A CFO's Strategic Playbook for Agility and Innovation in 2024

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The surge in enterprise cloud expenditure, a 20% YoY increase to be exact, is just a reflection of the transformative role of CFOs in this cloud revolution. In this competitive business climate, CFOs emerge as strategic linchpins, steering organisations toward agility and innovation. In this blog post, we explore the profound impact of cloud dynamics on the CFO’s playbook and discuss top leadership strategies for a cloud-native environment.

We will discuss:

  • The shift in mindset needed from the modern CFO
  • How CFOs can adapt and drive transformation through technology functions like application modernization
  • Key trends CFOs will need to keep up with in 2024 and a suggested roadmap

Adapting to the Cloud Revolution

The COVID-19 pandemic emphasised the need for businesses to adapt quickly, emphasising financial flexibility for survival. Cloud computing’s emergence has revolutionised business operations, allowing companies to allocate financial resources to digital transformation projects. This prompts a reassessment of administrative tasks within the finance department currently termed as “Process Optimisation”.

Gartner recommends financial institutions transition from on-premise to cloud-based systems for increased flexibility and agility. CFOs find themselves at the forefront, grappling with questions about data security, scalability, and the flexibility of chosen cloud solutions.

Key Questions CFOs Address:

How to ensure the security of financial data in the cloud?

Does the chosen cloud infrastructure scale to accommodate growing financial needs?

What is the flexibility of the chosen cloud solution?

Is it a case of “if we need to migrate to the cloud” or “when do we need to migrate”?

The Venture Capitalist Mindset

The venture capitalist mindset advocated in 2019, involves taking calculated risks and prioritising long-term value creation. Wearing the “venture capitalist” hat means you as a CFO can approach funding for innovative projects differently. Instead of relying solely on the traditional annual budgeting process, which can be slow and inflexible, you lead a more dynamic funding approach. This involves setting aside a separate pool of resources specifically for investments in tech and innovation. This way, funding decisions can be made quickly and adjusted frequently, allowing the company to stay agile and competitive. Additionally, the CFO can guide business leaders on how to execute these projects in an agile way—by testing ideas in short phases and closely monitoring the results. This approach allows for smarter, more adaptable investments in innovation.

CFOs, particularly in the tech sector, can leverage this mindset for informed investment decisions, especially in research and development, acquisitions, and partnerships contributing to the company’s competitive advantage.

The same applies to taking decisions on pivoting to new technologies. While moving to the cloud is not much up for debate in most organisations, that stance is slowly changing in 2024. The CFOs of today are considering more than just the price tag attached to the cloud. In fact some have experienced savings following their cloud exit. The decision of whether to migrate to the cloud at all is still controversial, with cases where the cloud may actually increase infrastructure costs and accumulate in overall operational expenses. CFOs need to manage the shift from capex to opex in today’s day and age.

The outcomes depend on the strategies employed, requiring you as a finance leader, to be thoroughly informed about the associated risks.

Future-Proofing the Finance Function

The continued adoption of artificial intelligence

“With chatbots, real-time answering and immediate reconciliation, all consolidation between supplier and customer and payments can become automatic.” - Marco Torrente, CFO at WebBeds on how AI is improving customer experience. He predicts that ML will automate decision-making in cash flow and revenue forecasting and balance stakeholder expectations.

40% of the C-suite leaders surveyed by KPMG plan to invest $10 million or more in Gen AI for their tax departments in the next 12 months. As a CFO, you are poised perfectly to implement strategies that can have a ripple effect across the entire company. You have access to every single business unit inside the company and can drive change to help leaders across the board understand the financial insights and how they translate to various business functions and strategic decisions. The impact of AI on business units like finance has a potent effect on the company both at the technology platform level and business enablement level.

McKinsey’s Guide to Gen AI for executives like yourself sheds light on how you can approach Gen AI in this new chapter.

Here are key strategies suggested to create value at the enterprise level.

  • As a CFO, it’s crucial to recognize the evolving landscape and the increasing importance of technology, particularly Gen AI, in your role as a finance leader. Proactively engage in learning and innovation in emerging technologies, positioning yourself as a pioneer in driving financial innovation. Cultivate an open mindset within your teams to foster visionary thinking and ensure preparedness for allocating resources effectively for future growth. For this reason, it might be necessary to modernise your tech stack. All the while keep sustainability in mind, otherwise modernisation might lead to further losses.
  • In the Gen AI world, your strategic resource planning is paramount. Direct funds to initiatives that promise substantial impacts on the finance function, prioritising high-value projects within the constraints of finite capital. This underscores your pivotal role in maximising overall value creation.
  • Furthermore, actively experiment with Gen AI. Allocate a modest budget to enhance the learning experience for both you and your teams. Identify specific use cases with the potential to significantly impact the finance function, allowing for a swift understanding of the practical opportunities presented by Gen AI. For example, use a combination of conventional approaches to process optimization augmented with tools like process and task mining.

Remember, AI-enhanced productivity is increasing rapidly through seamless adoption and integration. The downside risks to watch out for concern data security and integrity.

Talent Acquisition and Retention - Why Should CFOs Care?

According to McKinsey survey data on CFOs, already 64 percent said they support employee capability building. But there is more room for growth. The modern finance leader recognizes that a skilled and motivated workforce is integral to the overall success of the organisation. Talent acquisition, the process of identifying and attracting qualified individuals, and retention, the strategies to keep valuable employees within the company, have become critical aspects of the CFO’s purview.

It has been found that re-allocation of human capital matters just as much as that of financial capital. In fact reallocating talent to match their value to where the business really needs it, positions you for higher shareholder returns up to 60% compared with your competitors, according to recent data from Harvard Business Review.

