The Digital Finance Imperative, new global research from Chartered Global Management Accountant® (CGMA), found that CFOs need to rethink how they measure the health of their corporations in the digital age. According to the study, while the majority of a corporation’s value derives from intangible assets such as customer sentiment and brand, few finance professionals surveyed say they can access the right data to measure and monitor these critical elements of their business – just 25% in the case of customer sentiment.
“Choosing the right KPIs is hard," notes Richard Wong, Vice President of Finance, LinkedIn. "You need to make sure that the KPIs you choose are measurable, impact the business and that the underlying data is right. The worst thing you can do is not have any KPIs. In the beginning, your KPIs may be very simple, and may need to change or evolve over time, but at least you will have KPIs to focus on, to track progress.”
The report, sponsored by Oracle, argues that measuring the business value of such intangible assets through innovative KPIs is only going to grow in importance as digitally enabled business models proliferate. Intangible assets have increased in importance over the last several years and today account for 80% of the value of companies that make up the S&P 500 Index. The respondents to the global survey believe the top value drivers for their businesses are customer satisfaction (76%), quality of business processes (64%) and customer relationships (63%).
However, the survey found that finance professionals are struggling to access and analyze data around intangible assets. For instance, only 25% of respondents are able to assemble and analyze data on customer sentiment and only 20% have access to data about the impact of their brand on their business. Only a third of all respondents say they can measure the quality of their business process.
“Finance is running the risk of sitting on the sidelines while more digitally-savvy lines of business deliver the insights that management needs to differentiate and grow,” notes Rondy Ng, Senior Vice President, Oracle Applications Development. “By unlocking the value of data using a modern and complete cloud-based ERP and performance management system, finance can seize the unique opportunity to become the new digital guidance system for the enterprise.”
When asked about the extent to which finance has been realigned to support new value drivers, only 15% of respondents reported that finance in their organization has been fully engaged with regards to ‘providing non-financial measures of progress towards strategic intent’ or ‘the identification of the intangibles to be measured and managed to ensure long term success.’
Dr. Noel Tagoe, FCMA, CGMA, Executive Director of Education at CIMA and one of the report’s authors, commented, “As digitization makes it more difficult for businesses to differentiate and earn a premium, the quality of decision making has become essential to success, and finance can take the lead in ensuring this quality. It has the enterprise-wide overview and skill required to work with diverse internal stakeholders, ensuring that the business assembles, analyzes, and applies data to improve performance.”
The study features insights from 744 executives in 34 countries. Respondents include executives from world-leading companies including LinkedIn, Walmart eCommerce, Shell, and Southwest Airlines.