How can CFOs drive value through digital decision-making?

22nd June 2015

Lesley Meall, FSN writer, reports on a recent FSN webinar which considers the emerging field of digital decision-making. 

 

 

 

Never before have so many organisations had access to so much data or to so many software tools for collecting or analysing it; but using all of this to improve decision-making is still challenging. “We’ve come a long way since 1989, when Howard Dresdner coined the term ‘business intelligence’ to describe fact-based decision support systems. Now, 26 years on and several technology cycles later, decision-making remains an open issue in most organisations, despite no lack of investment or focus,” says John Wilkinson, group chief operations officer of BOARD International. 

Many organisations have a plethora of software that can potentially inform decision-making: general purpose business intelligence (BI) systems, analytics applications, tools for simulation and business modelling, and software for financial planning and for operational planning. But this does not automatically translate into improved decision-making, let alone the sort of ‘digital decision-making’ that still requires an explanation – see below – despite being the subject of so much hype and so many inflated and unrealistic expectations of senior finance professionals. 

So in a recent FSN Elite webinar (at https://fsnelite.com/community/fsn_webinars), Gary Simon, CEO of FSN Publishing, and leader of the FSN Modern Finance Forum for CFOs on LinkedIn asked Wilkinson some searching questions about how CFOs can drive value through digital decision-making. Some of Wilkinson’s responses may be partisan, but this doesn’t prevent them from being enlightening; and if you have not yet watched the webinar or a recording, doing so can still repay the half hour it will take you to rectify this. 

Integration and insight

Lack of integration between disparate systems (and their associated data) has always been a barrier to insight, and Wilkinson makes a good case for BOARD and other unified systems for corporate performance management; CPM. Because these systems can unify some or all of the disparate systems and information silos that may otherwise isolate financial and operational planning, making it difficult to align all of this (and decisions based on it) with strategic and operational needs or to understand the potential financial implications. 

“What’s missing in many organisations is not the availability of the technologies but the connections between them,” says Wilkinson. He uses two BOARD customers to demonstrate what can be achieved with a single unified platform. EMAAR, a large Dubai real estate company, decides strategy at group level, links this to a financial plan, then drives this down into each of its 43 business units where it translates into operational activities; local managers can simulate from the bottom up how they can reach their objectives, linking to the top down plan – and at a very granular level. It can even estimate the costs associated with the number of lost balls on a golf course. 

The entire business can be measured against any element. “The key at EMAAR is to have an end-to-end system that joins up and connects the financial planning to the operational planning and then closes the loop with performance management,” says Wilkinson. His other example is the Swedish retail fashion giant H&M, which uses BOARD as the platform that provides its many thousands of store managers (often simultaneously) with near real time analyses of the financial implications of their field-management choices, with a roll-up to global financial implications. 

H&M’s 24/7 global operation operates on tight margins and must accurately predict its stock requirements and the number and types of workers in each of its 40,000 stores for every hour of the day. So store managers need BI on historical information and in-store trends, simulation tools to model alternatives and achieve objectives, financial planning tools for top-down planning and aggregation, plus performance management tools – and this demands a system that can handle huge data volumes, offer a single unified view of financial and operational data, support collaboration and be flexible enough to align and change along with the business. 

Digital decision-making

In a world where organisations are in a constant state of flux, buffeted by new business models and technologies, lower barriers to competition and geo-political change, systems such as these may be a vital piece of the digital decision-making puzzle. “I think we can define four main drivers of the shift from traditional to digital decision-making,” says Wilkinson. He cites data, information, analytics, processes – and the impact of related trends, such as increasing volumes of structured and unstructured data, ease of access and use, and the intelligence and self-service functionality being built into all sorts of software applications – not just analytics. 

Whether these developments become a threat or an opportunity for CFOs and other finance professionals remains to be seen. According to Wilkinson, some finance controllers and group controllers are already positioning themselves as digital decision-makers by taking the lead in this technological transformation: “They are increasing their knowledge of analytics, of simulation, of planning and forecasting technologies and they are the ones driving the shift from older more rigid technologies such to a more modern and flexible approach.” If digital decision-making can enable CFOs to drive value, others may wish to do likewise.

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