The Exciting Evolution of the CFO in Business Transformation

Jim Marous (00:00):

Hello, and welcome to Banking Transformed. The top podcast in retail banking. I'm your host, Jim Marous, owner and CEO of the Digital Banking Report, and co-publisher of The Financial Brand.

Jim Marous (00:20):

As part of the digital transformation process occurring to financial institutions, CFOs must increasingly leverage technology and data analytics to become a strategic partner to leaders across the organization, driving organizational success.

Jim Marous (00:36):

Beyond optimizing financial performance and streamlining operations, finance operations can now, play an instrumental role in the innovation process, sustainability reporting, and identifying new growth opportunities.

Jim Marous (00:49):

I'm really excited to have Monica Proothi, partner and global finance transformation lead for IBM Consulting on the Banking Transformed Podcast.

Jim Marous (01:00):

We discuss how the finance function has evolved from reactionary transactional work to value generating roles and strategic engagement.

Jim Marous (01:10):

The role of finance is transforming as business models are adjusting to the introduction of advanced technologies, the application of data and analytics, and the increased focus on customer experience.

Jim Marous (01:21):

More than ever, finance is taking center stage as organizations strive to adapt to changing market conditions, improve their performance, and deliver value to their customers.

Jim Marous (01:34):

Bottom line, today's CFO must embrace change, be willing to accept and take risks, and partner with leaders across the entire organization to become future ready.

Jim Marous (01:47):

So, Monica, before we get started, can you share a bit about yourself and your role at IBM Consulting, as well as how IBM works with financial institutions to be better positioned to be future ready?

Monica Proothi (02:00):

Yeah, thank you, Jim. It's a pleasure to be here today. So, my name is Monica Proothi. I am based out of New York City. I lead our global finance transformation practice for IBM.

Monica Proothi (02:09):

And really that's everything from CFO advisory, operating model, BPO, ERP modernization, new and emerging data, kind of the landscape of everything that goes and across end-to-end finance.

Monica Proothi (02:24):

And a little bit about my background is I've been in the finance transformation world for about 20 years now, and that's been across both industry and consulting roles.

Monica Proothi (02:34):

In the industry side, I spent 10 years in banking and capital markets. And then in the consulting side, 10 years there with a strong focus in financial services.

Jim Marous (02:45):

So, it's interesting because the theme of this year's SAP Sapphire event was the importance of business evolution and the transformation to help organizations become more future ready.

Jim Marous (02:57):

Within this theme, there was a discussion around how CFOs are emerging as finance transformation leaders. Can you explain that a little bit?

Monica Proothi (03:06):

Yeah, absolutely. So, the role of the CFO has changed. It is gone from being counters to storytellers. And what I mean from that is we've gone from this kind of foundational role focused on reporting, reconciling, planning, and it's expanded.

Monica Proothi (03:22):

So, it's not that that's gone away, but the actual role and the skills required has really expanded around there because now, finance is playing more of a role of providing insights, partnering with the business.

Monica Proothi (03:35):

So, we're no longer reporting the news and informing the business. We are now, creating the news and partnering with the business. So, really shifting from transactional to relationship type work.

Monica Proothi (03:47):

And finance leaders, they're providing decision support to the business through data and through insight. So, if you think of it as kind of like four layers, you've got data, and then reporting, and then analytics, and then driving insights, which will lead to that kind of decision support layer.

Monica Proothi (04:06):

CFOs really need to be ensuring then that their organization can produce that. And their people can be able to understand what is my new purpose, what is my new role, how can I perform in this role? And what are the skills that I then need, require to do that?

Monica Proothi (04:23):

So, it's one, is the role has changed and two, is now, making sure your organization can support that new role.

Jim Marous (04:30):

Well, you talk about the new role and the new responsibilities and how the finance area has really transformed significantly.

Jim Marous (04:39):

But to be honest with you, at least most financial institutions that I deal with, the CFOs have been in place for quite a long time. How does IBM help organizations, help their CFOs and their finance divisions to actually change their legacy thinking?

