Digital transformation has put an end to “the status quo.” The days of riding the coat tails of one’s “brand legacy” are over. In the retailing world, particularly when you’re going direct to the consumer, there are any number of analytics-powered insights that give you a sense of the next product to buy, or give you a sense of where to direct that consumer to a different channel, or give you a sense when that consumer is trading or leaving your group and give you techniques and methodologies to bring back that customer. Automotive is a great example. Many organizations are working very hard to bring up the IQ of their companies and their executives around technology and digital analytics. ServiceNow CEO reflects on 2020, says digital transformation is the opportunity of this generation Tom Relihan Nov 26, 2018. Read about the importance of digital transformation, connecting to third party systems and the role of the CFO in our whitepaper on digital transformation. There’s some critical ones here that we’ve talked about before. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. Press enter to select and open the results on a new page. Digital transformation in finance is reshaping the role of the CFO like never before. We’re looking towards the future with eight predictions for the finance function of 2025. Four or five years ago, before the rapid evolution in advanced analytics that has occurred over the last two to three years, we spent a lot of time in certain industries focusing on digitizing processes. A lot of the technology for big companies was built decades ago in an old legacy-system model that’s very hard to adjust. There are four or five specialized skills that every one of these transformations needs: there’s data scientists, there’s data engineers, there’s architects, there’s application architects, there’s cybersecurity people, there’s consumer-experience designers; all of these skills are quite difficult to find. More and more leaders of finance departments are realizing how important it is to keep up with technology or risk falling behind competitors … “We invested in ourselves,” said Palkhiwala. And honestly that is what makes the job fun for me.”. Because digital analytics is inherently creating more transparency, many organizations find that there’s price pressure, there’s consumer pressure, there’s shopping behavior; all of that is putting some pressure on the revenue line. This is something new. During that period, we wanted to accelerate 5G and drive deployment of 5G. The first and most important one that we talked about earlier is to make sure the corporate strategy is heavily infused with the digital-analytics strategy, and that the digital-analytics strategy is central to the corporate or business strategy. Michael Bender: When we started talking with a lot of companies about digital transformations three or four years ago, we used to say, “OK. Sean Brown: From McKinsey’s Strategy and Corporate Finance Practice, I’m Sean Brown. Then even in this broader CFO role, I have been involved on the customer side, pricing side, supply. What are some of the ways that a CFO can avoid these? We'll email you when new articles are published on this topic. A new study from Syspro, conducted in October 2020, assessed the sentiment amongst senior-level CFOs within manufacturing … It’s very hard to transition away from that technology environment. Use minimal essential Maybe you create some other services models that augment the product model in order to capture more of the value from digital. Digital transformation is the buzzword that’s breaking though the conversations and minds of CFOs, and for good reason! Q: How do you view the inability to get approval for the NXP acquisition? If you can get those grouped for a big organization, then you can build skills and capabilities to pursue and scale those. A: Steve (Chief Executive Steve Mollenkopf) and the executive team did an incredible job of keeping those issues away from most of the company. They decided that was such an advantage to their suppliers, and their suppliers liked it so much, that they were going to work cooperatively with a number of the suppliers in order to enhance that data store and provide even more information around what was selling in the stores or selling online. Get a rundown of the findings and learn how finance digital transformation helps CFOs adapt to … Since they go together, one of our current arguments is, “You really ought to get focused on where data and analytics is going to add a competitive advantage in your business. We are definitely hiring in India, China and Taiwan. Some overinvest in digitized processes and underinvest in analytics, others do vice versa. 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The term “digital transformation” is often discussed in technical terms. Michael Bender: I think there’s six things. You see that most classically in the retail world with the emergence of Amazon dislocating on multiple categories relative to the bricks-and-mortar retailers, and the bricks-and-mortar retailers trying to find ways to fight back. Number three is really thinking through the funding mechanisms. By that I mean, in order to do this well, one of the organizational challenges is moving away from the very rigid year-on-year planning cycle and everyone trying to move opex up by a nickel and not getting clear on how the capex/opex trade-off and the technology spend versus operational spend is going to change. We delivered on all of them. Consistency is extremely important, and being able to deliver. And it inked a new