Eight in ten CFOs spearheading digital transformation

17 September 2018 Consultancy.uk

According to a new study, finance directors are increasingly leading the charge for digital change within companies as their role pivots away from the traditional accounting function. Eight in every 10 Chief Financial Officers are now spearheading their companies’ adoption of digital technology, as disruption continues to grip the business world.

As Chief Financial Officers at companies across the world face up to seemingly unresolvable uncertainties surrounding Brexit in the UK and the mounting threat of international trade wars more generally. In this climate of anxiety, a number of Deloitte surveys have shown that many CFOs have grown more risk-averse, and are predictably placing greater emphasis on defensive strategies for the coming years. As a result, CFOs are increasingly turning to technology to help them combat this array of issues.

A global poll, from EY, at the turn of the year saw CFOs list their number one priority as “Upgrading IT and financial data analytics tools to professionalise finance management.” Due to the notable challenges this presents, including the need to up-skill staff and recruit technological specialists into companies, 87% of CFOs also noted that they plan to increase their investment in corporate reporting technologies over the next two years. Meanwhile, 85% of the same group confirmed are now providing automated alerts to audit committees and boards about governance, risk and compliance issues, with this increasing to 95% of US respondents and 93% of UK respondents.

Following up on this, new research by Accenture has found that today’s financial directors play a larger role in driving digital disruption across their respective organisations than ever before. Rather than looking back, today’s CFOs are change agents who look forward, directing company-wide digital investment. Accenture probed more than 700 finance leaders from around the globe, alongside more than 200 up-and-coming finance professionals considered tomorrow’s likely CFOs, to find that as automation has become a key objective to maximising the functionality both inside and outside a CFO’s role, many of those in the job are working to get their houses in order to free up the time they need to branch out and take on entirely new tasks with broader impact.

Proportions of finance functions that are receiving growing requests for insight and analytics in key areas

Reflecting this, 81% of all CFOs now see identifying and targeting areas of new value across the wider business as one of their main responsibilities, while 77% believe it is within their remit to drive business-wide operational transformation. At the same time, a further 73% of respondents told Accenture that they are already exploring how disruptive technologies could benefit the entire organisation and business eco-system.

Commenting on the drastic findings, David Axson, a Senior Strategy Executive Principal in Accenture’s UKI CFO Strategies wing, said, “In virtually every company we look at, the CFO is becoming the second most important C-suite executive, sitting at the right hand of the CEO and articulating a story about the financial results they expect to realise. An effective leadership team depends on the CEO and CFO being a great double act.”

The study revealed the areas in which finance functions are receiving the largest amount of growth in requests for insight and analytics, from the broader business. While financial data remains one of the largest areas in firms which were not considered “high growth”, listed by 54% of respondents, in the case of high-growth firms – organisations that greatly exceeded their targets for revenue growth last year – it was only joint-fourth, at 72%.

In the case of high-growth firms, financial data was behind market data relating to pricing and trade, social media data, and marketing and CRM data, each at 74%. This suggests that companies getting the most from their finance functions are the ones which encourage their CFO to expand their digital remit beyond purely accounting roles.

Finance’s non-traditional strengths and their value to the business

To further illustrate this point, Accenture’s study also looked to demonstrate the potential value of finance’s non-traditional strengths to the broader business. In every case mentioned, fewer than 8% of respondents found that finance was worse than other functional areas at the capabilities in question, while a majority of three-quarters or more found they were better than other functions.

The foremost of these fields was in forecasting the long-term value and lifespan of specific technologies being implemented by a company. As firms across the board look to boost their performance by adopting a range of new innovations, this is increasingly important to help ensure a firm gets the maximum value for money from their new apparatus, and according to the report, 80% feel that finance is better at this than other functions.

Elsewhere, guiding the successful adoption of emerging and evolving technologies and effectively balancing investments in technology, between core and new business elements, also scored highly. With both perceived as being fulfilled best by finance by 78% of respondents, the functions reveal that CFO’s understanding of technology, alongside their knowledge of the financial health of each area of a company, are key to maximising digital transformation efforts.

David Axson added, “In an era of unprecedented disruption, this repositioning of the role will continue as CFOs take the role of digital stewards, using data to drive value and improve efficiency while mapping out the digital investments required for their organisations to remain competitive.”

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Four ways digitalisation is transforming car brands and dealers

16 April 2019 Consultancy.uk

From changing expectations from the customer to new stakeholders entering the industry, the digital transformation of global automotive industry means it is facing the wholesale transformation of its business model. In a new white paper, global consulting partnership Cordence Worldwide has highlighted four major digital trends that are transforming the relationships between car brands and dealers with consumers.

With digital transformation drives booming across the industrial spectrum, automotive groups are no different in having commenced large digital transformation programmes to improve productivity, efficiency, and ultimately profitability. Falling sales figures mean the automotive sector is facing an increasingly difficult road ahead, something which means companies in the market are even more hard pressed to find new ways to improve their bottom lines.

While it offers major opportunities, the industry’s move to digitalise is not without complications. It has triggered a series of major internal changes, which have presented automotive entities with the challenge of becoming a “customer-oriented” industry. A new report from Cordence Worldwide – a global management consulting partnership present in more than 20 countries – has explored how automotive companies are navigating the rapidly changing nature of digital business.

