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A strategic CFO drives finance technologies, forges alliances

Technology disruptions and shifting business landscapes are creating new opportunities for the CFO. One expert shares insight on how to stake your claim.

CFOs today don't need to take a page from a Game of Thrones playbook, but many would do well to cast off the "bean counter" persona for a sweeping view of the enterprise domain.  

Indeed, the time has come for CFOs to claim their rightful place as full-fledged business partners, many experts say. The finance technology landscape is rife with disruption, and the opportunities to lead abound. But this expanded and strategic CFO role won't come automatically. CFOs must take the initiative.

In this Q&A, Jack E. Gold, founder of the IT strategy research firm J. Gold Associates, weighs in on how to do just that. Gold shares advice on how CFOs can help drive enterprise technology, why it's important to make friends with others in the c-suite and why learning about emerging financial technology is so important.

Blockchain technology -- and its power to affect, among other things, the finance office -- is getting a lot of attention. That's just one example of a technology trend with the power to disrupt the finance office. Should companies and their CFOs take an early-adopter approach to get ahead of the competition?

Jack Gold, founder of J. Gold AssociatesJack Gold

Jack Gold: Concentrating on the technology usually means that companies are being reactive -- "So blockchain is the hot new payment method, let's go figure out how we make blockchain work," right? "Big data is the buzzword, let's figure out something about big data that we can use." What I suggest is taking a proactive approach focused on what's going to be important [in terms of business strategy], build a strategy around that and then back fill with the technology.

You can be driven by the technology, or you can drive the technology, and in the past most companies have been driven by technology -- meaning they're reacting. Obviously you can't shut down the company, you have to continue working, but in some cases, you will focus on a three-year-out strategy and find that the technology you need to make it happen may not be there yet.

What's an example of that?

Gold: Let's say you're running on SAP, and you are running your company based on the technologies they make available to you. So they'll come out with an HR package, they'll come out with ERP package, they'll come up with a payments package, they'll come out with whatever it is they come out with. And being a good SAP, Oracle, IBM, whatever-you-are shop, you will then say, "Aha, this can help me in this area; I will buy it from you and put it into place." Some of these big companies are doing this, as well as these big vendors -- but what I'm suggesting is that you need to sit down today and start formulating a strategy of where you want to be in three years. And if SAP, Microsoft, Oracle, whoever doesn't have the technology in place to do that, you need to be driving them to get the technology you need to do business the way you want to be doing it in three years.

Here's an example: Today, when a quarter closes ... most companies take about 30 days to get their financials in order. Now, there are a lot of regulations, but again it takes 30 days; it's a huge amount of effort. Why? With all of the technology we have in place, with all the relatively inexpensive computing horsepower that we have out there, why can't I get that updated instantly? If I were giving a weather forecast, and it took me 30 days to crunch the numbers, how much good would it do you? Or a medical diagnosis?

There are a lot of examples of this, yet we assume that it's going to take a fair amount of time for us to understand what our financials are doing, and that's partially because for big companies, it's a really big data problem, it's huge. [Gaining insight into the financials] is not easy because there are a lot of factors. So companies need to be driving their vendors to be providing better tools so they can get that up-to-date information virtually instantaneously. And we're making progress. I'm not suggesting that those companies, those vendors aren't doing that; they're moving in that direction. But most companies are pulling in the technology later on, reacting to the technology becoming available as opposed to saying, "This is the strategy I need to focus on. Let me go drive my vendors to get me that technology."

What do you recommend to a CFO who wants to be proactive about driving technology generally?

Gold: So, that CFO has to be, this doesn't sound real nice, but basically has to be in IT's face -- "This is what I need. How can we make that happen?" But that requires that the CFO knows something about what's available, what IT can do or can't do, where the business is going longer term, all the kinds of stuff that we look at being strategic view vs. just being a mechanic.

What is the CFO's role specifically in helping to drive vendors to develop the technology your company needs?

Sometimes you have to take risks, and the numbers would tell you not to do it.
Jack Goldfounder of J. Gold Associates

Gold: Most CFOs don't go directly to the vendor, right? There's a CIO. The CFO goes to the CIO, the CIO then goes to whoever and tries to make it happen. But the CFO needs to be more in touch with what's going on in the IT department, number one, because how do you know whether what you want can happen? It's a partnership, you're not going to take over the IT department, but the CFO and CIO have to have a much more closely aligned, understanding to at least some extent of each other's business. Also, it depends on how big your company is, but generally speaking, in very large companies they have strategic account managers or something to that effect from your vendors ... there's no reason why the CFO can't be talking to those vendors, trying to get an idea -- in conjunction with IT, with the CIO, because you don't want to cut them out because then you create battles -- but talking about where you think [the vendor's] strategy is going to assess whether they're moving down the same strategic path as you are and whether they'll be able to provide you with tools you need.

The CFO needs to have at least a two- or three-year vision of where they want to be. It's not just, "What are the numbers today?" It's, "How do I get there in two or three years?" And I think if you can do that, you're doing a much better job managing what you're supposed to. The CFO has a fiduciary responsibility, and the fiduciary responsibility doesn't just mean counting numbers, it means setting strategy for the company based on what the numbers say.

