Data: Digital transformation fuel for the CFOs office

Ernie Martin: [0:04]
So thank you, thank you very much Madhurima for that excellent and warm introduction. And so thanks, guys for joining us here at Radiance. 2022. So let’s jump right in. So data is everywhere. And so the lack of quality data and availability have on the digital transformation plans of the CFOs. Office, what are the potential risks? And so let me ask you for a Shilpam, what are those potential risks for the CFOs office when they’re trying to wrap their arms around data for data governance?

Shilpam Ahuja: [00:36]
That’s an interesting question. Actually, talking about data, I would like to highlight the recent survey that’s done by Workday, which is like, which reveals like how finance leaders are looking into investing in digital transformation, in order to address the growing data challenges. And you know, the results of that survey were that majority of CFOs, they mentioned that the biggest gap in their organization today is that they are not able to take our critical and informed decision because of the lack of availability of data. And also that has resulted in delayed product launches and missed financial forecast. I think having data in order is key. And an organizational insights are only as good as the quality completeness and accessibility of the data. I would like to highlight only and, you know, my experience of dealing with the CXOs for the CPG industry recently, where they wanted to embark towards the digital journey, because their end to end AR was completely manual. But when when we spoke with the AR GPO, we figured out that their master data is completely messed up. So we actually, you know, try to walk that with them that you know, as long as your customer hierarchies are not updated, or your AB contacts are not updated, then the tool will only give you so much and it won’t be optimized. So I think that both the projects should run in parallel in order to have the optimum benefits. That’s what we propose to them. Because if we even delay the digital transformation, then the benefits would get delayed. So and I think in this example, right, if we are not able to manage the data quality, well, then it results in a lot of time, which is being spent on non-value-added tasks like data cleansing, data, aggregation, and reconciliation. And finally, despite having the two, you end up doing manual reporting. So I think an under-investment in data definitely leads to increasing operating costs, and real regulatory risks.

Ernie Martin: [02:56]
So the risks, the risks are real. They’re worth acknowledging. And so Jack, let me go to you. And so you work with CFOs around leadership. And so what are those challenges that CFOs face when they’re trying to wrap their arms around data governance,

Jack Sweeney: [03:12]
right? So I was thinking about this. And what I do is I interview CFO for a podcast half for the last seven years, we’re up to 800 episodes now. So what I’ll be provocative here, and their biggest challenge is what is probably commonly known as impostor syndrome. And I’ll give you an example or some context as to why what I’m getting at here. If you go back 15 years, 20 years, there have been conferences that talk about the changing role of the CFO. In 2006, there was a book called Reinventing the CFO by Jeremy Hope, he had interviewed several 100 CFOs took them in depth to talk about what’s happening with their role. Now think about that. That’s 2006. That’s before the cloud really came to be what it is. That’s certainly before digital transformation was going to work like that. And what suddenly there’d always be a slide up there saying look at all the stakeholders they have to build relationships with. So seven years ago, when I did began the podcast, my notion was finance leaders really need to begin to talk about what they do differently. They need to connect with broader constituencies, but they need to build relationships that they never had before. So to bring it back to why I think they struggle with impostor syndrome, particularly in the middle market. There are so many CFOs who and I always think of the David Byrne song once in a lifetime where you may find yourself if you’re a CFO, you may find yourself a jerk So in the national sales conference for your company, you may find yourself sitting across at lunchtime from your largest customer, you may find yourself in a breif session with your customer support team. And again, these are these are places that the CFO from 20 years ago never sat or had to be. But CFOs today have to be part of everywhere the data is influencing decisions, and that’s hiring. That’s employee morale. That’s the customer experience. I mean, we spend so much time talking to CFOs, about how they’re measuring the customer experience. And you know what, there’s a dynamic there, where they all want to show up the other guy, they we figured out how to do this. And I always enjoy that, because that’s what’s exciting right now in finance, and to see the leaders get excited about it. But what stops them? What’s the challenge? I don’t, I shouldn’t be at this table. I don’t want to go to your sales conference. Why, because they feel like, that’s not my role. It is though, it’s a

sprawling role today that they play, and it’s really an important role. But their leadership voice has to extend much further than it used to. So that’s mine.

Ernie Martin: [06:18]
Right, And that’s, and that’s a good, that’s a good way to put it. So, as CFOs, as leaders step in to that role of leadership, and they begin to work with stakeholders and other other folks in their organization at the C suite level. There’s a lot of stuff all of a sudden on their plate. And so some may look at it and see it as a lot of noise. And so Jack, continuing on that, on that take that you had, how do leaders how to CFOs cut through the clutter and the noise and discern what’s important, and what’s simply a distraction.

