Beyond the bend: CFOs steering businesses towards a digital-first future

By Kabir Ahmed Shakir, Chief Financial Officer, Tata Communications Ltd

The role of the CFO today has undergone a notable transformation. Beyond the traditional confines of financial stewardship, the mantle of transformative leadership rests upon their shoulders. More than ever, they are the vanguards of change, ably assisting the CEO in ensuring that disruptions are not merely weathered but harnessed. The need for constantly evolving processes to cruise through uncharted waters has become more essential than ever.

CFOs as architects of the future

CFOs must embrace their role as the architects of the future – one where finance not only drives the business but also fashions a transformative legacy.

What does this entail? For one, it begins with building the muscle for futureproof thinking and action. For instance, if you are driving a car through difficult terrain and approach a bend at full speed, you will crash, and if you drive too slowly, you will be overtaken. The task then is to navigate the road ahead at the right speed while maintaining the right approach.

Applying this predicament to the corporate realm, one wonders who the mavericks were who made some defining digital transformation investment decisions five years ago, ahead of the pandemic and other socio-economic upheavals.

A great example that comes to mind is – Pokémon Go, the mobile game that became an overnight phenomenon in 2016. This was a highly addictive game that made people walk through tourist spots, front porches and odd places in their cities to capture virtual creatures on their phones. Stocks of Nintendo, the franchise owner of Pokémon, shot up over 25 per cent in the two market days after the augmented reality game’s release, as fans scoured the streets for their favourite characters. Nintendo’s valuation immediately went up by $7.5 billion in a short span of 48 hours.

Fascinating, isn’t it? But here’s the real future thinking that was the proof of the pudding. Niantic, the American software company that created the game, was able to harness the cultural touchstone that Pokémon was, thanks to the cloud infrastructure investment made many years ago. So, when the game became a global phenomenon, Niantic already had what it took for a successful launch.

Did the company possess a crystal ball that showed it the right facts and figures? Did the finance function lead the decision? While those answers may not be available, one can confidently say that it played an influential role. By ensuring the infrastructure was agile and flexible, they most likely did not have to commit upfront costs but capture the upside; i.e.; scaling up costs in line with revenue growth.

But going back to the driving example, one could glean that it is ultimately the CFO’s decision to invest for unknown turns and bends on the road. This indeed involves developing the knack for steering and accelerating the vehicle or the business at just the right speed, in blind yet calculated anticipation of the unknown. Decisions made today that have the ability to transform businesses should not just make them more profitable in five years but also help them stay relevant and future-proof.

CFOs as catalysts of digital innovation

There is enough evidence to suggest that all innovation is now digital. So, it becomes paramount that the CFO creates an environment that prepares businesses to withstand and evolve along dynamic challenges like technological progress.

As enterprises progress from digital projects to digital programs and adopt full-fledged digital roadmaps encompassing all parts of their organisations, the paradigm shift to digital presents a formidable responsibility to the CFO.

For example, in a hotel I stayed at recently, everything in the room was Wi-Fi enabled and controlled by a tablet – the lights, AC, ceiling fans, room service, and more. This made me think about how manufacturers of physical switches would have to evolve or face a major business risk. It may not even be an exaggeration to state that companies may truly thrive or die on the basis of the degree of digital evolution they undertake.

Therefore, the CFO of a business should be trusted with leading the way. One look at the four quadrants of CFOs today – Stewards, Operators, Strategists, and Catalysts suggests that it’s the latter quadrant where the crème de la crème of the top-performing Fortune 500 companies are. They’re making the decisions that are shaping the future – and the businesses they help steer are reaping the rewards of such decision making.

CFOs as drivers of disruption

The contemporary CFO must adeptly navigate the winds of change, steering the organisation towards a future where disruptive progress reigns supreme. Identifying the drivers of opportunity becomes paramount.

Case in point, a company’s online presence matters more than ever. Customers demand better products and one needs to be online to deal with this. Even if a non-digital company doesn’t have an online presence, it affects its business. Take third party rating sites such as Trip Advisor for example, where some customers are reviewing most businesses – and other customers are listening and making decisions that affect a business based on what they read.

Similarly, today a business may not be able to disrupt a competitor by offering a 30% price cut. The competition will instead come from a fundamentally different go-to-market model. This is where the CFO steps in – in laying down forward-thinking plans, and more often than not, these plans are based on digital transformation.

CFOs need to act with lower data and lesser time

Personally, a key idea, especially to do with data driven preparedness in the post pandemic era has been: “Getting comfortable with the uncomfortable and making decisions with less information and less time.”

Simply put, while before the pandemic, businesses were in a VUCA (volatility, uncertainty, complexity, and ambiguity) world, they have since been pushed into a BANI (brittle, anxious, nonlinear, and incomprehensible) world. This has led them to understand the importance of developing agility and resilience to respond to constant change. Agility of processes, for example, can be key to navigating rising inflation because it can determine how quickly a business responds to a changing market condition. For instance, if it takes 20 days for information to get from the grassroots to the decision-makers, the business will always be out of sync with the present.

On the other hand, in the current BANI world, where the economy can go faster, slower or stabilise, resilience can also act as a shock absorber that can allow businesses to comfortably absorb economic hits. So, CFOs must act swiftly to make financial strategies that are fit to compete and propel their business through these times – and further differentiate themselves in the market.

To achieve both, a considerable level of agility and resilience, it is crucial to stay informed and gather extensive information and data points. By doing so, CFOs can effectively steer their organisations forward, overcoming challenges and recognising opportunities in their rear-view mirror.

Overall, businesses need to drill into the facts they do have to produce a range of future scenarios. Traditional planning approaches need to be complemented with data-driven insights that keep planners firmly rooted in reality. The role of the informed CFO is particularly helpful on this front as he or she can use their analytic knowledge for decision analysis and game theory to figure out the likelihood of each future scenario. Embracing data-driven strategies, businesses can chart a path towards resilience, growth, and customer-centricity even amidst unpredictable circumstances.

Going beyond the bend

Organisations need a digital-first infrastructure in place. And CFOs, in my view, need to be able to spend a sizable amount of their investment budget on digital. It could simply mean that organisations have to now be prepared to fail faster and learn quicker. Future-facing CFOs need to make the decisions which will help their business evolve and be in the best place possible for whatever is ‘beyond the bend’.

In this brave new world, adaptability is not just a virtue; it is an indispensable survival skill. As the CFO takes centre stage, they lead the charge in ensuring businesses remain dynamic and ready to embrace dynamic challenges with tenacity and grace. Their artistry lies in fostering an ecosystem that not only withstands the digital tempest but thrives amidst its waves of change.

As the dawn of change beckons, CFOs are truly the architects of possibility, building a path to a brighter, more prosperous horizon.