 After all, finance has been using
technology for years to improve the way it serves its customers. What’s different now?
1. Digital transformation creates new ways of doing things. In the past, technology-
enabled change was predominately used to replace manual processes and make them
faster and more efficient. While the push to reduce cost and increase efficiency is
ongoing, as we move into the digital era, technologies like predictive analytics, social
media and artificial intelligence (AI) are not only changing the speed and efficiency of
processes, but creating entirely new ways of doing things. For example, AI has made
it possible for companies to predict relevant events using data about the intensity of
social media conversations around the world. The intensity is measured by the number
of posts based on predetermined keywords.
2. Digital transformation is customer-centric. Past technology-driven transformations
automated processes within and between enterprises. In contrast, digital
transformation uses technology to serve internal customers better, for example by
leveraging big data and predictive analytics to provide better, faster insight.
3. Digital transformation increases the velocity of change. Not only have the
speed and nature of technological change accelerated, with new technologies and
combinations of technologies launched at a fast pace, but the speed of adoption has
also changed dramatically. Companies pilot and adopt new tools in a matter of weeks
and months, not years.

1
The Hackett Group defines finance digital transformation as changing the way the function delivers services,
engages with stakeholders and executes work, through the pervasive use of technology, improving finance
performance and customer experiences.

© 2017 The Hackett Group, Inc.; All Rights Reserved. | 3000147 Finance Executive Insight I The Hackett Group I 1
 A Two-Pronged Approach to Change
CFOs have a two-part mandate as they lead their teams in the digital era. First, they
must both adapt to and adopt digital tools and thinking. The “adapt” side is where
finance adjusts its practices, inventing new ones where necessary to accommodate a
more digital business and accelerate its decision-making and strategic success. “Adopt”
means identifying where it makes sense to embrace new technologies that change the
way finance delivers its portfolio of services. This dual approach is not just for CFOs.
It should permeate the actions of all finance team members, whether they are in the
corporate center, business units or a global business services (GBS)/shared services unit.

Adapting to digital business

A digitally savvy CFO appreciates how technology is changing the very nature of
the business and its metrics. For example, many software companies have shifted
from delivering shrink-wrapped CDs to selling cloud-based subscriptions. This has big
implications for accounting, which in turn affects finance processes. These changes as
well as the effect of digitalization on performance and value must be communicated
to stakeholders and incorporated into earnings projections. It is imperative for CFOs
to communicate externally as well, through a choice of metrics that help analysts and
investors understand business performance.

In addition, finance must be able to assess the value of digital assets, goods and
services. This is far different from valuing physical inventory, patents or reputation. In
many cases, digital assets are fast becoming more valuable than physical assets, or even
the primary ones for companies like Uber or Facebook. This valuation is also important in
the case of potential acquisitions (an example is the acquisition by Walmart – a primarily
brick-and-mortar retailer – of Jet.com, a digital business). Finance needs to figure out
how to assign a value to a social media presence, especially in businesses where an
online presence is essential. At the same time, it must take into account a vast number
of new, digital-related risks, such as cyberattacks and loss of digital assets to piracy.

Adopting digital tools

It is imperative for CFOs to prioritize the technologies that will help finance deliver
value to internal customers. For example, older technologies reduced the time spent
by finance teams on low-value work and repetitive tasks like account reconciliation or
cash application. Newer technologies are designed to make finance professionals more
productive and effective in knowledge-based work like advanced analytics and business
partnering. CFOs who embrace digitalization can steer their teams toward the provision
of deeper, more nuanced insight to business partners. That in turn can be applied to
create revenue, reduce costs and assess investment opportunities. Below are examples
of real-world applications of a variety of digital technologies.
• The retail organization of a telecom company, faced with inventory management
problems, wanted finance’s help figuring out what to keep in inventory. Finance helped
it realize the question was incorrect, or at least incomplete. Instead, the retail group
needed a better understanding of customer preferences at the local level. Using big
data and advanced analytics tools, finance helped the business unit understand local
demand and decide what items to keep in stock. By optimizing inventory, the business
improved sales and reduced cost.
• A medical device company decided to overhaul its order entry and back-office
supply chain by using robotics process automation (RPA). The company needed a
comprehensive automation platform that was flexible, accurate and provided a strict
control environment. It also had to be easily and quickly deployed. Within six months,
the company had 14 “bots” in operation, completely changing the targeted processes
and significantly reducing headcount.
• A U.K.-based retailer used a cloud planning tool to create a collaborative environment
with self-service capabilities. The shift increased data integrity as well, by permitting
business units to contribute directly to the forecasting and budgeting process instead

© 2017 The Hackett Group, Inc.; All Rights Reserved. | 3000147 Finance Executive Insight I The Hackett Group I 2
 of sending multiple iterations of emails and spreadsheets, as was done previously.
While the previous on-premises solution allowed some remote participation, adding
users was expensive and the interface was cumbersome. Today, BU-level finance staff
can run their own analyses, reducing the time it takes to make decisions. They are also
able to ask more sophisticated questions, which yields better insight.
• To improve its forecasting acumen, a global consumer goods company uses a third-
party provider’s predictions about the potential for disruptive events (e.g., a coup, a
strike, a new election) in various countries. Using a set of predefined keywords, the
provider applies AI to collect social media posts from around the world and analyze
their frequency and the intensity of conversations.

