Digital Transformation Investment - Right Practice CFO

Digital Transformation Investment – Right Practice #3

Challenge: CFOs are concerned with generating a reasonable return on their digital transformation investments. Many CFOs acknowledge the underperformance of their digital transformation investments in order to accomplish a successful digital transformation program.

Market General Approach

CFOs of many enterprises concentrate on reducing blunders by establishing rigorous controls and gates for the consecutive funding of digital transformation programs.

Right Practice

Leading CFOs are more interested in designing a decision-making environment in which investments will work and digital transformation will exceed leadership expectations.  Such an environment will enable making [external] risk identification as a core part of appraising business cases and will provide resources and funding for “highly possible to achieve” digital transformation programs.

Digital Transformation Versus Other Initiatives

Many different factors like emerging technologies, regulatory changes, and investors active approach create an environment that making investment decisions not any easier. In this environment, CFOs with growth agenda are investing in digital transformation programs. In return, CFOs expect to receive reasonable returns from their digital transformation investments. For instance, a CFO has several business cases before him/her to invest in digital transformation, logistics renewal, expanding production or customer service capacity. Choosing which investment to make and creating an environment where the investment can succeed is very challenging. In reality, most of the investments will miss initial targets let alone exceed them. However, choosing which investment will create the competitive advantage in the mid-term is the number 1 question for CFOs.

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Finance Decision Making Has To Change

Traditionally, most CFOs try to reduce the number of investments that do not fulfil the leadership expectations. Therefore, their teams focus heavily on appraising the business cases that make the leadership sure that they do not bet on the wrong horse. This is a defensive approach that slows down the growth of even successful enterprises.

WHAT IF CFOs let their teams concentrate on investments that promote drastic growth measures like what Digital Transformation promises. To achieve the complete potential of the digital transformation investments, they start to focus on designing a decision-making environment in which investments will work and digital transformation will exceed leadership expectations.

To design such environment, CFOs will encourage [external] risk identification as a core part of appraising business cases and will provide resources and funding for “highly possible to achieve” digital transformation programs.

In this newly designed environment, CFOs enable making funds available for exploratory initiatives QUICK, identifying funding adjustments EARLY, cancel underperforming investments FAST and redirect funds to in-progress programs that need more resources NOW.

Happy to discuss this further if it makes sense to you. Or even if you disagree, happy to hear your thoughts on this.

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