The CFO-CIO Partnership for Digital Convergence

Note: This article is one of my latest, and can also be found in another great publication- CFO Tech Outlook. 

https://www.cfotechoutlook.com/magazines/April/2016/#page=38

Emerging technologies provide the perfect storm of opportunity for the CFO and CIO to work closer together to increase revenue, profit, business growth, while at many times in parallel, reducing risk. CIO’s and CFO’s are often “frenemies”, and many times under the best circumstances co-exist together to cooperate. CFO's and CIO’s have sometimes been at odds over the years in organizations, as the CIO is under immense pressure to keep the costs down, typically measured by the CFO as a percentage of revenue. This measurement is rarely forward looking as it is typically focused on “keeping the lights on” for the company, with the IT organization as a “necessary evil” and cost center. What if the CFO and CIO worked closer together to exploit technology to flip this equation to focus on revenue, profit and business growth?

 Let’s examine a trend that many CFO’s are implementing in their organizations–zero-based budgeting. Zero-based budgeting (ZBB) is an approach to decision-making that reverses the working process of traditional budgeting. In traditional incremental budgeting, managers justify only variances versus past years based on the assumption that the "baseline" is automatically approved. By contrast, in zero-based budgeting, every line item of the budget, rather than only the changes, must be approved. Zero-based budgeting requires that the budget request be re-evaluated thoroughly, starting from the zero-base; this involves preparation of a fresh budget every year without reference to the past. This process is independent of whether the total budget or specific line items are increasing or decreasing.

 ZBB has transformed organizations from a very angst-filled activity that management undertook only during times of economic duress now to an ongoing, vital process. In times of volatility, profitable companies with a strong competitive edge are best positioned to innovate, grow, and beat the competition. ZBB helps companies identify oftentimes resources that are not generating an adequate return and encourages strategic redeployment of those funds in order to achieve business objectives and strengthen companies’ market positions. And in today’s era of digital disruption, many use those funds to invest in new technologies and capabilities that can help them out-compete traditional and non-traditional, digitally enabled competitors.

By working with a new strategy to re-allocate resources and funding, there is a tremendous opportunity to leverage technology convergence through the ecosystem of partners to accelerate outcomes and growth for the business.

Looking at the CFO’s responsibility from a slightly different angle—regulatory and compliance are additional expenses for the enterprise. ZBB can help to find where there are risks and gaps in an organization for new regulatory demands. However, as this CIO impacting expense is increased by the CFO, the already planned operational improvement costs are now seen through a different lens as needed to meet a new regulatory mandate. Improvements in reporting, analytics and insight (and underpinning platforms) that are required for regulation can now also become revenue generators for the enterprise.

 In conclusion, today's and tomorrow's CFO is best positioned to succeed and help drive their organization to further growth by embracing emerging technologies as an extension of their own technology to accelerate business, improve capabilities, and reduce risk. Those who can best change their mindset from one of competition and increased collaboration with continuous relevance for the customer will be able to help shape the hype from expectation to reality.