apqc webinar: ibm cfo study 2010 · 2019-09-01 · excludes participants that select “don’t...

© 2010 IBM Corporation

APQC Webinar:

IBM CFO Study 2010

July 13, 2010

Presented by:Carl Nordman,IBM Institute for Business Value

© 2010 IBM Corporation2

2003

The 2010 IBM CFO Study is the fourth edition since 2003

CFO Studies

Introduction

20102005 2008


We conducted the study at the height of the economic crises andcomes to market as signs of a new economic environment emerge

Introduction

Source: IBM Institute for Business Value; Based on IMF Global Economic Outlook Sep. 2009, CPB Netherlands Bureau for Economic Policy Analysis 24 Dec. 2009, JP Morgan GlobalManufacturing PMI (Jul 2006 – Dec. 2009)

Liquidity driven crises

Real estate bubble burst

Failure of collateralized debtobligations

Drop in global commerce

Cost reduction pressures

Rising unemployment

Drop in commodity values

Dramatic drop in consumerdemand

Increased risk, volatility anduncertainty

Subdued growth

Continued cost pressures

Continued high un-employment

Reduced global commerceand demand

End-to-end stimulus andgovernment hand in business

Sovereign debt concerns

Industry restructuring andconsolidation

Continued uncertainty,elevated volatility and risk

New Economic EnvironmentGlobal Financial Crises

Economic Environment, Recent Past and Looking Forward

- 3 0 %

- 2 0 %

- 1 0 %

0 %

1 0 %

2 0 %

3 0 %

2005 06 07 08 09

Oct

Emerging Asia

EmergingEconomies

World

AdvancedEconomies

2005 06 07 08 09

Nov

EmergingEconomies

World

AdvancedEconomies

3 0

3 5

4 0

4 5

5 0

5 5

Change in IndustrialProduction

Mfg. PurchasingManager’s Index

ConsumerConfidence

Signs of Stability


IBM’s 2010 CFO Study is the largest known study of its kind, withover 1,900 participants

Geography SectorEnterprise Size (US$)

Title Scope of Role

Asia Pacific,27%

EMEA,42%

Americas,31%

Public, 13% Communications,13%

Industrial,25%

Distribution,28%

Financial Services, 20%

BU / ProgramArea, 5%

Country,27%

Region,11%

Enterprise /Global, 57%

Others, 8%SVP /Controller /Treasurer,

14%

CFO / DeputyCFO / Director,

78%

<=$500MM,25%

$501MM to$1B, 15%

>$1B to$5B, 28%

>$5B to$10B, 11%

>$20B,14%

>$10B to$20B, 7%

CFO Study 2010 Firmographics

N = 1,910Source: IBM Institute for Business Value, The Global CFO Study 2010Geography = Country of Company Headquarters

Introduction

Others, 1%


CFOs believe that industry / sector pressures will increase challengesand opportunities over the next three years

78%

74%

69%

61%

56%

40%

Pressure to reduce cost base

Need for faster decision making

Demand for external transparency (e.g.,Board, shareholders, taxpayers, regulators)

Product / service demand growth

Ability to attract and retain talent

Potential access to short-term liquidity / long-term capital

Industry / Sector Changes Over the Next Three Years

N = 1,844 to 1,905Note: Executives asked: In the next 3 years, how will the following conditions change in your industry / sector? Excludes participants that select “Don’t know”Note: Defined as enterprises selecting [5] Increase considerably and [4] on a 5-point scale where [5] Increase considerably and [1] Decrease considerablySource: IBM Institute for Business Value, The Global CFO Study 2010

CFO Agenda

As a result of these factors, ~60% of Financeorganizations believe that they have to makemajor changes to respond.


CFOs are taking a more prominent role in enterprise decisionmaking

Elevated Role of FinanceRole of Finance in Driving Decisions Across the Enterprise

45%

47%

34%

41%

53%

54%

59%

39%

44%

41%

50%

42%

26%

24%

19%

33%

Enterprise cost reduction management

Selection of key performance indicators

Capital asset management

Risk management

Prioritization of resource allocation

Strategic revenue planning

Business model innovation / reshaping

Information management strategy

Advisor (e.g., analysis and insight)Decision Maker (e.g., create the plan)

N = 1,881Source: IBM Institute for Business Value, The Global CFO Study 2010

CFO Agenda

89%

88%

84%

83%

79%

78%

78%

72%

Over 70% of CFOs believe they have anadvisory or decision making role on theEnterprise agenda.