New business models

The level of change likely to be wrought on the automotive industry by digitalisation is hard to overstate. Automation could well lead to significant reductions in the number of accidents, higher vehicle utilisation and lower pollution levels, while leading to a $2.1 trillion change in traditional revenues, with up to $4.3 trillion in new revenue openings arising by 2030.

As a result of this colossal opportunity, it is easy to see why almost all automotive groups now have digital departments, with generally strong communication within the digital transformation and the customer approach. The changes to society which this may have are potentially distracting automotive firms from the change it is leading to in its own companies though, according to Cordence’s paper.

The automotive market is dead, long live the mobility market

Because of this, the sector’s business model is set to transform over the coming decades. With digitalisation speeding up the appearance of concepts such as car-sharing, a subscription package model will likely become more palatable. At the same time, car and ride-sharing models will cater to the sustainability criteria of millennials, who will rapidly become one of the automotive market’s leading consumer demographics in the coming years.

Antoine Glutron – a Managing Consultant with Cordence member Oresys, and the report’s author – said of the situation, “These ‘old school industries’ are now working on creating new opportunities, but in so-doing are facing challenges and threats: new jobs, new technologies, new ecosystem of partners, necessary reorganisation, different relationship with customers, and even new businesses. The customer approach topic is in fact a real challenge for car companies as it implies changing their business model and adjusting their mind-set to address the customer 4.0: from product-centric to customer-centric, from car manufacturer to service provider.”

Digital customer experience

In the hyper-competitive age of the internet, even top companies face an uphill challenge when it comes to holding onto customers through brand loyalty. Digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly out-dated strategies. As modern customers wield an increasingly impressive array of digital tools and online databases, they and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The automotive sector is no exception to this trend, according to the study. In order to adapt to the needs of the so-called ‘customer 4.0’, car companies will increasingly need to change their business model and move away from product-centric companies to customer-centric ones, from car manufacturers to service providers.

Glutron explained, “As an automotive company, you can no longer expect customer loyalty simply with good products; you must conquer and re-conquer a customer that “consumes” your service. The offer now has to be global, digital and personalised. Your offer has to be adapted to this customer’s needs at any given moment. A key issue related to data control is to build customer loyalty by creating a customer experience 'tailored' throughout the cycle of use of the 'car product': purchase, driving, maintenance and trade-in of the vehicle.”

One way in which the sector may be able to benefit from this desire for a tailored experience is via connectivity. Consumers are generally positive about new connective features for automobiles, and many are even willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are already particularly interested in paying a little more for navigation and diagnostic features in their future new car. This can also enable automotive companies to exploit a rich vein of customer data, enabling them to rapidly tailor their offerings to consumer behaviour.

New automotive segments

Digital transformation has also brought with it the rise of completely new application areas. As mentioned earlier, the most well-known example is the autonomous or self-driving car, where the last steps forward were not taken by major automotive groups but by technology companies such as Tesla. While this may have given such firms the edge in the market briefly, a number of keystone automotive names will soon be set to take the plunge into the market themselves, leveraging their car manufacturing prowess and huge production capacities to their advantage.

Before companies rush to invest in this market, however, it is worth their while to remember that the readiness and uptake for such vehicles differs greatly geographically. For example, following a study published in 2018, 92% of Chinese would be ready to buy an autonomous car, compared with only around 35% of drivers in France, Germany and US. Meanwhile, the infrastructure of different nations will also be significantly less accommodating of the new technology.

Use digital for steering thr activity

Elsewhere, Cordence’s analysis has suggested that hooking the cars of tomorrow into the Internet of Things is also likely to see a rapid change in the business model for car maintenance, providing real-time diagnostics for problems. This presents chances for partnerships to improve the connectivity of cars, especially with tech companies; for example, PSA partnered with IBM for a global agreement on services in their vehicle. Meanwhile, data could also be sold to other parties with an interest in this data, such as the government, which could use it to manage traffic levels, or ensure that only adequately maintained vehicles take to the road.

Glutron added, “With the increase in the amount of client data and connected opportunities, the recommendation is to set up data-centric approaches. The value is now in the customer data. The general prerequisites are to rework the data model and the Enterprise Architecture and generally build up a data lake including data from all sources (internal and external, structured and unstructured).”

From automotive to mobility

Relating further to the idea of connectivity, the report claimed that automotive firms must now adjust their models in line with the provision of end-to-end mobility, rather than treating the sale of a car as an end point in their relationship with the customer. In order to realise this transformation, transformations are likely to become more and more important.

A network of partner companies means automotive firms can provide a global mobility experience. As the vehicle is increasingly connected to its environment, new partners can also be cities, governments, and other service providers within the global mobility services industry in which the car brands want to take part.

According to the study, the target is clear. Companies must look to a holistic transport service, offering to move customers from A to B in a unique and pleasant way – otherwise they might as well take public transport. At the same time, they should extend the services reachable “on-board” (especially the enhancement of the connectivity between the car and smartphones or other connected devices), and reach high standards in terms of user experience (online sales, online payment, customised experience during and after the use of the car).

Concluding the report, Glutron stated, “These mobility market transformations could be considered a threat for the car manufacturers. Quite the opposite: if they take up the challenge and review their business model so that they become the service provider – communicating no longer to a driver but to a ‘mobility customer’ – they can then take advantage of their expertise and their position as a historical player. The most convenient means of transport are cars, and building a car is highly-skilled work.”