Finance AI

Digital aspirations in Finance: what type of essential CFO do you want to be?

by Uri Kogan July 27, 2021

The world is becoming increasingly digital, and the finance department is no different. We’ve come a long way since the adding machines and calculators of the early 70s and now have widespread adoption of automation and specialist IT in finance. But what comes next?

While that question might seem to be one to ask the technology vendors, in reality, the way technology gets adopted within any given finance department is entirely based on what type of CFO leads the department. From the cautious technology follower to the cavalier finance disruptor, below we identify the four key flavors of CFO that we see today and specify a series of recommendations for each CFO type to drive their own digital transformations. 

The four types of digital CFOs

All CFOs have specific responsibilities. Organizations expect them to manage the overall financial stability of the organization, lead the finance team, and provide the fiscal guidance, control, and compliance expected by their board, shareholders, and regulatory bodies. But an often overlooked part of the CFO’s responsibilities focuses on the use of information technology within the finance department. 

Technology within the finance department is not new — the abacus has been around since around 300 BC, after all — but today’s pace of technological advancement in finance is unparalleled. The modern CFO not only needs to know finance but also needs to be a technology expert. However, just like approaching a tax audit, not all CFOs view technology in the same way. As a result, IT adoption and deployment levels vary massively from one finance department to another. We have identified four types of digital CFO, each with unique characteristics and perspectives on using technology.   

The Follower

The Follower doesn’t like breaking new ground and will only adopt new technology when it has been tried and tested by others. This CFO type believes strongly in the power of the community and embraces new technology based on recommendations from other CFOs or industry analysts. 

As a result, once the Follower decides to deploy a specific technology, they truly commit. For example, automation is now firmly embedded within Follower-led finance departments, as are exercises to get better value from supplier networks and integrated ERP systems. The Follower CFO is committed to long-term maintenance agreements and stability; however, they are still unsure about moving their systems to the cloud.

The Optimizer

The Optimizer CFO continually looks to get better at everything. They rely heavily on data to improve each part of the finance department to reduce costs, improve efficiency rates, and get better value everywhere. Optimizers love automation systems and currently focus on making their RPA systems do more and more. They like the idea of AI but can’t see any real tangible benefit yet. The Optimizer CFO has a broad IT system portfolio and is constantly looking to better connect and integrate the existing systems.

The Modernizer

The Modernizer likes to see the finance department working as efficiently as possible, using a range of modern and relevant technologies. They don’t actively seek out new technologies but are not afraid to experiment with new tools and techniques where they can see a potential value. Modernizers actively use supplier networks, utilize cloud-based solutions in several areas, and are well-versed in the use of automation. The Modernizer CFO’s biggest challenge is finding the right balance between old and new systems and migrating between legacy technologies and more modern equivalents without disrupting the business. 

The Disruptor

The Disruptor CFO is a rare beast. They actively look to use technology to do things differently and shake up the finance IT landscape. Disruptors actively explore AI technology, rolled out mobile-enabled systems years ago, think blockchain and the Internet of Things will revolutionize the way we all work, and have more cloud systems than on-premises applications. Disruptor CFOs need to work hard to ensure that the rest of their team and C-level colleagues understand why they adopt such cutting-edge technologies, but often have highly-dedicated staff who are 100% committed to the disruptor mentality.   

Assessing digital finance maturity

Each of the CFO types has its own speed — the pace at which they are happy to adopt change. But irrespective of how fast they want to go, each finance department needs to understand where they are starting from. This involves continually re-assessing their IT capabilities, benchmarking their maturity, and determining if and when changes are required. 

Many CFOs are currently focusing heavily on automation. However, they must also understand other technologies as well as broader trends that affect their departments, such as the changing workforce demographic, increased remote working, and the growing importance of cloud-based subscription software. All of these factors heavily influence the CFO when making strategic IT decisions.

One tool that we find helpful when making these decisions is the Autonomous Index. The Index offers a way to benchmark the technical capability within the finance department and provides a guide to the appropriate next steps when selecting technology enhancements and a roadmap. 

You can find more information on the Autonomous Index here, but in short, the Index defines three broad categories of technical maturity in the finance department. From manual systems at Level 0 through three additional levels of increasingly complex and mature capabilities, developing finance automation is the goal. Levels 4 and 5 focus on the holy grail of technology within finance: autonomous systems where AI and automation come together to provide intelligent, agile, integrated systems capable of performing end-to-end finance processes without human intervention. 

