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4 Minute Read

The evolution of the CFO

The role of the CFO has evolved. CFO 1.0 was a historian of past performance; CFO 2.0 was a real-time analyst.

Sage’s research reveals that the future CFO (CFO 3.0) is a decision maker, driver of strategic change and a visionary of the future.

Technology is certainly a driving force behind the evolution of the CFO, though the extent at which it can transform a business is dependent on how committed the CFO is to embrace it and taking the lead.

Read on to learn more about the evolution of the CFO and how to become the CFO 3.0.

CFO 1.0: The historian

The CFO 1.0 is a historian of past performance. On their road to success, the CFO 1.0 is cautiously driving along with only the rear-view mirror to help them navigate their way.

For the CFO 1.0, the role is more traditional, focussing on the company’s financial data and past performance.

Essentially, they focus on the past, and use this data to make decisions for the future.

However, this won’t prepare a business for the future in the way that’s required to support growth.

A business’ growth is not linear, and we therefore cannot afford to use past patterns to accurately predict how the business needs to function in order to progress.

While there is still a place for this traditional approach to financial leadership within a business, forward-thinking CFOs must be able to spot issues and make decisions in real-time and predict the future with assistance from data and technology, rather than solely focussing on the past.

CFO 2.0: The real-time analyst

The CFO 2.0 has the use of modern financial tools which allows them to automate the finance function.

They can use real-time data and dashboards to provide the analysis and insights needed to help a business improve its operational and managerial performance.

As a result, they can free up capacity and allocate resources to areas that need it most and, in turn, have the time to help the business strategically.

Going back to our analogy, while the CFO 1.0 solely relies on their rear-view mirror, the CFO 2.0 is also able to look at the road ahead.

In other words, the CFO 1.0 has access to information which allows them to tell colleagues what has happened, but the CFO 2.0 can add information about why it happened and use this to aid strategy.

However, the heavy fog on their path means their visibility is limited and they are only able to make decisions in real-time. They can catch issues as they occur, but they can’t accurately see where these issues are happening ahead of time.

CFO 3.0. The visionary

We are entering a new technological era in which artificial intelligence and machine learning are used to enhance everything we do.

As a result, we are also entering a new phase for the finance function; to see us through this change, we are also seeing further evolution of the CFO.

Unlike their predecessors, the future CFO has use of the rear-view mirror, a full and clear view of the road ahead and a full digital cockpit providing information about their journey miles in advance.

When a problem seems likely to arise, the future CFO can look ahead and plot a new route.

The CFO 3.0 uses data and emerging technology to create an agile and flexible vision for the future of the business and often heads up the digital transformation of the company.

Becoming the future CFO

It’s clear that the future CFO needs to be versatile.

The role now is so much more than number-crunching, reporting, or managing, CFO 3.0 needs to possess accounting, analytical, business, and strategic thinking skills in equal parts, and must be able to use all these lanes efficiently to ensure the business is on the right route.

Data provides the tools required for accurate analysis and rapid decision making, giving CFOs everything they need to ensure positive change and growth.

The evolution of the role also means that CFOs now also play a big part in data governance, data flow and cybersecurity, among other things.

As a result, greater performance analysis is possible, innovating the business model and revealing new commercial opportunities.

For many finance leaders, having the right technology in place in the first place to allow them to deliver data-driven insights keeps them up at night.

In so many businesses, the digital technology skill gap is already a concern for CFOs who are struggling to evolve.

 

Your journey to CFO 3.0

Whether you are already embracing emerging technology and driving digital transformation in your organisation, or you’re at the start of your journey to evolve from CFO 1.0, there are a couple of steps you can take.

Start by assessing your finance function and focus on getting your digitalisation strategy in place.

One of the most important steps to take at this time is to evaluate the digital skill gap across your business, and address areas where improvement is needed in order to allow all departments of your business to grow together.

 

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