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A new IBM study indicates that chief financial officers (CFOs) who have access to and employ big data and analytics are more effective.
The study, titled “Pushing the Frontiers,” is based on findings from face-to-face conversations with 576 CFOs from around the world. Conducted by IBM’s Institute of Business Value (IBV), the study found that CFOs’ expectations of their finance team have evolved, as have their views on technology.
According to the study, the vast majority of CFOs (82 percent) said they see the value of integrating enterprise-wide data, but only 24 percent think their team is up to the task. This marks a 205 percent increase in the gap between the importance of data and the ability to exploit its value since the question was first asked in 2005, representing a critical divide in the skills and capabilities for today’s finance teams, IBM said.
IBM conducted its analysis with more than 4,000 C-suite leaders by using a global team of business strategists, consultants, data scientists and statisticians. Big Blue also used its Watson cognitive computing system to draw additional inferences from the study data. This was the first time Watson has been used for such an IBM study.
The IBM research revealed a subset of CFOs the company refers to as value integrators: individuals who are more effective in finance efficiency and analytical insight than their peers. This year the study also identified an even smaller set of high performers called performance accelerators, CFOs who have mastered their core duties so thoroughly that they are far ahead of their peers. In fact, performance accelerators have been 70 percent more successful than value integrators, measured in terms of revenues and profits generated during the past three years.
“In our discussions with CFOs over the past decade, the significance of technology and analytical tools in transforming the finance function and broader enterprise has continuously risen,” said Bill Fuessler, a partner in the Finance, Risk & Fraud unit of IBM Global Business Services, in a statement. “Data has always sat in the center of a CFO’s job responsibilities, and CFOs now recognize how insights from big data are helping their company become more competitive. CFOs are being asked to anticipate the future and discover new areas of revenue growth—we anticipate this will spur a new strategic alliance between the CFO and CMO as they partner to drive the corporate growth agenda.”
IBM said the percentage of performance accelerators who are effective at integrating enterprise-wide information is double that of value integrators. Similarly, the percentage of those who are effective at continuously improving processes is 43 percent higher, while the percentage of those who are effective at developing finance talent is 48 percent higher.
IBM said a critical differentiator for these most successful CFOs is how they use data.
While the average CFO relies on spreadsheets and intuition for the majority (66 percent) of their work, more than two-fifths (44 percent) of performance accelerators combine internal and external data to produce insights. As such, performance accelerators are more effective at conducting various forms of analysis, including tracking and forecasting supply-chain financial data, planning and predicting resource capacity, and conducting industry and competitor analysis, IBM said.
Most significantly, according to IBM, performance accelerators use the insights they have discovered to create profitable growth, spending more time on other activities such as forging an infrastructure to capitalize on big data, handling acquisitions and divestitures, and developing new business models.
“At Pabst, we have transformed our finance function to move away from the proverbial thousand spreadsheet march, now using an analytics platform to completely shift the workloads of the finance team toward higher value activities,” said Cordell Sweeney, senior vice president and CFO at Pabst Brewing Co., in a statement. “Our business has a tremendous amount of information, and we have been able to change the culture by leading more robust data driven discussions with our leadership teams and field. Leveraging analytics has enabled us to change the conversation and become value-added partners, using business insights to drive decisions that lead to gaining market share, increasing profitability, and creating value for our shareholders.”
IBM’s study also showed that more than half of the performance accelerators have created a service delivery framework to guide the design, development and operation of key financial processes. They are also more likely than other finance organizations to use a stand-alone, cross-functional shared services center for transactional financial activities.
Performance accelerators also have a much better grasp of the digital domain, as nearly half work in companies with an integrated physical-digital strategy. Further, the majority (70 percent) understand—and collaborate with—customers more extensively than other CFOs.