Until recently, autonomy was the realm of only the Disruptor, but rapid developments in the availability of autonomous systems now mean that autonomy is available and gaining acceptance by all types of CFO except the Follower.

Driving digital transformation with the Essential CFO

The type of person you are today does not dictate the kind of person you can be tomorrow. Far from being cast in stone, your journey is your own. This mantra is equally true for CFOs. 

While individual CFOs may have certain instincts that make them naturally cautious, innovative, or disruptive, each needs to create a simple, progressive roadmap to deliver an effective digital transformation within any finance team. Even the most change-averse CFO needs a steady path to deploy technology, and Disruptors still need a step-by-step plan to deliver the most impact.

The Essential CFO draws elements from each of the four stereotypical CFO styles to craft a hybrid, agile, dynamic, yet balanced entity. The Essential CFO has a clear view of the specific needs of their finance department and looks to create a roadmap for adopting and deploying technology into their domain. While the speed of deployment may vary, there is a common set of steps that we recommend all Essential CFOs take:     

Make one change at a time

Finance departments should start by selecting one key area to transform. Changing more than one thing at a time is not only confusing, but it makes it impossible to measure which change made an impact. The decision on what to change should be based on the department’s needs and where the organization sits on the Autonomous Index. 

Useful for Follower, Optimizer, Modernizer.

Lead with data

Make the most of existing data within the department and organization to drive change. Instead of generating massive management reports, utilize real-time digital dashboards to enable finance professionals to rapidly access and digest data, driving actionable decision making. This data focus will serve the finance team well as a platform to introduce AI-based tools.

Useful for Follower, Optimizer, Modernizer.

Enable the team

Far from technology being used to replace human skills, opportunities exist to upskill the workforce using new digital tools. CFOs need to consider how digitally savvy their existing team already is and how much digital change their department can handle. If skill gaps are identified, recruiting staff with both finance and technical skills is advised. Regular staff are often not consulted during digital transformations. But the most effective digital leaders bring the workforce with them and actively engage them at each stage of the journey. 

Useful for Follower, Optimizer, Modernizer, Disruptor.

Automate the finance business process

Every single CFO should be looking to automate wherever possible. Organizations that embrace automation functions see strong results with higher productivity, reduced costs, and increased efficiencies. Finance teams should start by automating basic and repetitive tasks and progress from there.

Useful for Follower, Optimizer.

Go beyond the basics of the modern finance experience

A modern finance department does more than ever before. According to the Harvard Business Review, finance teams need to deliver six organizational competencies: data trust provider, regulatory architect, performance monitor, predictive risk monitor, innovation center, and automation leader. This expanded role can only be achieved with deep, integrated, and visionary use of technology.

Useful for Optimizer, Modernizer, Disruptor.

Go autonomous 

We are entering the age of autonomy, where the default will become technology driving processes from start to finish, without human intervention, in the majority of cases. This new world will finally free staff to focus on high-value, complex work to increase their job satisfaction and get the best from their time and skills. This move will not come without financial and philosophical investment from CFOs. This is the final step in our recommendations because it is the hardest and requires all of the other steps to be taken before autonomy is possible. However, the best things in life are worth working for, and autonomy is no different. Those organizations that deliver autonomy within their finance departments first will see increased efficiencies, productivity, and cost reductions that their non-autonomous competitors will simply not be able to compete against. 

Useful for Optimizer, Modernizer, Disruptor.

Conclusions

The CFO plays a pivotal role in every organization in the 21st century. Controlling finance, compliance, and risk on one hand while driving innovation and productivity on the other, the modern finance leader is multi-skilled and highly sought after. While exploring the personality traits of the four common CFO styles, we identified the strengths and weaknesses of each. However, to truly deliver as the financial leader that the enterprise now expects, the CFO must transition from being one-dimensional to multi-dimensional. Drawing the best characteristics from the Follower, Optimizer, Modernizer, and Disruptor styles, the Essential CFO learns from the past, embraces change, and looks to prepare for the future, today.  

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Uri Kogan

Vice President of Product Marketing