The Digital CFO’s Mandate

The number-one fiduciary responsibility of a CFO is to deliver value to shareholders.
And, since digitalization and new technologies are rapidly altering the way organizations
deliver value, CFOs must become the digital leaders of the finance function. According
to results from The Hackett Group’s 2017 Key Issues study, digital transformation is
expected to have a dramatic impact on the finance organization’s performance and
service delivery model (Fig. 1).

FIG. 1 Impact of digital transformation on the finance organization

Percentage of finance organizations agreeing with statement

Will offer step-change

performance improvement
39% 58% 97%
Will fundamentally change how
services are delivered over 38% 53% 91%
next 3-5 years

Will fundamentally change talent and

leadership needs of the business
30% 56% 86%

Finance has or will establish

new “digital” roles
13% 58% 71%

Finance has developed and is

executing a digital transformation strategy
7% 37% 44%

Finance digital transformation strategy is

aligned with or integral to enterprise’s 8% 35% 43%
digital transformation strategy

Finance has resources and competencies

to execute digital transformation strategy
6% 29% 35%

STRONGLY AGREE AGREE

Source: Key Issues Study, The Hackett Group, 2017

However, there is a big gap between the expected effects of digital transformation and
the capabilities of the finance function today (Fig. 2).

FIG. 2 Presence of digital transformation strategy versus ability to implement

84% 89%
of study respondents report that of respondents say that digital
digital transformation will transformation will fundamentally
fundamentally change the way change the talent and leadership
finance services are delivered needs of their function . . .
over the next 3-5 years . . .
. . . but only32% 25%
. . . but only
have developed a have the needed
strategy for resources and
getting there competencies
in place today

Source: Key Issues Study, The Hackett Group, 2017

© 2017 The Hackett Group, Inc.; All Rights Reserved. | 3000147 Finance Executive Insight I The Hackett Group I 3
 Consequently, digitally savvy CFOs must take steps to close the gap between the likely
impact of digital transformation and the function’s execution capacity. They must be
stewards of the effort to bring new technologies and a digital vision to the team, so that
the enterprise can benefit from the promise of technologically and innovation-enabled
change like big data, advanced analytics and AI, among others. The following actions are
necessary:
• Build a customer-centric digital process: Finance must focus on serving internal
customers more efficiently and effectively. This may involve streamlining repetitive
processes by moving them to a GBS organization or using tools like RPA to automate
parts of the process that are rule-based and can be handed off to algorithm-driven
technologies.
• Build a digital architecture: Finance should create a connected and agile technology
platform that integrates multiple applications (e.g., core ERP, planning and forecasting,
reporting and analysis, BI and other best-of-breed applications) to connect vendors/
suppliers, end customers and internal customers. The platform must be able to leverage
a variety of internal, external, structured and unstructured data.
• Develop digital competency through Centers of Excellence. CFOs should establish
digital COEs where technologies like RPA can be tested to discover applications
with strong business cases for deployment in the finance function. The COEs act as
virtual “sandboxes” in which new technologies can be tried out on a small scale. If a
business application is identified as one that can help the organization move toward
a digital future, the center is responsible for developing its implementation roadmap,
rules and governance structure to see it to fruition.
• Create digital value through data governance: CFOs should spearhead data
governance efforts to make sure enterprise data is accurate and ready to be used.
Master data management (MDM), which defines the way data is stored and managed,
is an increasingly important area of focus. Without it, analytics applications cannot
run effectively. In addition, the digital governance policy must cover how finance is to
handle unstructured data, keep data secure, utilize predictive analytics and manage
real-time data from vendors and suppliers.
• Develop data “smarts”: Data is of no value unless it’s used to drive action. Going
digital means merging data with sophisticated analytics that provide insight into what
is going to happen and what to do about it, rather than only reporting on what already
occurred. Finance must deliver the right information at the right time to the right
“owners” so the business can take action.
• Develop a digital workforce: Finally, digitally savvy CFOs must come up with a talent
development strategy designed to support their emerging approach. A full 80% of
participants in our Key Issues Study believe that digitalization will change the skills and
leadership approach required to manage their function. But the study also found that
very few finance organizations plan major updates to talent management programs
and practices this year (Fig. 3). Finance will have to take bolder steps if it is to retrain
and reshape its workforce to become more strategic in nature, collaborate with the
business and provide higher-level analytics support.