Jim Marous (04:57):

Because we talk about it often that organizations can buy all the technology in the world, but if the organization itself is not transforming to be more of a change agent, more embracing of what's happening in the marketplace, it all kind of falls flat compared to what it could do.

Jim Marous (05:16):

How do you work with organizations to really have the finance function change from what they've done in the past?

Monica Proothi (05:23):

Yeah. And look, I mean, biggest misconception is that finance people think that they can transform finance. You need that partnership, you need change management. You need to understand how to transform and how to innovate.

Monica Proothi (05:36):

And that's the role that IBM is really playing, is helping CFOs to understand that and helping them to understand they now, need to propel business value. And what does that mean and how do you partner with someone for that?

Monica Proothi (05:52):

A CFO is a steward of investment capital. They're responsible for the ROI, they're responsible for the decisions that are being made. They may not be held accountable for the project, but they are for what's being invested and the return that they're going to get.

Monica Proothi (06:09):

So, they're being asked to deliver more for less. And how do you do that? Do you have to think about labor arbitrage, process arbitrage, and technology arbitrage?

Monica Proothi (06:22):

We always jump straight to labor arbitrage or straight to technology, but you actually need all three. And all three of those will really help a CFO to reprioritize their investment spend.

Jim Marous (06:35):

It's interesting because banking traditionally looks at ways to reduce costs, and that was really pretty much the role of the financier. But now, it's, as you mentioned, prioritizing investments to what should be done going forward.

Jim Marous (06:52):

So, really what you're doing is you're putting the context of what is needed from the CFO in the context of what they're used to from the past, but really expanding it tremendously as to what the potential could be in the future. Correct?

Monica Proothi (07:06):

That's right. That's right. And think of it this way, the activities no longer just sit within finance. The finance activities actually sit across the entire enterprise. Gartner coined it as xP&A. I mean, we've been calling it Integrated Business Planning.

Monica Proothi (07:21):

Like if you think about xP&A or FP&A, what that really means, it's that planning part. But now, with so much around data and insights, we're actually driving and starting the feedback loop where finance can predict and support marketing to support sales, who's then going to drive supply chain.

Monica Proothi (07:42):

And then it goes back into kind of that feedback loop because it goes into reporting. So, finance is actually now, at the forefront.

Monica Proothi (07:47):

And there was a recent statistic when companies fostered a strategic focus and alignment to finance functions. Within the company mission, they saw 49% higher revenue growth and 20 times higher in EBITDA growth over a five-year period.

Monica Proothi (08:05):

So, really finance is playing a much more important role at the forefront and across the entire enterprise.

Jim Marous (08:13):

That's interesting because when we work with organizations, we talk about innovation and we talk about change management. Many times, we have to rethink who we include at the table at the very front end.

Jim Marous (08:25):

I was a marker in the banking days when I was a banker, and I remember being really happy about the fact that I had a finance background because I realized that I was all often competing or going against the financier about how we spend our money.

Jim Marous (08:41):

What you're actually saying is that's no longer the case. If you bring financing on the front end, they are much more powerful and add a lot more to the overall business change model than if they're just brought in at the back end to see do the numbers work.

Monica Proothi (08:58):

Yeah, that's right. And as I mentioned, CFOs are the stewards of investment capital. They're responsible for the ROI, they're accountable for what a company is investing in and the return that they're going to get.

Monica Proothi (09:08):

So, if you think about innovation, innovation could be much more than like a cool new thing like generative AI. It could also, be a service, a new way of working, some type of creating new experiences and driving revenue growth.

Monica Proothi (09:21):

And CFOs are responsible for embedding that into transformation. So, embedding finance transformation and innovation into the culture.

Monica Proothi (09:30):

So, if you think about it as a flywheel. You've got the one big push, like the big bang, that doesn't work anymore. That's not going to push the flywheel. You have to push little incremental ones and eventually it starts to go on its own.

Monica Proothi (09:44):

And you start to have innovation and these little Ts and these little transformation projects embedded into the culture. It almost becomes self-funding as well, because you get the value back and then you can look at maybe something bigger across the organization as it continues to go.

