Data-Management-Data-Alchemy

CFO corner: The CFO’s guide to data alchemy – seven axioms for turning gold into rhodium

The most precious metals have historically been rhodium, platinum, gold, ruthenium and iridium. These metals aren’t necessarily rare, but require highly specialized processes and equipment to be extracted, refined and used.

However, since we are now living in the age of digital technology, I don’t believe these are still the most precious materials on earth. There is currently a trend in extracting and using another invaluable resource. It’s called “data.” Data is the new gold, information from that data is the new platinum and actionable insight generated from that information is the new rhodium.

The role of the CFO

Data allows businesses to become more competitive, tap into new markets, better develop products and services and generally increase profits.

But just like ore, data alone is useless. It must be processed and shaped into something useful before it can add value to an enterprise. This transformation of data or “data alchemy” is often described as big data, Internet of Things, predictive analytics, machine learning and artificial intelligence.

Companies are turning to their C-level leaders to lead this operation, specifically, the CFO.

A CFO’s traditional role has been to focus on the end-state aspects of financials. But in today’s data-rich environment, CFOs are expected to understand and use data to predict, influence and ultimately shape financial results.

So how can modern CFOs turn data into actionable insights?

Here are seven axioms for CFOs keen on practising data alchemy:

Axiom 1: Look for data everywhere  

Data is everywhere. CFOs must step away from their general ledger lens and start analyzing all the data that exists outside of the chart of accounts. CFOs must also identify which data sources are essential for enterprise success. The data requirements for a project-based company, for instance, would require more in-depth insights into every project, past and present, and a software company would be more interested in data that helps to analyze new versus recurring revenues.

Most importantly, CFOs must be able to cross-compare multiple sources of micro and macro-level data to identify correlation and causation.

Axiom 2: Identify drivers of success

I often ask my clients, “beyond financials, what drives company success?” I’m often met with silence.

There are typically 15 to 20 non-financial metrics that encompass drivers of enterprise performance. CFOs must find what they are and how to ensure that data is continually collected, shared and used. If you are unsure or just starting your data journey, use this as a starting gate and go from there!

An example is a client who supplies OEM auto parts to major vehicle manufacturers. After analyzing data, they determined one of the most critical drivers of success was “on-time, in-full delivery.” Once the data on that single metric was collected and posted daily to the enterprise dashboard, the enterprise’s focus completely changed.

 

Read the rest of the article in the Ottawa Business Journal

 

Dr. Vijay JogVijay Jog is the founder and president of Corporate Renaissance Group (CRGroup), a Quisitive Company (QUIS) and Ottawa-based firm dedicated to transforming business management and performance. He has led CRGroup’s growth in areas of strategic finance, corporate performance and dashboards, strategy design and execution and helping clients bridge the gap between technology and finance. Dr. Jog consults with organizations around the world and is a leading author and speaker in the areas of corporate performance and the office of the CFO.

For additional resources, visit crgroup.com/model-cfo