© 2017 The Hackett Group, Inc.; All Rights Reserved. | 3000147 Finance Executive Insight I The Hackett Group I 4
 FIG. 3 Top five capabilities that finance must develop to help companies achieve their
goals in 2017
Percentage of companies ranking issue as of "high" or "critical" importance

Develop better partnerships 21% 56% 77%

with the business

Improve finance’s analytical, modeling

and reporting capabilities
21% 55% 76%

Redeploy capacity to more

value-creating activities
15% 58% 73%

Expand finance work executed in

GBS/shared services
29% 39% 68%

Align talent and skills with changing

finance needs
25% 41% 66%

CRITICAL HIGH
Source: Key Issues Study, The Hackett Group, 2017

It is the CFO’s responsibility to prepare the finance organization to succeed in digital

business. The toolbox of new finance skills includes:
• Intellectual curiosity: As more finance professionals are tasked with delivering
faster insight and building sophisticated models to help drive business decisions,
analytics skills will be in high demand. Staff not only need to know how to model, but
how to ask the right “why” questions, detect patterns in data, find cause-and-effect
relationships and challenge the status quo.
• Technological savvy: Finance professionals don’t need to become data scientists or
programmers, but they do need to be familiar with new technologies so they can have
intelligent conversations with peers in the IT organization and quickly adopt new tools
that do not require IT intervention.
• Business acumen: Staff assigned to partner with the business (in some cases
embedded in business units) need to have a thorough understanding of the company,
its operations, its value drivers and competitive environment.
• Storytelling skills: Data is the mechanism that makes digital business possible, but
the delivery mechanism is a “story.” Even the best pattern recognition software won’t
change the mind of an executive if the results are not expressed in the form of a story,
a business problem or solution. The more data CFOs have, the more they need to be
able to present it in engaging and visual ways.

Conclusion and Recommendations

To be successful in their digital mission, CFOs must define a roadmap for change and
align it with enterprise-level digital transformation initiatives. Any discrepancies between
the two could lead to the creation of technology islands and put finance at odds with
corporate objectives. The strategy needs to support the organization’s overall approach
to leveraging digital technologies to transform its business model and relationship with
customers. CFOs who have the vision and wherewithal to reconfigure the finance
organization will see their careers (as well as company performance) soar.

© 2017 The Hackett Group, Inc.; All Rights Reserved. | 3000147 Finance Executive Insight I The Hackett Group I 5
 The two most urgent and decisive steps for the digitally savvy CFO are as follows:
1. Define a digital roadmap and vision: In a typical roadmap, the CFO assesses the
baseline, defines the end goal and plots the steps required to get from Point A to
Point B. But today, after Point B there is a Point C, a Point D, and so on. In addition to
its inherent complexity, digital transformation is happening at an accelerated pace.
New technologies keep emerging, making it next to impossible to predict what will be
possible tomorrow. A successful digital strategy incorporates these characteristics:
• Agility: Just as the company needs to be able to shift its own strategy quickly in
response to disruptive technology and innovation, finance must be agile enough to
rapidly alter its own strategy and technology to support management and business
leaders as they execute changes in their approaches.
• Prioritization: Finance should assess its existing delivery model and decide how
it can make itself more agile, starting with projects that are relatively simple but
will deliver a visible return quickly. Only then should it move on to more complex
areas. For example, some processes, such as T&E and accounts payable, can be
automated and moved into a GBS environment. RPA can be applied to invoice
matching to reduce demand on resources, who are then required to deal only with
exceptions. Other processes may need a redesign before they can be digitized and
moved to the cloud or a big-data environment.
• Continuous improvement: Finance must embrace a culture of continuous
improvement and constant experimentation. This demands a willingness to
fail and try again, through the use of small pilot projects to test new concepts
and adjusting plans and expectations accordingly. In the context of digital
business, this may mean highly targeted pilots of big-data projects or limited
implementations of RPA to test the waters.
2. Align with organizational strategy: At the heart of digital transformation – and
the driving factor behind companies’ overall strategies – is a focus on customer
experience. Thus the second imperative for digitally savvy CFOs is to align their
finance-function strategy with that of the company. For example, if the business
model is shifting to the use of social media to gauge product demand, finance needs
to develop the capacity to pull unstructured data into its analytics platform so it can
interpret and put metrics around performance. Also:
• Match finance technology to business objectives: Digital projects need to be
grounded in business strategy and solve actual business problems. On their own,
big data, predictive analytics or cloud applications are not valuable. The outcome
needs to help the business make a decision or drive an action that ends up affecting
the customer.
• Develop and acquire analytics capability: According to The Hackett Group’s 2017
Key Issues Study, the two biggest enterprise “asks” from finance this year are to
help the business formulate strategy and provide it with better analytics. To align
finance digital strategy with business requirements, CFOs need to bolster their
analytics engines (for example by establishing specialized Centers of Excellence),
clean up their data, and acquire new data warehousing tools that can accommodate
big data and support predictive analytics.

