New imperatives for CFOs. The end of the “efficiency era”.

This is a summary of the welcome address at the India CFO Summit 2021, given by Shabbir Imani,
Founder – Director Expenzing. He shared his thoughts on how recent events have impacted CFO’s
approach to digital transformation.

For the past few decades, the focus area of most business initiatives was ‘increasing financial
efficiency’. Just-in-Time inventory management, economies of scale, outsourcing, and all digital
initiatives focused on getting more done using less resources.

However, recent uncertainties caused by the COVID pandemic, US-China relations, and the
suffering economy have put a crank in what was working alright earlier. Some efficiency
systems like Just-in-Time inventory management, which take so long to work well, only hurt the
businesses this time around.

Efficiency is still important. However, it is no longer the cornerstone for business improvement
projects.

So what next?

The two new trends in business growth that seem to be emerging are:

1. Resilience: How well can you hold your ground in adversiy?
2. Agility: How fast can you adapt to the new business requirements?

How are these new trends impacting CFO’s digital initiatives?

Hyper-Automation: Iron-fist of number-based ROI no longer controls digital initiatives. This trend has opened doors for value-based digital initiatives that manage risk, increase operational efficiency, and make life easy. The industries/organizations that experience increased human resource turnover have greatly benefited from this trend. It has also helped to bring about a shift in team composition. Because of automation, organizations can bring in more analytically inclined people who are initiative drivers without increasing the total team size.

Moving beyond ERPs:  Systems like CRM, HRMS, Warehousing, etc., which were earlier available only as part of an umbrella/generic ERP offering, are now breaking away into specialized products. New and modern products offer a categorically better UM/UI, that has an immense influence on overall product adoption.

Organizations are motivated to create a larger integrated ecosystem extending beyond their own, to include the entire value chain like suppliers, banks, etc. Specialist systems help them move beyond recordkeeping and add value, like having a better process management system with a granular delegation of authority and better compliance and built-in controls. 

Approach to Application Software: 

The contemporary approach is to put in a system quickly without languishing over a long decision-making process with very few decision-makers. Organizations now prefer cloud, SaaS, products instead of on-premise, in-house, and custom-built software. Minimum investment reduces risk and allows the organization to move fast if the product is not working as expected. ‘Fail fast’, so that you can learn and move on rather than continuing to invest in a losing enterprise. 

Tools that help CFOs manage the balancing act:

1. Planning cycles to be shorter and more open to change.
2. The clarity in decision-making: To have more focus on the circle of control, keeping the circle of influence under observation, and having some bandwidth for monitoring the macro-environment.
3. New Approach to Risk Management: High risk, high pay-offs with better contingencies. 
4. ESG and Corporate governance: Customers and clients consciously choose companies doing better in this area. It is seen more often than not, that the organizations with the right controls and governance are found to be doing better than others.