Generative A.I. aside, not all CFOs have cracked the code on digitisation, Kristof Stouthuysen says.
Thirteen years ago, Stouthuysen received his Ph.D. in managerial accounting, and he has continued his research on the finance field and CFOs. As an academic researcher and consultant, he’s studied hundreds of finance chiefs and senior finance leaders from more than 20 industries at global companies with revenues ranging from $250 million to more than $20 billion.
He’s currently a professor of management accounting and digital finance at Vlerick Business School and KU Leuven and director of the Centre for Financial Leadership and Digital Transformation at Vlerick.
In his latest report in the MIT Sloan Management Review, Stouthuysen shares findings from his research for the past six years on digital transformation in the finance function. In the report, he points to seven key capabilities CFOs must develop to become digital leaders:
- Use advanced analytics to meet strategic needs
- Unpack and explain machine learning outputs
- Collaborate on data management across functions
- Embed analytics skills
- Explore and experiment
- Manage cultural change
- Include everyone on the team in digital efforts
And Stouthuysen shared three top reasons why some CFOs are slow to take full advantage of new technology:
1) How they define themselves. “Many CFOs still act as if their main task is just reporting numbers,” Stouthuysen says. “The traditional bookkeeping type of CFO spends too much time on transactional processes.” Then it becomes a perception issue.
“On the one hand, you have a CFO who doesn’t take the initiative to start investing in digital solutions,” he explains. “And on the other hand, they’re also not perceived by their colleagues as being real business partners.” The digital finance leaders Stouthuysen has spoken with consider technology and advanced analytics to be strategic priorities for protecting company assets and achieving measurably better business outcomes. “If the CFO doesn’t step up, it will be difficult to build a case for the digital transformation of the finance office,” he says.
2) Not understanding the technology. “If you look at one of the major technologies behind advanced analytics—machine learning—it is still an unknown technique for many finance leaders,” Stouthuysen says. “They still do not grasp the basics behind it, what the technology is capable of, and how to get started with it.”
He provides the following example in the report: “The CFO of a global car manufacturer found that explainability and interpretability were among the main challenges of using A.I. and machine learning to detect financial and credit risks. In such a context, it’s critical to understand how a model is making predictions in order to confirm that it’s not employing proxies for any demographic characteristics that would be illegal or unethical to consider when weighing a credit application.”
3) Lack of advanced analytics skills in the finance organisation. “Yes, you need a strong CFO that has a vision, that knows the technology,” Stouthuysen says. “But a strong CFO also needs to have strong talent for execution.” Digitally mature finance offices have upskilling programs to provide additional training, he says.
An example from the report: “To develop a team with a stronger orientation toward analytics, the CFO of an international hotel group stopped hiring candidates with traditional finance or accounting backgrounds and instead recruited data scientists, mathematicians, and data engineers. She provided these new hires with on-the-job training in the fundamentals of budgeting, financial analysis, compliance, risk management, and other accounting principles. Senior practitioners were required to spend at least one day a week helping to develop the accounting and finance skills of the new staff members.”
Final thoughts? “A successful CFO realises that the technology evolutions that we’re currently facing might bring lots of advantages to the finance office,” Stouthuysen says. “That CFO is very much open for change.” He also says a CFO shouldn’t just jump into any new technology solution, “but should have a real strategy on the way forward.”
This article was written by Sheryl Estrada from Fortune and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.
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