CFOs today actively seek and value finance professionals with expertise in cloud technologies, collaborating with HR to attract talent. Agile workforce planning, investment in cloud skills development, competitive compensation, data-driven talent analytics, cultural alignment with innovation, and talent retention amid mergers and acquisitions are important now.

In order for frontline staff to contribute high-value work in a finance function where more jobs and processes are automated, they require systematic training and upskilling programs. You might also need to lead a cultural shift in order to persuade formerly risk-averse financial staff members that, in certain cases, experimenting with AI in novel ways could ultimately prove beneficial, in addition to providing training and upskilling.

The Integration of ESG metrics - Tapping the Cloud for Sustainability

Stakeholder, employee, and consumer opinions increasingly value ESG, especially environmental and social factors. The C-suite’s capabilities lie outside of sustainability expertise. However, their strength lies in their communication prowess to share ESG data, promote sustainability performance and create and protect stakeholder and shareholder value. The use of existing cloud ERP, HR and finance systems and tools, can facilitate smoother, data-driven communication across different functions within an organisation.

The incorporation of Environmental, Social, and Governance (ESG) metrics into the finance team’s responsibilities reflects a fundamental shift in modern CFO roles. CFOs can actively integrate ESG considerations into financial strategies, addressing environmental impact, social responsibility, and governance practices. This involves assessing sustainability factors, aligning financial modelling with eco-friendly initiatives, and ensuring transparent governance practices. The benefits include enhanced risk management, improved stakeholder relations, and increased access to capital. For example, Cloud platforms can include features that help monitor and ensure compliance with evolving ESG standards and regulations, allowing CFOs to stay ahead of compliance requirements.

However, there are a couple of challenges attached to these new priorities include data standardisation and the challenge of balancing short-term and long-term goals. Your finance team’s commitment to ESG integration brings with it a holistic approach that positions finance as a driver of responsible and resilient business operations.

How Might a CFO Adapt to Technological Advancements such as App Modernization?

Modernising business applications is hardly new. It’s been kicking around for more than 15 years. What does it look like for you as a CFO to get your hands on the modernization process today?

  • As a CFO, you would diligently analyse cloud costs every month, diving deep into the expenses associated with various cloud services. Your role involves directing the CIO, CTO, or technical leadership to explore alternatives or provide guidance to align with AI implementations for optimising costs.
  • Continual evaluation and benchmarking of cloud service providers would be essential for you to stay abreast of evolving market trends, innovations, and competitive pricing. This knowledge empowers you to make strategic decisions regarding the selection and retention of cloud vendors, aligning these choices with your organisation’s overarching goals.
  • You play a crucial role in tracking efficiency gains through application modernization strategies. By instituting a system of cost accountability, you encourage department heads and project managers to monitor and manage their respective cloud budgets. This decentralised approach ensures that cost considerations are seamlessly integrated into daily operations.

  • In terms of investment strategies concerning technology, your responsibilities include deciding between leasing and buying and conducting a thorough analysis of cloud vendors based on market growth. It’s imperative to align these technology investments with the broader business objectives of your organisation.
  • To effectively manage cloud costs, you rely on advanced cloud cost management tools such as AWS Cost Explorer, CloudCheckr, nOps, Scalr, Nutanix Beam and Microsoft Azure Cost Management and billing. These tools provide real-time monitoring of use and allocation data, along with insights into potential savings. This up-to-date and accurate financial information empowers you to make well-informed decisions regarding cloud-related expenses.
  • Considering the benefits of a hybrid cloud, you might investigate how it might meet your organisation’s unique needs. Embracing an even-handed approach to cloud adoption allows you to balance costs with flexibility and scalability, ensuring optimal outcomes for your organisation.
  • Engaging in scenario planning, as mentioned earlier, is a proactive step you take, participating in activities where different technological and financial scenarios for the app modernization process are explored. This strategic foresight enables you to develop contingency plans and make well-considered choices in the face of rapidly changing business environments.

Case Study Example- Ruth Porat

One notable example of a CFO who successfully drove transformation through app modernization is Ruth Porat, who serves as the CFO of Alphabet Inc., the parent company of Google. Ruth Porat played a key role in driving financial discipline and operational efficiency within Google. As part of her responsibilities, she led efforts in modernising various aspects of the company’s operations, including its technology infrastructure and applications.

Under Porat’s leadership, Google implemented strategic initiatives to enhance its cloud services and streamline its business processes. This included optimising applications and adopting modern technologies to improve overall efficiency. The focus on app modernization allowed Google to respond more effectively to the evolving demands of the tech industry and positioned the company for sustained growth.

In an interview with Yahoo Finance in 2021, she mentioned the three things you need to consider when it comes to the process of investment and capital planning- analytics for long-term growth support, rigorous stack-ranking within the needed areas, and operational excellence. Her promotion has put her in charge of supervising the risky hardware and services ventures within Google’s portfolio.

Ruth Porat’s success in leveraging app modernization as a transformative strategy showcases the critical role CFOs can play in driving technological advancements to enhance business performance on a global scale.

Final thoughts.

Continuous collaboration with CIOs will undoubtedly be needed to ramp up investments in cybersecurity. So will the need for CFOs to have a clear governance framework around systems and data. Both of these should be a crucial priority for CFOs in 2024. As modern CFOs embrace new tools for financial management, the realisation sets in that staying in the status quo won’t cut it. Choosing the right partners, especially those offering expert advice, is the key to unlocking the full benefits of tools and cutting-edge tech, helping CFOs seamlessly blend technology, save costs, and make smart decisions.

Facing challenges in cloud cost management, modernization, or adapting to new technologies? Reach out for expert assistance.

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