Finally, as strategy is developed and aligned, CFOs must stay vigilant regarding new
digital technologies, continuously educating themselves and encouraging their staff to
do the same. They must keep abreast of what other companies are doing, learning about
potential use cases that may hold promise for their own activities and educating other
company leaders on these topics. Most important, they must make it clear that they are
fully committed to digital transformation by assigning these projects the highest priority
and rewarding staff for implementing new technologies and mastering new skills.

© 2017 The Hackett Group, Inc.; All Rights Reserved. | 3000147 Finance Executive Insight I The Hackett Group I 6
 The Hackett Group (NASDAQ: HCKT) is
an intellectual property-based strategic
Related Hackett Research consultancy and leading enterprise
benchmarking and best practices
Key Issues Study 2017: Finance’s Top Four Strategic Priorities in the Coming Year implementation firm to global companies.
(January 2017) Services include business transformation,
enterprise performance management,
Profile: Finance Agility Leaders (August 2016) working capital management, and global
business services. The Hackett Group also
Designing Service Delivery in the Digital Era (October 2016) provides dedicated expertise in business
strategy, operations, finance, human
capital management, strategic sourcing,
About the Advisors procurement and information technology,
including its award-winning Oracle EPM and
Nilly Essaides SAP practices.
Senior Research Director
The Hackett Group has completed more than
Ms. Essaides has over 25 years of experience researching, writing, 11,000 benchmarking studies with major
and speaking about finance and treasury issues, with a focus on the corporations and government agencies,
way finance adds value to the enterprise through excellence in financial including 93% of the Dow Jones Industrials,
management and planning processes. Previously, she worked at the 86% of the Fortune 100, 87% of the DAX 30
Association for Financial Professionals, where she led the FP&A (financial and 52% of the FTSE 100. These studies
planning and analysis) practice. Ms. Essaides, a prolific blogger with drive its Best Practice Intelligence Center™,
thousands of LinkedIn followers, writes for external publications such as Digitalist which includes the firm’s benchmarking
Magazine. In addition, she co-authored a book about the internal transfer of best metrics, best practices repository, and best
practices, If Only We Knew What We Know (Simon & Schuster, 1998). practice configuration guides and process
flows. It is this intellectual capital that enables
The Hackett Group’s clients and partners to
Tom Willman achieve world-class performance.
Associate Principal and Global Practice Leader, Finance Executive Advisory Program

Mr. Willman has nearly 20 years of experience helping CFOs and other
senior finance executives transform their organizations by deploying more
efficient and effective processes, Service Delivery Models and enabling
technologies. Areas of expertise include planning and forecasting, close
and consolidations, management reporting and analysis, and the design Email: info@thehackettgroup.com
and implementation of shared services organizations. Previously, he spent www.thehackettgroup.com
10 years with IBM Global Business Services and PricewaterhouseCoopers, consulting
in their Finance Transformation practices, and several years in the Audit and Assurance Atlanta +1 770 225 3600
practice at Coopers & Lybrand. London +44 20 7398 9100
Sydney +61 2 9299 8830

Allan Frank Atlanta, Chicago, Frankfurt, Hyderabad,

Chief Digital Officer and Co-founder London, Miami, Montevideo, New York,
Paris, Philadelphia, San Francisco, Sydney,
Mr. Frank brings 40 years of technology and business leadership, Vancouver
knowledge and experience to his role at The Hackett Group. Previously,
he was the first Chief Technology Officer for the City of Philadelphia;
co-founder, President - Management Consulting and CTO at Return
on Intelligence, Inc., a global IT services company; Partner-in-Charge,
Enabling Technologies Consulting and CTO at KPMG Peat Marwick;
and President and CTO of Answerthink, Inc., later renamed The Hackett Group. He is a
recognized expert in the areas of information delivery, decision support and knowledge
management. His work in knowledge management has been the subject of case studies
by Harvard Business School.

This publication has been prepared for general guidance on the matters addressed herein. It does not constitute professional advice.
You should not act upon the information contained in this publication without obtaining specific professional advice.

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