Monica Proothi (10:00):

The other big thing as we think about innovation, there's a lot of focus on sustainability in ESG. Finance is even playing a part there. They have to become the masters on quality and integrity and integrity for external metrics, which includes sustainable reporting for finance.

Monica Proothi (10:16):

So, finance now, wears multiple hats and the people who sit within there and the talent have to be able to adapt to this innovation and to this new culture.

Monica Proothi (10:26):

So, a big part of that is going to be around setting up an agile rapid collaboration, rapid transparency to be able to constantly update skills, understand, are we still aligned to the business strategy? It changes every six weeks. And so, innovation really, it's embedded in the culture.

Jim Marous (10:48):

So, the SAP Sapphire Conference in Orlando was also, all about ERPs, especially as we are in a time of economic uncertainty. How does IBM plan to continue leveraging SAP's technology to drive innovation and growth in the future?

Monica Proothi (11:06):

So, ERP modernization, SAP, they're long-term commitments. So, one of the ways that IBM is looking at helping to drive is to think about competitive differentiation. Everyone is implementing a core, everyone is moving to the cloud.

Monica Proothi (11:20):

So, now, it's building the wrapper around the core, so that our clients can become competitive differentiators.

Monica Proothi (11:27):

There is a recent announcement. SAP is embedding IBM Watson AI into their solutions. They're going to provide AI driven insights and automation to help accelerate innovation.

Monica Proothi (11:39):

That's part of a wrapper. There could be multiple different wrappers. It could be a combination of cloud, data, emerging tech. Everything has to now, be built around the core to make sure that our clients can be competitive and have the advantage.

Jim Marous (11:57):

So, you really have to have the core be flexible, agile, ability to pivot as soon as new technologies take place. When implementing cloud-based ERP systems, how can finance professionals unlock the greatest possible value? How is this different from what has been done in the past and what are some of the opportunities out there today?

Monica Proothi (12:21):

So, people are at the heart of this whole thing. They need to be willing, they need to be able. I really like this analogy of a house because it's people, process, data, and technology.

Monica Proothi (12:32):

Now, everyone always jumps to data is the foundation. I like to think of it as the ERP and the modern flexible architecture is actually your foundation. You need that core.

Monica Proothi (12:45):

And then data is actually like the utility. So, think about electricity and water and how it kind of flows through the house and keeps the lights on. You need data to keep the lights on as part of your electricity.

Monica Proothi (12:57):

And then you've got workflows. So, you're not going to create a room that's not connected to another room. Then you walk in and it's siloed. You have to walk out to get into another room. You want to have this open, transparent floor plan, so the workflow flows.

Monica Proothi (13:13):

And then you've got your people. So, you have people in a new house, they need to know how to operate their new smart technology house. So, they've got to be willing and able.

Monica Proothi (13:22):

There are a set of things that drive human willingness. So, having the right incentives, believing that the work matters, cultivating this leadership to be coaches and empowering their people, understanding their purpose.

Monica Proothi (13:33):

And then there are a set of things that drive ability. So, are we getting the right skills that we need? Have we created the right operating model, the right environment? Do we have the right tools and accelerators in place for people to be successful?

Monica Proothi (13:46):

So, it's really all of those things where we're going to unlock the greatest value. But you do have to have that core there where we think about the cloud-based ERP.

Jim Marous (13:57):

So, you've been singing this tune around finance transformation for quite some time. I talked to you before the podcast started about the fact that there's no lack of information out there about what Monica feels about finance transformation.

Jim Marous (14:10):

And sometimes I'm sure you feel like you're talking to a brick wall and other times there's an amazing breakthrough.

Jim Marous (14:18):

What challenges have you seen in the marketplace as we embark upon finance transformation? And more importantly, what challenges do CFOs face as they try to become change agents in their organizations?

Monica Proothi (14:34):

That's a great question. So, there's challenges around data and making sure the data quality is right.

Monica Proothi (14:40):

I think we've spent so much time on setting up a data warehouse where you have structured data that's been filtered. And then you set up a data lake that becomes unstructured data. And we now, think of it as a little bit of a data swamp. And now, there's data lake houses that has both structured and unstructured in Databricks.