N = 1,834Source: IBM Institute for Business Value, The Global CFO Study 2010

34%

28%

26%

21%

16%

9%

28%

35%

23%

CoreFinance

EnterpriseFocused

However, Finance needs to improve its effectiveness in order todeliver on the enterprise agenda

CFO Agenda: Importance vs. Effectiveness

2

Gap

1

3

ImportanceEffectiveness

Driving integration of informationacross the enterprise

Providing inputs into enterprisestrategy

Supporting / managing / mitigatingenterprise risk

Driving enterprise cost reduction

Strengthening compliance programsand internal controls

Driving Finance function costreduction

Executing continuous Financeprocess improvements

Developing your people in theFinance organization

Measuring / monitoring businessperformance

Rank

52% 61%

55% 83%

49% 84%

59% 75%

62% 85%

52% 80%

59% 80%

39% 73%

51% 77%

0% 20% 40% 60% 80% 100%

CFO Agenda


Enterprise focused activities have increased in importance for CFOsover the past five years – some dramatically

2005: N = 844, 2008: N = 1,195, 2010: N = 1,904Source: IBM Institute for Business Value, The Global CFO Study 2005, 2008, 2010

Importance of Enterprise Focused Activities Over Time

61%

69%

56%

40%35%

71%

84%

73%

66%62%

80%85%

80%77%

73%

Providing inputsinto enterprise

strategy

Measuring /monitoringbusiness

performance

Driving enterprisecost reduction

Supporting /managing /mitigating

enterprise risk

Driving integrationof information

across theenterprise

2005 2008 2010

1

2

93%increase

109%increase

21 3

CFO Agenda


A broader enterprise focused role requires core Finance efficiencybe in place to reliably support business insight and decision making

Addressing the Broader Enterprise Focused Role of Finance

Source: IBM Institute for Business Value, The Global CFO Study 2010

Finance Efficiency

Business Insight

Demands on Finance

Help drive enterprisecost reduction

Support riskmanagement

Partner in strategy andvalue creation

Improve access to andreduce cost of capital

Provide performanceinsight and anticipate

Finance CapabilitiesNeeded

CFO Agenda


Analysis of CFO responses against financial performance measuresidentified correlations with enablers of efficiency and business insight

Finance Efficiency and Business Insight Enablers

Low High

Corporate philosophy oninformation standards

Common Finance datadefinitions and data governance

Standard Financial chart ofaccounts

Standard / common Financeprocesses

Do not see any value inenterprise-wide standards

Enterprise-wide standardsmandated for all business units

and enforced

Not adopted Enterprise-wide > 75%



Enabler

Analytical capability (operationalplanning and forecasting)1

People / talent (effectiveness ofdeveloping people in Finance)

Technology (deployment of acommon planning platform)

Not deployed Satisfactory analytical capability

Ineffective Effective people / talent

Not deployed Deployed to a large extent

Fin

an

ce

Eff

icie

ncy

Bu

sin

ess

Insig

ht

1 Also analyzed Scenario Planning, Predictive AnalyticsSource: IBM Institute for Business Value, The Global CFO Study 2010

CFO Agenda


Four Finance profiles become apparent when participants aresegmented by efficiency and business insight

Finance Profiles


FinanceEfficiency

Business InsightLow High

Low

High

23%

12%

32%

33%

CFO Agenda


Value Integrators excel in both efficiency and business insight, whichis correlated to financial outperformance

Efficiency + Business Insight Contributes to Outperformance

Revenue Growth: N = 580; EBITDA: N = 531; ROIC: N = 501;Source: IBM Institute for Business Value, The Global CFO Study 2010

Value Integrators also have an almost20% better operating efficiency ratio thanall other companies examined.

