In today’s global economy, finance departments are facing different barriers and multiple challenges that can slow down the procedures or distract the managers from their core identity, business value. International regulations, currency exchanges, big data (with its high volume, high velocity and veracity,) global execution costs, fast-moving markets, and uncertainties are just some of the attributes that a modern CFO should deal with. Finance departments need a Blue Ocean strategy instead of a Red Ocean approach to be successful, and innovation is the key to creating blue oceans.
Chan Kim and Renee Mauborgne in Blue Ocean strategy, define a value innovation model that demonstrates cornerstones of blue ocean strategy in the battle of cost and buyer value. They define five pillars for the Blue Ocean to distinguish it from the traditional battle war model or Red Ocean. Businesses need to plan for every single one of these pillars to be able to innovate, and the finance department will play a key role in the decision-making and strategy development to accomplish it. Organizations need to:
- Create uncontested market space
- Make the competition irrelevant
- Create and capture new demand
- Break the value-cost trade off
- Align the whole system of a firm’s activities in pursuit of differentiation and low cost
Enterprises need to be tough, be flexible and be disruptive to make an innovative decision. They need to decide on the business factors that should be reduced, raised, eliminated or created around the whole value chain to create a new value curve.
Innovation can change the world of an organization and make everything possible. But, what will it look like for a finance department and what would be their role to become a business partner in an innovative firm, which creates blue marines and removes boundaries? How should they deal with volatiles and economic uncertainties? How can they balance between global standardization and localization across teams and functions? How can they deal with big data and high volume of transactions and historic data? Today, finance department, as well as IT and other departments can eliminate the duplication of data and bring together the actual data and plan in one place. Thereby, saving time on reconciliation and enabling simulation of possible outcomes of different business options and optimizing the decisions.
Based on a report from CFO.com publishing, “shaping the finance function of tomorrow”, most of the finance executives believe that they need to spend the biggest portion of their time working closely with their operational units in guiding the businesses, but just half of them actually achieve this objective. It can prove that finance departments are still struggling with basic but necessary operations. They need to be armed with in-memory finance solutions that can empower them with real-time data analytics and decision-making, as well as real-time collaboration and reporting.
To find more about how finance executives can empower themselves with the right tools and play a vital role in business innovation and value chain, review the finance content hub. Here you will find additional research reports and valuable insights.