patent license with Huawei after more than a year of tricky negotiations amid trade tensions between the U.S. and China. Number five is getting the investor story right. The CFO has to be intimately involved with the CIO and other parts and the individual business heads, to ensure that transformation program and the underlying initiatives are being executed well. Q: How do you think about COVID-19 and managing the business through it? collaboration with select social media and trusted analytics partners Whether that buzzword is robotic process automation, shared service, self-service in the finance function, ubiquitous business information, automation at scale, somehow the CFO needs to lead by example and think through how digital analytics is going to change the finance function. The second strategy was focusing on adjacent markets that were demanding technology from mobile. Then you’d decide you needed a large ERP [enterprise-resource-planning] system to implement the technology, and you’d go out and select a technology. Qualcomm’s shares ended trading Friday at $147.42. Because we all love a pilot—doesn’t have much commitment, you go and do some stuff, you put a team together, they pilot away. And then finally on the organizational side, there’s a whole set of adjustments to the finance process—again, stage-gating, keeping track of big technology projects, funding the best things going forward, knowing where the true north in value is. They embrace new techniques, such as predictive analytics, to drive digital transformation to new frontiers of its capabilities. We also know that individual companies are getting radically reshaped by those changes and disruptions in the industries. The first one is technology modernization. With the increased power of certain cloud-based finance capabilities and other techniques like robotic process automation that supports shared services and remote delivery, there’s increasingly an argument that the CFO has to lead by example, by digitizing the finance function. According to McKinsey leaders and senior partners Tanguy Catlin and Kate Smaje, CFOs can help operations, marketing, and other divisions get on the same page, and be better aligned when it comes to their definition of digital transformation. In the past 70 years of computing, the world advanced from the vacuum tube to the transistor to the semiconductor, … “CIOs have a natural advantage today because ‘digital’ is at the core of any transformation,” says Daniel Sanchez Reina , Senior Director Analyst, Gartner. That allowed us to really get through those years with good financial performance. See how Deloitte helped solved emerging finance issues by helping companies adopt digital ways of working … College of Engineering in India. Finally, you’re going to have to reduce the cost structure ahead of declining consumer demand. How do you figure out how to identify, track, and monitor the big digital-analytics projects? Why CFOs must drive digital transformation. Fortunately, what has happened through COVID is a lot of the products and technology that we make have become even more important. For example, 15% of CFOs are fully responsible for digital transformation … Adobe’s CFO on how digital transformation works for the software firm. How CFOs should drive digital transformations, Subscribe to the Inside the Strategy Room podcast, Memo to the CFO: Get in front of digital finance—or get left back. But how far have CFOs got in their digital transformation journey? tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. The Internet of Things is a great example. But if you’re a big, multinational telco, or a big oil-and-gas company, or if you’re a big multinational conglomerate, what that leads to is a whole lot of different people at very different levels of understanding about how digital analytics changes their business, all using some form of piloting to start figuring out what the answer is. Akash Palkhiwala has held several senior finance positions at Qualcomm during the past 19 years. You see this often in banking, where big banks are building sidecar banks, because they want to go to a more digital-savvy, younger consumer who’s looking to the bank for a peer digital experience. Most organizations need to be building both those muscles. A: As you know during that process, we did reduce our operating expenses significantly. Executives must know how to make the right moves to develop the modern … Sean Brown: If you’re trying to tell your child what major they should be in, sounds like analytics is a pretty one to go to. I think generally there is confidence that we will be able to execute. Today, we’re joined by Michael Bender, a senior partner in our Chicago office and the global coleader of McKinsey Digital and Analytics. Don’t be alarmed, San Diego scientists say, So far, reinfections have been rare and mostly mild. The role of today’s CFO is changing. our use of cookies, and You need a customer-experience designer; you need product designers; you need agile, strong coaches to drive these teams; you need cross-functional teams; you need data scientists; and you need data engineers to go in and dig out the data. The CFO is in an elevated position, … They could see a lot in certain parts of the trading business from bringing new data insights into the trading business. That gives him an insider’s perspective of how the company maneuvered through a tumultuous three-year stretch where it fought off antitrust lawsuits, a hostile takeover attempt and the collapse of a major acquisition. 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