How analytics can help shape strategy
Analyzing market data shows organizations how to change to meet customer needs, enabling them to switch course early if markets change and they find themselves on the wrong track.
Every CFO craves reliable information, so it’s no surprise that the desire to improve data management and analytics is the top reason why CFOs are working more closely with CIOs — who often report to the finance boss. Good data is critical to containing risk and making sound strategic decisions.
Digital devices — for example, in the hands of sales staff or even delivery drivers — can upload real-time information on sales to corporate servers. The benefits are manifold. Finance chiefs can monitor cash flow. Designers can learn what customers like — or don’t. Marketers can measure the impact of their campaigns. And operations can reorder fast-selling items and streamline logistics. But effective information automation requires easy-to-use interfaces, great systems, seamless flows between different types of device, and lots of storage and analysis capacity.
The amount of digital information increases tenfold every five years. Online cloud storage offers a good, affordable solution. But that raises a vital accounting issue that companies must address: IT systems used to count as capital expenditure (capex), but renting online storage and number-crunching capacity is operating expenditure (opex). Companies and accounting need to adapt to the new world.
Analytics and shaping strategy
Great analytics do more than contribute to controlling financial risk: they can transform the capacity of a company to recognize and seize business opportunities.
Data analytics have become the key to corporate competitive advantage. The first company to identify emerging demand trends and tailor its operations to delivery can quickly establish itself as the go-to source for particular goods or services, and secure premium pricing. Having the right digital infrastructure is vital. A strong relationship between the CIO and the CFO is increasingly critical to the health of any business — and the ability to grasp emerging opportunities.
Nowhere is this rule better understood than in ecommerce. Nils Chrestin, CFO of Global Fashion Group, an online retailer active in 27 emerging markets, commented, “Data-driven analytics really drive a business like ours.”
Combining data and making it available to different functions in a form that can be used in a variety of ways is a critical innovation enabler. It doesn’t just make it easier to design products and services that customers want. As Chrestin emphasized, it enables staff to think about process innovation, the development of new marketing channels and so on. It spurs continuous innovation across the business.
To meet the challenges of this new digital environment, there are five key questions that CFOs in emerging markets should prioritize:
- Does our current reporting structure give sufficient emphasis to IT as a creator of value?
- Are we using data and analytics effectively to solve major business challenges and leverage its predictive capabilities?
- How are we ensuring skills within the finance function are being kept up to date to face new digital challenges and seize opportunities?
- Are we striking the right balance between opex and capex in our IT operating model?
- Are we treating cybersecurity as a risk management issue and taking a strategic approach to prioritizing assets for protection?