11.3%

14.0%

12.1%

0.5%

9.4% 9.3%

> 20xmore

49%more

30%more

EBITDA5-year CAGR, 2004-2008

Revenue5-year CAGR, 2004-2008

ROIC5-year average, 2004-2008

Value Integrators

All other enterprises

CFO Agenda


Three Themes emerge from the study

Delivering efficiency through standards matters morethan ever

Providing business insight drives performanceimprovement beyond finance

The greatest rewards come from doing both well

Efficiency through standards



Theme #1

Delivering efficiency through standards mattersmore than ever



“In the next three years, change will drive thecriticality of decision support. Therefore, wemust find better ways to do transactionsupport and control activities with improvedprocesses and more automation.”

Bob DriessnackCFO, Intermec Inc.

“Finance has undertaken a number of initiatives tounderpin growth, in particular the establishment ofa shared service center. This has enabled us torespond much more quickly, close in days notweeks, undertake rapid process change andreduce costs.”

Richard YuVP Finance, Aviva-Cofco Life Insurance, Co. Ltd


Finance struggles due to structural complexity issues related toautomation and standards


Efficiency Challenges


Finance continues tospend nearly 50% of timeon transactional activities

Over 25% lack thenecessary common data

definitions and processes

Nearly 40% of enterprisesproduce financial metrics

manually

Over 35% lack a commonreporting platform


The study revealed the three most prevalent things companies havedone to improve Finance Efficiency

Finance Efficiency Accelerators



81%

33%

Enterpriseswith highFinance

efficiency

All otherenterprises

Adoption of Process Ownership

145%more

91%

62%


efficiency


Implementation of a Common Ledger andAccounting Transaction Applications

47%more

49%

29%


efficiency


Adoption of Alternative Delivery Models

69%more


55%62%

26%27%

18%10%

Change Needed

to Respond to

External Forces

Past Change

Success

62%

47%

23%

32%

14% 20%

Change Needed

to Respond to

External Forces

Past Change

Success

Enterprises that have implemented a Common Ledger andAccounting Transaction Processing system are more prepared todeal with “change”

Change Needed

No/limited Change

Moderate Change

Significant Change

No/limited Success

Moderate Success

Significant Success

Past Change Success

%CHANGEGAP*

Finance Change Readiness

15%CHANGEGAP*

Enterprises that have adopted acommon ledger across

LESS than 75% of the organization

Enterprises that have adopted acommon ledger across

MORE than 75% of the organization

Change Needed N = 1,460; Past Change Success N = 1,460* Difference or ‘gap’ between expected level of change needed and past success in managing changeNote: Significant change defined as [5] Substantial Change or [4]; Moderate Change defined as [3]; No/limited Change defined as [1] No change or [2]Note: Successful defined as [5] Very successful or [4]; Moderate Success defined as [3]; No/limited Success defined as [1] Not successful or [2]Source: IBM Institute for Business Value, The Global CFO Study 2010

-7



Alternative Delivery Models and Process Improvements go hand inhand


Impact of Alternative Delivery Models on Process Improvements

45%

55%

62%

69%

44%

38%

45%

44%

59%

30%

Benchmarked processes to external sources

Employed functional best practices

Utilized tools to automate financial workflow

Implemented a common reporting platform

Established measurement and monitoring of cross-

functional processes (e.g., order to cash) at the

activity level

Enterprises that have adopted shared services / COEs or outsourcing enterprise-wide for transactional activities

All other organizations

18%better

22%better

41%better

17%better

47%better



Effectiveness Benefits of Finance Efficiency

Enterprises that have adopted standards and increased Financeefficiency are performing better against the core finance agenda

65%

62%

61%

56%

52%

56%

48%

46%

Strengthening compliance

programs and internal

controls

Driving Finance function

cost reduction

Executing continuous

Finance process

improvement

Developing your people in

the Finance organization

Enterprises with high Finance efficiency All other enterprises


Finance Efficiency Helps theEnterprise React to External Forces

Effectiveness AgainstCore Finance Activities

N = 1,867 to 1,880Note: Defined as those enterprises selecting [5] Very Effective or [4] Effective on a 5-pointscale where [5] Very Effective and [1] IneffectiveSource: IBM Institute for Business Value, The Global CFO Study 2010

