January 9, 2017 | Written by: Bill Fuessler
CFO’s continue to feel the pressure as their C-suite colleagues look to them to provide business insights. Not just insights based on traditional reporting from internal information. But insights that come from beyond the walls of their respective Finance organizations, including operational data, insights from social media, and data from external sources.
For IBM’s recently released CFO Study – representing our sixth CFO Study since 2003 in which we interviewed nearly 700 CFOs around the world to better understand how they are finding success despite today’s challenges of convergence, competition and commotion – we identified a group of organizations whose Finance functions excelled above and beyond their peers in terms of efficiency and insight. We call them Performance Accelerators. Performance Accelerators are not only superior at doing the basics around finance operations and basic business insights, but take analytics to the next level by incorporating information from outside the organization and applying cognitive and predictive analytics.
In fact, these Performance Accelerators are pivoting their organizations to help uncover new revenue growth opportunities by being more predictive and less reactive. How are they doing this? By applying more advanced analytics to their reporting. For example, 88% of these Finance organizations use predictive analytics for identifying and tracking new revenue growth opportunities while only 25% of their peers do this. They also use predictive analytics to a greater extent for revenue forecasting and risk management – 64% and 107% more than other Finance organizations.
So what does this translate to? We found that Performance Accelerators financially outperformed their peers in terms of revenue growth and profitability. While we certainly cannot conclude that there is always a direct correlation, one can’t help but feel that Performance Accelerators are minimally doing the right things in helping their organizations find new paths to revenue growth and profitability.
And the CFOs with whom we work day in and day out confirm this. They are eliminating internal and external barriers that prevent them from more quickly and efficiently providing incremental value to the business and enabling growth. They are assessing how successful their Finance function is at delivering incremental value to the enterprise. And they are gauging how digitally efficient their Finance operation is able to deliver a robust set of actionable insights.
Let’s look at some real world examples across several industries. In insurance, buying the right product can be intimidating to many people. Some Insurance companies are using cognitive technologies to assist potential clients to better understand their buying choices. By having data that shows what similar people with their profile chose to buy, companies can keep potential customers in their channel and not lose them due to frustration over complexity…thus leading to revenue growth. Another good example is in Banking around event triggered next best actions – essentially looking for a buying moment for a customer. An example we have seen is how a bank will get an alert when a customer puts a large sum of money in a low interest bearing account. This transaction may be an indication that a new “life event” has occurred for this customer and therefore represents an opportunity to offer proactive help it finding the right product for the customer – building goodwill and the ability to upsell and drive more revenue.
Finally, consider the Retail sector. When one thinks about large retail chains and the amount of SKU’s they have multiplied by the number of retail outlets, there are literally hundreds of millions of items to keep track of. Many of these enterprises have very sophisticated forecasting systems that work well when there are no external factors to disrupt them. But, as just one example, the weather can significantly play into the buying patterns of consumers. Add in other external factors, known ironically as headwinds and tailwinds, such as economic trends and performance of suppliers, and forecasting models are instantly adversely impacted and major supply chain issues ensue. By incorporating weather data and insights into their advanced analytics, a retailer is able to better understand how external forces impact results, which leads to better supply chain management, cost efficiency, and ultimately, additional revenue for the company.
What role does the CFO play in these scenarios? Acting much like a ‘Chief Analytics Officer’, the CFO is best positioned to partner with his or her leadership team to provide the direction on what advanced analytics solutions will provide the needed insight while also delivering the expertise on how to shape the metrics and economic forecasting models needed to uncover these new revenue sources.
There has never been a more advantageous time for CFOs to help carve a path through the chaos and help their enterprises pursue profitable growth. Highly performing CFOs are truly helping shape their organizations’ strategies for the future.
Please visit http://www-935.ibm.com/industries/retail/nrf/ for more information on IBM’s presence at NRF.
Learn more about digitally transforming your finance operating model here or contact William (Bill) Fuessler, global leader for IBM’s Finance Consulting Practice.
Bill regularly consults with CFOs on a variety of transformation initiatives and is a recognized expert in how the finance function can be more strategic, address new risks and challenges, and drive enterprise-wide profit improvement.
Note: This blog was previously published in The CEO Forum/Fall 2016