Monica Proothi (14:59):

So, there's all these different pieces. So, data is definitely one of the biggest challenges and the hardest challenges for our clients to kind of overcome.

Monica Proothi (15:08):

And the second biggest challenge is really around change management and cultivation of the people. Because you can spend a hundred million dollars on an ERP technology and get nothing out of it.

Monica Proothi (15:19):

I think the other really big thing though is it takes three years to implement some of these new technologies, five years. And the world changes in six weeks.

Monica Proothi (15:30):

So, it's, like I said, building that core, even building an agile operating model around this to be flexible in order to quickly adapt to the changing environments. COVID, inflation, possible recession.

Monica Proothi (15:45):

We don't know what's coming. So, we've really got to make sure that our clients can pivot quickly and are not just going down this road and in three years from now, is the next time they can pivot.

Jim Marous (15:56):

So, I'm going to throw something your way because my recognition and my awareness of the finance function is they're very specific. And I'm going to say anal in the old way and saying that they really want perfection.

Jim Marous (16:09):

Well, a lot of this is not a perfection game anymore. I mean, if you just look at data and analytics, if an organization's waiting to move forward until their data is completely clean and completely in the right format, they'll never move forward.

Jim Marous (16:24):

What challenges do you see when CFOs really have to change their mindset to not be in as perfection minded and also, maybe building small solutions that can be implemented in a shorter amount of time with a really good ROI and then move forward the iterative process rather than the big bang theory?

Monica Proothi (16:45):

Yeah, absolutely. I mean, it's all about that agile iterative process. Looking at small wins, quick wins where you can get immediate value. Because right now, nobody wants to spend a hundred million upfront. They don't have it to spend.

Monica Proothi (16:59):

CFOs, as you said, they're perfectionists. So, if we can give them quick wins and early value along a longer transformation journey they'll see those benefits and be able to reinvest them.

Monica Proothi (17:12):

So, it really is an agile approach. You can crowdsource whether it's coming from process mining or from employees, or thought leadership from partners.

Monica Proothi (17:24):

So, you get all these ideas and kind of incubate them, figure out which ones are aligned to your strategic outcomes and initiatives for the organization end to end, and then start to build business cases around them.

Monica Proothi (17:36):

Pick one or two that you're actually going to implement, get the early value back. And then self-fund that back into an innovation fund or an innovation council that you have set up and start the process again.

Monica Proothi (17:46):

And that's this whole flywheel effect where it's just little pushes at a time where it eventually just becomes part of the culture that of course we're going to just continuously improve.

Jim Marous (17:57):

You talked about having to build a platform and an infrastructure that is both very structured from the standpoint of the direction is correct to being very flexible based on new technology that can jump at you with no notice.

Jim Marous (18:13):

A good example, the elephant in the room, is ChatGPT and the generative AI capabilities. What potential power might this new technology have as we bring it to the table?

Monica Proothi (18:28):

Yeah. I mean, the power in here is immense because reporting can be done quickly, insights can be done quickly. I mean, it's taking large data sets there.

Monica Proothi (18:37):

If we think about financial services clients in particular, there's a lot of use cases around customer disputes, virtual assistance, dispute resolution, because remember all of that as you reduce that amount of time.

Monica Proothi (18:53):

So, we've got a client where they have 3 million incoming calls, 7 million emails. And to be able to answer all of that is next to impossible. The amount of time it takes is impossible. So, it's really freeing up that working capital, being able to generate new revenue streams through ChatGPT and generative AI.

Monica Proothi (19:13):

So, again, in financial services, a lot more around fraud, retail examples, wealth examples. We are seeing more coming and we are actually putting together a blog that'll be coming out soon on that. So, I'd be happy to share and discuss more.

Jim Marous (19:28):

Well, it's funny because every day we wake up and we find new ways to use it. I mean, I'm using it every day in one way or another. It goes from finding restaurants to working with me on building contents that I'm developing on a regular basis.

Jim Marous (19:45):

But it doesn't come without threats. What threats do you see on the initial basis? Because we're not even a year old from when it got introduced in November of last year. What threats do you see on the horizon with ChatGPT?