What are your thoughts on the relationship between the CEO and CFO in terms of business and strategic leadership?

Gold: I see it as much more of a partnership. In companies that are functioning well, there's an executive committee (though it can be called different things) where the CEO, CFO, CIO, CMO [chief marketing officer] ... all the CxOs [appropriate c-suite executives] try to know enough about each other's business so they can all focus on getting what's right for the entire enterprise.

Companies can't use siloed approaches anymore like they used to -- manufacturing used to take care of manufacturing, sales used to take care of sales. So yes, the CEO is ultimately in charge, but there is an executive committee that needs to work together to make all this stuff happen, or it's not going to work long-term. ... If members of the c-suite team are all talking to each other, and they all know where things need to go, then the whole is more than the sum of the parts.

The transformation of the CFO role from bean counter to business partner is being talked about a lot and is certainly getting a lot of B2B media coverage. Can you paint a picture of the evolution of the CFO role and what the strategic CFO looks like?

Gold: The role of the CFO was to crunch the numbers and report -- it's an accounting function. That was the traditional CFO function, and in many companies that's still what it is. What I'm suggesting is that the CFO not only needs to be an accountant, but also needs to be a business leader, marketing person, a manufacturing person -- and I'm not necessarily talking at the engineering level -- but understanding the overall business of the company and being able to assess that and help drive that. So how does the CFO do that?

Rather than just reporting the numbers every once in a while, he or she goes and sits down with the CIO, the chief marketing officer, the chief manufacturing person, and there's some cross-pollination of ideas and strategies about how they can each work better and help the company overall. And it becomes a [collaboration] rather than "Here's my silo and here's your silo and we're not going to cross over into each one." Then it becomes not so much just a technology thing, but then it becomes, "How do we run our business long-term?"

So for instance, here's a question: How is Facebook ... going to change how I do business over the next three years? Now who is responsible for deciding that? Is it the CEO? Well, ultimately, because everything rests on the CEO, ... but maybe there are other avenues of exchange, ... it becomes an Apple Pay or Google Wallet issue. How does that affect how the business runs and how do I sell and what does that mean to my financials? So maybe, as an example -- I'm making these numbers up as an illustration -- AmEx may be charging me 3.5% on everything somebody buys with their credit card and takes 30 days to pay me as opposed to Apple Pay, which may only charge me 2% and pay me in 10 days. How does that affect my business? That's something that the CFO should clearly be looking at, and if there's a significant difference, that's profit margins that you need to feed back into the business.

To do this, the CFO, number one, needs to have a much broader sense of what's going on across all parts of the business the company is in. And number two, all of this change is being driven by data. And it's not just pure numbers anymore; it's all kinds of data, such as that generated by the payment technologies mentioned above.

The CFO needs to be able to access and analyze the significant amounts of data being generated today, and in as close to real time as possible, being able to use that to make strategic recommendations to other parts of the business. At that point they become a financial advisor rather than just an accountant.

How pervasive is the strategic CFO and its outgrowth, for example, the CFO making it to that top leadership role -- becoming the CEO?

Gold: It's changed over the last 10 years ... because the CFO is understanding much more broad-based business and able to make decisions. Sometimes you don't just make decisions based just on numbers. Sometimes you have to take risks, and the numbers would tell you not to do it. So there has to be some understanding of risk-reward ... that just pure numbers wouldn't do. So yes, I'm seeing a lot more CFOs being promoted up the ranks and I think that's because they've expanded their scope over the last decade, or now [more] have a much broader and better sense of business.

How can a more narrowly focused CFO develop into a strategic CFO?

Gold: My advice would be to learn everything you possibly can about all the other departments in your business and then figure out how you can take the information that you got and the knowledge that you got about the numbers and help them do their business better. ... And learn about where the technologies are going.

Today, at any given point, you may not know what [the future holds even in] a year or two. Look how fast the market's moving. So the other piece of this is: be flexible. Because whatever you think you're doing today, in a year from now or two years from now, it's going to be different. That's true of all technology right? That's true of any business. But it's amazing how many CFOs still think along the lines of [what a CFO] did 20 years ago.

There's one other piece of advice I'd want to throw in here, and I guess it's more political than technical.

In the past, it wasn't all that typical for a CFO to make it all the way to the top, to be the CEO of the company. But today, don't just think it's a dead end, that you're going to do numbers for the rest of your life. Think about how you can help out the business.

Next Steps

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This was last published in June 2016

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What are the most important traits to becoming a strategic CFO?
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Great points in this article about the CEO forging a more strategic relationship with the CEO and other LOB executives - this needs to continue to increase the value of Finance.  One comment regarding the CIO and CFO and the dependency there, the emergence of cloud-based applications for Finance allows the CFO and the Finance team to take control and reduce dependency on IT, and the big 3 mega-vendors for that matter.  If IT or the legacy vendors are delivering what Finance needs to be strategic and agile, there are plenty of viable cloud-based ERP and EPM vendors in the market for the CFO and Finance to evaluate on their own.  IT can be in the loop to ensure integration with existing systems, but they should no longer be considered a roadblock.
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