Jack Sweeney: [06:55]
Right. And and I want to just share with you, I wrote this down last Friday, I was interviewing the CFO of a company called Paycom, which is a human capital management company. The CFOs name is Adam NT, CFO Paycom. Again, he was turn back the clock three years ago, he was the VP of analytics. Now paycom had a very successful IPO last year. He came in, in again, it was a data mess. And his job was to start cleaning up the data and make things happen. But I pressed him. And I was like, Well, where do you begin? How do you what were the steps you took? And frankly, I was thinking about this panel, trying to think about this question. And I want to just read to you what he shared. He said, What I did was I began with a business question. And by the way, this episode comes out the second week of May. What should this metric say? What does that where does that data come from? How do we access that data, you have to challenge your team to force it into the construct. We didn’t have the funding or the budget to go build it out of the box. And we didn’t have the talent to do it either. But we created a cadence that over time helped us get there. And I think a lot of middle market companies are like that. And then one other comments I thought he made that were interesting. He said, I can remember one meeting where we spent an hour discussing what a booking was and what a booking wasn’t. How do we quantify a booking? Where do we put that data? So people have access to it? And how do we get people to stop using what’s on the Salesforce report and start using our data? It takes a very long time, he said, and what happened was there was a cultural shift, where people in the company began believing in the data. And he called it a cultural shift. And I thought that was interesting, because that’s not a technological really, that’s, that’s a cultural piece of this that I think exists.

Ernie Martin: [09:08]
Right, you’re right. It’s a cultural shift, I mean, change, digital transformation, transformation of any sort is difficult, it’s hard. CFOs find themselves stepping into roles that they’re not used to. And so you look at the role of the CFO 25 years ago compared to today. So Shilpam, from your perspective, as the CFO is working through and navigating, the pitfalls, the challenges, the opportunities of wrapping their arms around data, data transformation, what role does the CFO now play? In light of the fact that there’s a CTO? There’s a CIO, obviously, the CEO needs to be involved. What role does the CFO play?

Shilpam Ahuja: [09:51]
I think that’s very, you know, interesting questions. So basically, I think, to streamline the data governance strategy, it all starts from people, then a process is followed. And finally, it ends with technology. So each company needs to build on one another in order to have an effective data management strategy. And I think, in order to have a well defined data governance are, it’s very important to have the ownership and roles defined. So there must be a governance structure in place with the proper data management office, where the targeted data strategy and governance leaders who can set the overall direction and standard of the entire strategy. And I think, secondly, there should definitely be governance rules, in audit, or and they should be organized by the data domain, in their day to day work is a very simple example. So this is like if you’re embarking towards a digital transformation journey, a very simple thing of putting data in order in proper folders will take off your dependency on people and make it very process dependent. So those governance rules are very important. With whatever initiated, you’re going ahead or the value, that data is driving for you in the business. And I think it’s very important to have a data council are to actually bring together the domain leaders along with the data management office so that you can connect the data strategy with the corporate strategy and reduce the risks. So I think that ownership and roles needs to be defined. And I think the most important thing is that it should be an ongoing practice and not a short term project. So that’s the key. And anything to be successful, I think, should be linked to a transformation theme. And which is directly under the CEOs attention. So that, you know, whether it’s like a digital transformation, or it’s an ERP, upgradation, or it’s like an ERP enhancement, everything requires a good quality data. So it should be very tightly linked with the transformation initiative, that what value data is going to try. And as we are seeing a lot of elevated interdependence between the C-suites. Right, we just mentioned earlier about that. So I think that’s coming a lot when we try to see that how to ensure actually how the IT spending is aligned with the corporate strategy. And, and the key areas where we are seeing the CFO and CIO are converging these days are basically, you know, some of the key reasons like data management, data, analytical insights and qualification of cloud technology.

