Across industries, much has been said about the value and importance of digital transformation. But who exactly should be driving these efforts? Often, the CFO could be the most influential.
Deloitte Consulting Deputy CEO of Markets, Rich Penkoski, believes the CFO to be a key player and "incubator" of digital transformation across the organization. He says the back office is often the first to implement emerging technologies, and with their access to troves of organizational data, the value CFOs bring to the table cannot be overlooked.
Having led many of Deloitte’s largest financial and information technology-based digital transformations, Penkoski is able to see clearly the role of the CFO, and wider c-suite collaboration, in successful digital transformation efforts.
At Deloitte, Penkoski has spent the past 20-plus years "focused on all things finance-related for clients across all industries we’ve served," he told CFO Dive Thursday. "I’ve seen the CFO role evolve throughout history, particularly in tech."
What Penkoski sees in his client base currently is the CFO, whether strategically or inevitably, becoming the digital champion of the enterprise.
The back office is always the first area to implement emerging tech, Penkoski points out. "The CFO has historically led many changes from their own shop, and so, now, they’re looked upon as the champion to turn to for key strategic advice, and which tech is ready for the primetime, and also being asked what needs to happen in order for deployment to be successful."
More often than not, many workers view the CFO as a business partner across multiple dimensions of the business. As such, Penkoski thinks the CFO is "very well-positioned to serve as that trusted advisor to the business." Perhaps even more so than IT.
Citing Deloitte research, the average IT department today only spends about 55% of its budget on maintaining business operations, and only 20% of that is on building new capabilities. "We haven’t seen IT as a transforming digital force," Penkoski says. "Hence, the CFO has bridged that gap."
Another interesting dynamic he’s seen emerge is the relationship between the CFO and CIO, when it comes to agile funding projects. Finance and IT often come together to plan, budget, and measure ROI, he says.
"If you stop and think about it, when I deploy a new tech, or new tech-driven capability, by its very definition, I try to define a product, get it into production and enhance it," Penkoski said. "That’s a difficult concept for a traditional organization to grapple with when they’re on an annual planning cycle, and measure ROI on an annual basis."
Finance will have to work much closer with IT on a continual basis, he said, "to develop all new muscles for how best to think of the investment with agile methods."
Additionally, when innovative technology is integrated across an organization, Penkoski looks at that body of work as a portfolio. "Many real-time decisions need to occur to find which investments will get how much money, and at what time and pace," he said. "That will bring together business processes and efforts, and it’s an incredible opportunity for the CFO to really reposition and fulfill that catalyst role."
Over the years, Penkoski has noticed a divide between types of CFOs in this regard. "There’s a camp who fundamentally believe in, and work for, organizations where the ability to put management and decision-making data in front of the right people in a digestible fashion is their highest priority," he said.
The second category is comprised of CFOs who are de facto COOs or CSOs, who fundamentally consider the finance function to enable business strategy first.
Both groups, Penkoski said, have the same ability to impart positive technological change in their organizations’ operations.
For a non-tech savvy CFO to stay on top of the changing tech landscape, Penkoski has found many tactics to be very effective. The first is to think of the future of the finance function: namely, assembling a team of tech-savvy finance professionals.
"Think of the traditional finance organization," Penkoski said. "It’s very transaction-oriented. You need not only people who excel, but who are also very tech-savvy."
It’s almost impossible for anybody to stay on top of the constantly evolving world of finance and technology, Penkoski admitted, but a full collaboration between IT and finance will create a "learning and development cycle that benefits the whole enterprise."