So profound is the potential impact of data that the World Economic Forum considers it to be a new class of economic asset, akin to human capital and natural resources such as oil and gold. And like the Klondike gold rush that preceded it, data has the capacity to transform the wealth and competitiveness of sovereign states, companies and individuals. So, it is not surprising that the use and management of data weighs heavily on the minds of CFOs.
Results from FSN’s most recent Future of the Finance Function 2017 survey bears out the increasing importance of data to competitive strategy, but it also identifies a data complacency that is limiting the effective discovery and use of new sources of insight. 78% of respondents this year said decision-making has become more data driven over the last three years. But at the same time, they concede that the data remains disparate, disorganized and difficult to access.
However, the real challenge for CFOs is not the data that they know about, but the data they don’t know about. The survey found that only 40% of senior finance executives have managed to formally identify how new sources of data can give them a competitive edge. CFOs can’t add real value if they only have access to the financial information they generate themselves and it is here that CFOs and the enterprises they represent are particularly vulnerable.
So where are the data ‘nuggets’ that could transform an enterprise’s prospects for success?
Aptitude Software’s insurance customers seek to re-purpose policy, risk and actuarial data gathered to satisfy IFRS 17 accounting requirements into competitive advantage, while telecommunication businesses are leveraging customer relationship management systems to inform profitable pricing bundles and new customer offers.
Smart CFOs know that they need to look beyond traditional finance boundaries in the search for new insight and are turning to some surprising and untraditional sources. For example. “Chip-on-a-Pill” technology, which can provide data on how and when medicines are ingested, illustrates how some sectors are using new data sources to create completely new service and product possibilities. Remote data capture and location-specific information is being used in imaginative car insurance products in which the insurer can monitor car usage (speed, time of day) remotely, so called, “Telematics” and adjust premiums accordingly.
The trouble is that non-traditional sources of data do not come nicely packaged like general ledger data which is validated at source and subject to rigorous controls. New sources of data could be structured or unstructured, highly granular or sketchy and its delivery can be ‘lumpy’ rather than conforming to a regular accounting cycle. To which must be added some thorny organisational issues, for example, 48% of finance professionals say that other functions are not good at sharing data with finance.
The office of the CFO is uniquely placed to assist in the quest to turn data to competitive advantage. Collecting, synthesising, and interpreting data is second nature to the finance function. But with the world’s data doubling every two years, those organisations that fail to capitalise on the new information paradigm risk getting left behind.