N = 1,883Note: Defined as those enterprises selecting [5] Very Well or [4] on a 5-point scale

where [5] Very Well and [1] Very Poorly

25%better

11%better

27%better

22%better

74%

62%

Enterprises with highFinance efficiency

All other enteprises

20%better


N = 1,869Note: Defined as those enterprises selecting >51% adoption rateSource: IBM Institute for Business Value, The Global CFO Study 2010


N = 1,863 to 1,889

In turn, these accelerators have the greatest impacts on standardsadoption which is the primary driver of greater Finance Efficiency

300% greater adoption ofStandard Processes

143% greater adoption ofStandard Data Defintions

Up to 159% greater adoption of aStandard Chart of Accounts

66% greater adoption ofGlobally mandated Standards


7.7%

-1.2%

Enterprises with better Finance efficiency are rewarded financially

Finance Efficiency Contributes to Financial Outperformance

Revenue Growth: N = 745; EBITDA: N = 698; ROIC: N = 791Source: IBM Institute for Business Value, The Global CFO Study 2010

11.3%

9.3%


Enterprises with high Finance efficiency


11.4%10.3%

Return on Invested Capital5-year average, 2004-2008

Revenue Growth5-year CAGR, 2004-2008


11%more

>7xmore

22%more


Theme #2

Providing business insight drives performanceimprovement beyond Finance

Business Insight


“Business analytics is one of our most criticalFinance initiatives. We need to have the rightpeople and tools and stay very close to thebusiness.”

Mike NewmanCFO, Office Depot

“For multinational companies, regulatory andpolitical changes can happen arbitrarily atany time, significantly impacting theexecution of strategy. As a result, planningmust be much more scenario-based with theability to rapidly adapt.”

Markus KistlerCFO - North Asia and China, ABB


The majority of enterprises are not able to effectively deliverbusiness insights

44% are poor to averageat anticipating external

forces

Over 50% are manuallyproducing operational

metrics

Nearly 50% lack a commonplanning platform

55% not satisfied with theiroperational planning and

forecasting analytical capability


Business Insight Challenges

Business insight


Business Insight Accelerators

Automate Production of Financial & Operational Metrics


73%

57%

Financeorganizationswith strongbusinessinsight


FinancialMetrics

28%more

61%

43%

Financeorganizationswith strongbusinessinsight


OperationalMetrics

42%more

The study revealed the three most prevalent things companies withhigher Business Insight have done to improve

53%

35%

Finance

organizations with

strong business

insight


51%more

Establish Non-Financial Data Standards

66% improvement insatisfaction with operational

planning and forecastinganalytical capability

Business insight


We found a high correlation between the use of Alternative DeliveryModels and impact on Data Improvements


Impact of Alternative Delivery Models on Data Improvements

51%

50%

50%

41%

37%

40%

38%

30%

Streamlined Finance

information delivery

through automation and

self-service (e.g., CFO

Portal)

Utilized systematic data

cleansing and auditing

Employed electronic data

capturing at the source

(e.g., electronic invoicing,

optical character

recognition, point of sale)

Adopted third-party service

provider enabling tools

(e.g., workflow tools,

dashboards)



38%better

25%better

32%better

37%better



Effectiveness Benefits of Business Insight

Finance organizations with strong business insight are performingbetter against the enterprise-focused agenda

79%

71%

64%

63%

49%

54%

53%

46%

45%

30%

Measuring / monitoring

business performance

Driving enterprise cost

reduction

Providing inputs into

enterprise strategy

Supporting / managing /

mitigating enterprise risk

Driving integration of

information across the

enterprise

Finance organizations with strong business insight All other enterprises

Business insight

Business Insight Helps theEnterprise Anticipate External Forces

Effectiveness AgainstEnterprise Focused Activities

N = 1,458 to 1,469Note: Defined as those enterprises selecting [5] Very Effective or [4], on a 5-point scalewhere [5] Very Effective and [1] IneffectiveSource: IBM Institute for Business Value, The Global CFO Study 2010