Ernie Martin: [12:37]
Right, and that’s interesting, because you can’t talk about digital transformation without talking about technology, right? And so we’re looking at technologies like artificial intelligence, machine learning. And so what role does that play to help the CFO and the extended team wrap their arm around data governance,

Shilpam Ahuja: [12:59]
This is actually a little technical one as well. So I’ll try to put some of my AR domain in it as well. So basically, I think AI is, is actually being deep driven within the operating muscle of an organization, not just from identifying the gaps, but also for forecasting the future and, you know, predictions that are involved. And AI is now being I think it’s moving away from being experimental to being operational. And, and we’re seeing a lot of examples where, you know, it’s picking up pace like we try and link the customer experience are the payment behavior of the customer with predictive analytics, right? So how we do that we do this very commonly in collections, where we see that you know, based on the past payment behavior, which invoice is going to get paid by when and what confidence level. So and also alternative ways, we identify that what are the likely non-pairs, which actually help us to do the customer qualification. And when we do the credit assessment, credit approvals, it helps us to keep a check on bad debt. So definitely AI is transformative, because I think it places the CFOs office in future with the data driven power of prediction. And it helps you to take a proactive action and mitigate risk, right? Going a little technical on this. I think machine actually takes data as a fear. And it teaches itself, you know, for connection. So a algorithm derives insights from the data, and it actually gets the feedback from the outcome. Now it continuously refines its capability to actually come to the higher level of certainty. So I think if the data is plugged rightly within the machine, then it can give immense process efficiencies in terms of speeding up the accounts reconciliation process, or improving the accuracy of approval process. And I think it eliminates any traces of human bias.

Ernie Martin: [15:04]
Right. And that’s, you know, that’s, that’s an interesting point. technology in and of itself is great. But if it doesn’t provide value for the organization and for the customers, you know, it’s it’s not being applied properly. So AI and machine learning, if it’s driving efficiency for the organization, and ultimately bringing value to the customer, then it’s worth doing. Right. And so, Jack, with all of this, all of this information for CFOs to consider, what are the metrics that CFOs and leadership should focus on? As they’re wrapping their arms around data governance?

Jack Sweeney: [15:42]
Yeah, is there is there a, I was going to think you were going to ask me if there was one metric that could help them understand it, whether they’re achieving data governance? I don’t know, except data integrity audits or what have you. I was thinking that, again, I’ll come back to that cultural piece, ultimately, which makes I think, the data transformation complete. And we keep on talking about value creation. The other thing I, as I was reading, like, sort of the whole point of data transformation is about value creation. To me, when I’m speaking to CFOs, you know, what they are chasing after predictability? It is it is, and maybe that leads to, you know, value creating value for sure. But, and that’s what I’d like to just say that, why all this data transfer in a CFO in the back of their head, is I can talk to my investors, I can talk to do my resource allocation properly, because we have a predictable model. If you do not have a predictable model. It’s going to be a failure. And our latest episode, there’s a CFO. And Anisha Sood, CFO of First Choice Health. And again, it’s the one we just released on Sunday, she had this really great tale about when she was a venture investor, how there was a particular company in her portfolio that had convinced the board and everyone was really sort of gung ho for the success of this company did not have a predictable model. And unfortunately, it’ll, it fails or it fails to get the price that it had originally been valued at. But it’s just a great story talking about when he don’t have a predictable model, a lot of middle market businesses do not. And that is really the CFOs role when the CEO turns to him, it’s like, is there any way we’re going to be able to predict one day how we’re going to grow? That is a conversation, I think that takes place every every Tuesday, Thursday?

Ernie Martin: [18:09]
Exactly. And so I’ll throw this question out there. And either Shilpam or Jack, you can answer it. How do you foresee finance leaders moving towards impactful data governance strategy? In the next two years, five years or so?

Shilpam Ahuja: [18:25]
Yeah, I think I would just like to put something before I actually answer this. I think without data, you’re just like another person with an opinion. Right, so and whatever we have spoken so far, about whether it’s minimizing risk, it’s maximizing return on investment, it’s building customer relationships, it’s growing revenue. I think data that does not only support business, but it is the future of the business. And I think the first thing that can be done is by unlocking the hidden value of data by getting the stakeholders buy-in. And that’s only possible if we try and project a business case that what can go wrong if the data is not corrected, what is the dollar value lost, right? If we don’t feed a high quality data while doing any transformation exercise. So I think that will help us to take proactive actions and we’ll get the leadership mind to move forward with that particular initiative. Then the second thing, I feel that it’s very important to connect the data project with the business strategy. It should I think every data project should start with what is the outcome? What is the value that we want to drive from this particular initiative? And I think a good data governance strategy is something that actually is ongoing and iterative collaboration between IT and business stakeholders. And finally, I think it’s very important to lay down the solid benefits of this governance exercise, right? And it could be in terms of accelerating digital transformation, or focus resources for value creation, or maybe make business more agile and become more customer centric.

All right, thank you so much for your time today. Have a great rest of the day. Thank you