A Digital Commerce Transformation Call to Action for CFOs

The Digital Age is upon us and digital commerce is a primary catalyst to the disruption underway. To succeed, businesses must embrace weaving digital technologies into their business models and move quickly to transform to be more in tune with the voice of their customers. This is a journey that will evolve over the next several years where change will play out at unprecedented speed.

There is increasing awareness in the C-suite of the impact this change is dictating and many now see the need for a digital strategy that is board of directors-driven. This is evidenced in a recent survey from McKinsey & Company that reveals top executives are moving their digital strategies from something to be considered to now actively preparing for faster-paced enterprise deployment. The survey shows a majority of CIOs, CEOs and CMOs are now involved with digital projects; and that a significant number of executives believe digitalization will play a prime role in driving organizational change for the next several years.

I often see the role of the CFO left out of these discussions and yet their role is vitally important. Digital initiatives require a different approach to funding, execution, goal setting, and measurement than traditional “IT projects” of the past.

Here are three key points for CFOs to lead their companies to succeed in the digital evolution.

First, CFOs should actively participate in the creation of a digital strategy. It’s important to be informed and educated on all aspects of the digital strategy crafted for your organization so that the proper funding can be appropriated. Diving into this initiative will pay important dividends to your team.

Since there are few role model organizations to follow, most CFOs need to seek out new sources of information to assist in validating their funding approach. Industry analyst firms such as Forrester and Gartner are publishing valuable research on these topics today, as well as consulting firms such as CapGemini. Gaining access to this research as well as to key influencers for inquiries can pay big dividends as an outside voice of validation. Likewise, industry trade associations and social media sites such as LinkedIn provide a wealth of data and discussion topics surrounding digital transformation and digital strategy. All of this material must be assessed for relevancy to apply to your organization, but should be actively pursued on a regular basis.

Second, as a part of the digital strategy, recognize this transformational change is a multi-year corporate-wide journey, not a one-and-done technology project. Gone are the days of year-over-year budgeting models that reflect slow moving change and predicable trends! One of the benefits of investing in the research is to acquire relevant data points to use in setting an appropriate level of investment and gleaning related returns. For example, according to industry research conducted by Forrester Research, the level of investment for a core eCommerce solution is significant and has a broad range.

In general, CFOs must break out of historical funding and budgeting patterns and seriously weigh the risk of underfunding these initiatives. When an organization recognizes that digital transformation demands investments in leadership, technology, resource allocations, marketing technologies and programs, outside services, business process improvements, business policies, logistics, etc., by default they will demand a higher price tag than just the technology alone. Likewise, these technologies are a part of the new foundation that must be laid to become a digitally enabled organization of the future.

Unfortunately for the past several years, often due to a lack of a digital strategy, many organizations have allowed a “bolt-on” approach to digital enablement. While this may have initially required less investment, this approach has resulted in a fragmented landscape that not only becomes increasingly difficult to maintain and manage, but negatively impacts an organizations ability to respond quickly to opportunities or challenges as they arise. If you are currently operating in this model, an important part of your current strategy must be to intentionally move out from under this condition. According to the same Forrester Research survey cited earlier: “Digital is more than a bolt-on strategy. Bolt-on digital is like painting go-fast stripes on a car; it doesn’t change the underlying business. To become a digital business requires enterprise transformation.”

Third, CFO leadership in setting goals and measuring success is a powerful component to speeding up transformation, gaining alignment across resources, and in creating a new digital culture in your organization. Yet, In the McKinsey & Company study referenced earlier, few executives surveyed said their company has accountability measures such as targets and incentives in place for digitalization. And very few feel that their organization understands the exact value which digital efforts can deliver.

A well-executed digital strategy has a strong ROI attached to it. For example, an important metric for many organizations is average order value (AOV). Research now shows that the average online order value ranges from 10% to 40+% higher than offline order values. Some organizations have already succeeded in moving 30 to 60% of their order acquisition to their online channels. If you apply the math of just these two metrics, there is no question that the new revenue opportunity is significant. Yet, this opportunity will probably level out within the next 2 to 3 years, so speed of transformation is of the essence.

The Forrester Research survey referenced also illustrates the positive impact of embracing digital commerce for both revenue improvements and cost savings. With this information, it is easy to see the significant benefits of digital enablement. As more and more organizations transform and achieve these metrics, the negative implications for those who do not will become even more dramatic.

The sheer velocity and the invasive nature of digital transformation can be overwhelming to many organizations, especially as they begin to formulate a strategy to power through it. The CFO plays a vital role to lead proper funding, goal setting, and in measuring results for their organizations. The stronger this role is embraced, the more powerful the impact CFOs will have on their organizations and in contributing to their future growth.

Linda co-founded Insite Software in 2004, bringing 25 years of experience in industries focusing on manufacturing and distribution. She brings a unique understanding of eCommerce initiatives, business process, and ERP knowledge, as well as an extensive financial background to Insite Software. She offers Insite’s clients a unique blend of expertise, helping them to set and evolve their eCommerce strategy to deliver B2B or B2C commerce sites.