N = 1,471Note: Defined as those enterprises selecting [5] Very Well or [4], on a 5-point scale

where [5] Very Well and [1] Very Poorly

71%

51%

Finance

organizations withstrong business

insight


46%better

34%better

39%better

40%better

63%better

39%better


48%

73%

28%

21%24%

5%

Change Needed

to Respond to

External Forces

Past Change

Success

61%52%

24%32%

14% 15%

Change Needed

to Respond to

External Forces

Past Change

Success

Finance organizations with strong business insight have greaterreadiness to address “change”

Change Needed

No/limited Change

Moderate Change

Significant Change

No/limited Success

Moderate Success

Significant Success

Past Change Success

%CHANGEGAP*

Finance Change Readiness

9%CHANGEGAP*

All Other EnterprisesFinance Organizations with

Strong Business Insight

Change Needed N = 1,478; Past Change Success N = 1,478* Difference or ‘gap’ between expected level of change needed and past success in managing changeNote: Significant change defined as [5] Substantial Change or [4]; Moderate Change defined as [3]; No/limited Change defined as [1] No change or [2]Note: Successful defined as [5] Very successful or [4]; Moderate Success defined as [3]; No/limited Success defined as [1] Not successful or [2]Source: IBM Institute for Business Value, The Global CFO Study 2010

-25

Benefits


Decision making supported by strong business insight is alsorewarded financially

Business Insight Contributes to Financial Outperformance

Revenue Growth: N = 580; EBITDA: N = 435; ROIC: N = 606Source: IBM Institute for Business Value, The Global CFO Study 2010

Business insight

7.3%

0.6%

11.9%

9.0%

Finance organizations with strong business insight


12.5%

9.4%




33%more

32%more

> 12xmore


Theme #3

The greatest rewards come from doing both well

The Value Integrator


“Our job is to focus the enterprise on makingtimely, risk-based decisions by providingaccess to the right business-relevantinformation and insight-driven analytics.”

Mark ButhmanCFO, Kimberly Clark Corporation

“What makes companies stand out from oneanother is the ability to use analytics acrossthe end-to-end business model. Greatertransparency from one end of the businessto the other is key.”

Dennis HickeyVP - Corporate Controller, Colgate Palmolive


Those that excel in both efficiency and business insight are moreeffective than those who excel in only one dimension

N = 1,454 to 1,469Source: IBM Institute for Business Value, The Global CFO Study 2008, 2010

Effectiveness Across the Full CFO Agenda

Driving integration of information acrossthe enterprise

Providing inputs into enterprise strategy

Supporting / managing / mitigatingenterprise risk

Value Integrators

Driving enterprise cost reduction

Strengthening compliance programsand internal controls

Driving Finance function cost reduction

Executing continuous Finance processimprovements

Developing your people in the Financeorganization

Measuring / monitoring businessperformance

Percent more effective than baseline

140%100%80%60%0% 20% 40%

DisciplinedOperators19% Better

ConstrainedAdvisors

33% Better

ValueIntegrators59% Better

Scorekeepers(Baseline)

0%

120%

Constrained Advisors

Disciplined Operators

Scorekeepers



Value Integrators drive broader improvements in data andanalytics, process, and technology

Streamlined information delivery

Value Integrators

Percent Adopted

100%80%60%20% 40%

Constrained Advisors

Disciplined Operators

Electronic data capture at the source

Systematic data cleansing and auditing

Business Risks in Performance Reporting

Employed Functional Best Practices

Utilized automated workflow tools

Measurement & monitoring of processes

Common reporting platform

Common planning platform

What do Value Integrators do differently?

% More32%

35%

31%

22%

31%

25%

41%

31%

22%

0%

Data andAnalytics

Process

Technology




There is clear evidence Value Integrators have greater analyticalmaturity spend a higher % of time dedicated to analytics


CFO Study Profiles

Analytical Maturity against Time spent on Analytics

Value Integrator

% Time Analyics 30%

Analytics Maturity 9.1

ScoreKeeper

% Time Analytics:

22%

Analytics Maturity: 6.8

Disciplined Operator

% Time Analytics:

26%


Constrained Advisor

% Time Analytics:

28%


6

6.5

7

7.5

8

8.5

9

9.5

10

20 22 24 26 28 30

% Finance Workload Distribution for Analytics

Ad

op

tio

no

fA

dv

an

ce

dA

na

lyti

cs

Analytics Maturity:

Financial Analytics Planning & Forecasting Scenario Planning Predictive Analytics Event Based Automated Alerts



Part of what contributes to a shift in workload distribution to moreanalytics is alternative delivery models (SSC, COC/COE)

Finance Workload Distribution

28%

46%

49%

31%

26%

25%

41%

28%

26%

0% 20% 40% 60% 80% 100%

IBM F&A outsourcing clients

All Enterprises with

SSC/Outsourcing adoption >75%

All participants

Transactional activities

Control (and risk) activities

Decision support / performance management


13% more =- 34 days/year- 3 days/month

2% more =- 5.25 days/year- .4 days/month

Time spent ondecision support



Companies that have adopted Alternative Delivery Models fortransaction processing are more likely to consider this for controls,risk and decision support activities


Impact of Alternative Delivery Models on Other Finance Activities

64%

50%

17%

15%

29%

17%

4%

3%


Decision support /

performance

management activities


Decision support /

performance

management activities



184%better

194%better

325%better

400%better

Use ofenterprise-wideshared services

for:

Use ofenterprise-wide

processoutsourcing for:



Those that excel in both efficiency and business insight contribute toeven better financial outperformance

Efficiency + Business Insight Contributes to Outperformance

Revenue Growth: N = 580; EBITDA: N = 531; ROIC: N = 501;Source: IBM Institute for Business Value, The Global CFO Study 2010

Value Integrators also have an almost20% better operating efficiency ratio thanall other companies examined.




Fin

an

ce

Eff

icie

nc

y

Business Insight

9.8%

14.0%

9.0% 9.3%

3.9%

11.3%

-2.1% -0.1%

Business Insight

10.2%

12.1%

7.8% 11.6%



Conclusions: The Path Forward?

The Path Forward



Top Imperatives for Building the Finance Team for Tomorrow

CFO’s indicated their top priorities for building their finance team oftomorrow include addressing talent, leadership and insight training

N = 1,478Note: Defined as those enterprises selecting as either 1st, 2nd or 3rd PrioritySource: IBM Institute for Business Value, The Global CFO Study 2010

81%

62%

58%

50%

26%

12%

Attract and retain the

right talent

Develop leadership

Provide business

analytics and insights

training

Maintain expert process

know ledge

Balance high-value skills

w ith cost

Manage virtual/remote

w ork and related

succession planning Finance organizations lacking strong businessinsight were 16% more likely to be addressinganalytics training

52%

61%

Finance

organizations with

strong businessinsight


Business Analytics andInsight Training

16%more

Top Imperatives

The Path Forward



The Path Forward

Paths to Higher Value

CFOs aspiring to evolve their Finance Model to higher capabilityshould address performance gaps with specific action plans

FinanceEfficiency

Business Insight

Low High

Low

High

Value Integrators can maintaintheir advantage through a programof continuous improvement tosustain capabilities and value

Constrained Advisors have goodbusiness insight, constrained bystructural complexity, thereforeaddress process and datastandards to improve efficiency,accuracy and speed

High efficiency enabled by processand Finance data standardssuggests Disciplined Operatorsfocus on maturing business insightand partnering capabilities

Scorekeepers can attempt a directpath to become Value Integrators.This will involve establishingFinance efficiency whilesimultaneously building businessinsight capabilities. Alternatively, astaged approach can also be done

?


The Path Forward

Provocative questions that emerge when considering transformationopportunities

What is your corporatephilosophy on Process and Data

Standards?

Does your organization havesufficient analytical skills?

How confident are you that yourorganization is focused on the

right financial metrics?

How accurate are your financialforecasts?

Is Data and Information viewed as aCorporate Asset?

What can Finance do to breakthrough the Transaction

processing barrier?

How can CFO’s build a winningbusiness case for driving Finance

Transformation?

What criteria should be used toprioritize Finance transformationprojects – is ROI enough or even

right?


THANK YOU!

To continue the conversation, join us at

www.ibm.com/cfostudy2010

The Path Forward


apqc webinar: ibm cfo study 2010 · 2019-09-01 · excludes participants that select “don’t...

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