Monica Proothi (19:58):

So, I think we need to be cautious of, again, the data sets, what's actually in there and how do we parse through what is good data and bad data. Also, obviously, around cybersecurity is going to be a big issue.

Monica Proothi (20:11):

I mean, we think about a private cloud and a public cloud, a generative AI ChatGPT is big data sets from everywhere. How do we make sure that client's data is protected in a way that we can still provide insights to them as well?

Monica Proothi (20:29):

So, I think that's probably the biggest horizon. What challenge that I see on the horizon around security.

Jim Marous (20:38):

We're coming out of the SAP Sapphire Conference in Orlando and a lot happened. So, what do you see as the biggest opportunity within organizations now, going forward in the short term and in the midterm?

Monica Proothi (20:51):

So, in the short term, I think it's going to be again, how we align competitive differentiation and as a wrapper around the core. I think that's going to be the biggest thing. How do we take SAP and combine that with AI.

Monica Proothi (21:08):

And as I mentioned, SAP is now, going to embed IBM Watson AI into their solutions to be able to provide those insights. So, that's the immediate short term, it's happening right now.

Monica Proothi (21:19):

And in the medium term, it's being able to prepare for what's next and doing that ahead of time. So, having that flexible architecture so that six weeks from now, or six months from now, when the new ChatGPT is out, we're prepared for that.

Monica Proothi (21:35):

The other really big thing, and I think this is more medium to long term, but it is coming up fast, is ensuring that our clients are quantum safe. Because quantum is coming up on the heels here and as soon as we get quantum to be able to unlock all of the data sets that are out there, just as quickly as we need that, we need quantum safe cryptography to protect everybody's data.

Jim Marous (21:59):

It's interesting because I look at this and think there are going to be some CFOs out there that are honestly scared to death because change is never easy, it's never fun, but it provides opportunity. And if you've been in the business for quite some time, this is a real major paradigm shift.

Jim Marous (22:19):

On the other hand, with the right mentality, with the right partnerships and collaborations around you, there's never been a more exciting time to be in finance because no longer you're the outlier simply saying, "No, no, no," or, "Yes, yes, yes."

Jim Marous (22:35):

You're really embedding yourself within an organization and becoming the spearhead upon which everything else is built. And the more CFO goes out and I'll say literally shaking hands with the other people within the organization and moving forward with them, it's a fun time, isn't it?

Monica Proothi (22:55):

It's an amazing time to be in finance right now. I mean, we have taken a sleepy industry and it's awoken. We're at the forefront. We get to be part of the business partnering and the team and setting the expectations up front, setting the standard for how the company is going to run. It's incredible.

Monica Proothi (23:16):

Finance is now, responsible for not just the bottom line. We are responsible for the top line, the bottom line, and the green line.

Jim Marous (23:25):

Yeah. It's an exciting time for those that embrace change. And again, this is where the collaboration comes in, where it doesn't have to be done completely by a specific CFO. It is really done in conjunction with the partnerships and the collaborations they build across the marketplace.

Monica Proothi (23:44):

That's right.

Jim Marous (23:45):

Monica, thank you so much for being on the show today. I really appreciate and look forward to speaking with you in the future about how we're doing at transforming the finance industry.

Monica Proothi (23:55):

Thank you, Jim. Thank you for having me.

Jim Marous (23:57):

Thanks for listening to Banking Transformed, the winner of three international awards for podcast excellence. If you enjoy what we're doing, please take 30 or 45 seconds to show some love in the form of a review. It helps us continue to get great guests.

Jim Marous (24:11):

Finally, be sure to catch my articles on The Financial Brand and the research we're doing for the Digital Banking Report.

Jim Marous (24:16):

This has been a production at Evergreen Podcasts. So, special thank you to our senior producer, Leah Haslage; audio engineer, Sean Rule-Hoffman; and video producer, Will Pritts.

Jim Marous (24:26):

I'm your host, Jim Marous. Until next time, remember, finance transformation is not just about new technology, it's about a new mindset.