Part of a Series
This Reflection is a part of the
2016 CFO of the Future Summit Report.
To see the complete report, click here.
We are living in a time bubbling over with ideas on how to improve organizational performance and value creation. From digital technologies to behavioral economics to the Internet of things to network-enabled business models and beyond, the future is primed for CFOs and finance leaders to leverage change for transformation.
Yet a central challenge for CFOs in today’s digital world is the degree to which changing societal and market conditions impact what shareholders, customers, and stakeholders view as “valuable.” As market trends shift, or as customer demands change, the nature and definition of “value” evolve as well. The digital world is upending most industries and markets, which pressures CFOs to adapt their organizations to a new value proposition and methods of producing that value. In fact, at this year’s Summit, 76 percent of attendees said they have faced “significant change” in their operating environment over the past five years, and 90 percent anticipate significant change over the next five years.
This continual adaptation presents an adaptive challenge for CFOs as they have to navigate three focal areas:
- First, the day-to-day focus of the finance function is generally on Optimizing Current Business Value – executing strategy that preserves core and organic business value while managing risk. The focus is on “current state” business models and supporting activities, such as building and scaling shared and managed services; navigating the regulatory environment; communicating with shareholders; and managing cost, cash, currency, and capital structures.
- Second, while maintaining organizational performance is a must, CFOs are increasingly taking a central role in Generating New Business Value – leading strategy that builds inorganic/new business value. The focus is on ideating and incubating future business models based on disruptive technologies and innovations, mergers and acquisitions, and strategic partnerships, as well as financing and scaling viable models.
- Third, the CFO of the future must work across the C-suite and be a central figure in Creating Dynamic Capacity – aligning the firm and its people with a continually evolving value proposition and business model. The focus here is on adopting and integrating new skills and competencies, while embedding dynamic capabilities in the firm’s structures, systems, processes, and people.
Putting all the pieces together requires a deft hand. Often the capabilities to optimize a current business model, generate new forms of value, and become more dynamic and agile can be found within an organization as it reorganizes or recombines best practices and innovations internally. But increasingly – particularly in a hyper-digital world – an organization has to reach outside its own boundaries to bring in new capabilities – whether that be ideas, technologies, collaborations, or people. These new capabilities – whether they are “home grown” or brought in from the outside – then have to be integrated into the current organization, which means CFOs of the future will have to grapple with an array of governance, structural, procedural, and cultural barriers.
Thus, for the CFO of the future there is a challenging but valuable and fruitful journey to undertake. The cases and special sections in this report will illuminate some lessons from leaders who have already embarked upon this journey; it will also capture some of the disruptive forces that are transforming the field. But above all it is designed to generate a sense of urgency and opportunity in a changing world.
Let’s get to work,
Dr. Antonio M. Oftelie
Fellow, Technology and Entrepreneurship Center at Harvard
Executive Director, Leadership for a Networked World
Harvard John A. Paulson School of Engineering and Applied Sciences
Air Zoom Pegasus 33