The Temperature of Finance 2020

1. Introduction

The concept of the Analytics Business Partnerᵀᴹ outlines how Finance moves from the “table stakes” of clean and concise historical reporting, to an active strategic participant in the business by delivering insight and foresight for data driven decisions. This research paper defines the framework and assesses where Finance is on its journey to become an Analytics Business Partner.

3^rd GENERATION BUSINESS PARTNER

The role of Finance has evolved over the past 30 years, and with new labels as the Modern CFO, Next Generation Finance, etc. new requirements for Finance in the 2020s emerge. Finance needs to adopt a new skill set and toolbox to master the new requirements.

Stepping out of the role as the Recordkeeping Accountant several decades ago and into a partnering role to the business, Finance is now entering into its 3^rd generation partner in the 2020s. But how much value does Finance really add today?

Most Finance organizations still operate as a supporting partner, using a strong financial backbone combined with business acumen and collaboration to get a seat at the table. However, not many Finance groups are challenging decisions using financial information, and fewer use advanced analytics and AI to generate insight and foresight to impact the strategic direction.

This must change, with the advent of the 3^rd generation partner, the Analytics Business Partner. This concept raises the bar to engage both emerging technologies and a broader skillset.

ANALYTICS BUSINESS PARTNER (ABP)

Standing on the threshold to 2020, advanced analytics and Artificial Intelligence (AI) have become “buzz- words” in the Finance community. It’s hard to open a Finance related article without running into Big Data Analytics, AI, Predictive Analytics, etc. that are all areas Finance must master in the 20s if not already. Finance is at risk of getting side-lined as other departments (sales, operations, marketing, and even HR) will usurp major parts of the Finance job description, if Finance doesn’t advance its analytics capabilities. As such, a new skill set and toolbox needs to be adopted for Finance to become an Analytics Business Partner.

Analytics Business Partners master the tools and techniques that provide analytical insight and foresight. Elements which Finance delivers to enable the business to take data driven decisions that will impact future performance. As such, Finance must evolve into a predictive powerhouse that predicts future events and evaluates unseen risks and reveals unknown opportunities of future events.

Finance operating at this level will be the glue in the organization who business leaders always use when strategic decisions are made.

The Analytics Business Partner will become the Finance path to job security, job satisfaction, and most important, the pay-off on top-line growth and margin improvement is high for implementing an Analytics Culture for Data Driven Decisions.

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Temperature of Finance 2021 Global Survey

2. Analytics Business Partner Concept

Many articles discuss “What Is” Finance as the Trusted Advisor, the Modern CFO, or the World Class Business Partner, but common to all is they don’t describe the “How To” achieve the role. How Finance becomes a better partner is not something just described with wordy articles. A framework is needed to illustrate how Finance is to build skill sets and the toolbox to master the Analytics Business Partner.

For many years Finance has had a monopoly on reporting numbers to the business, but this monopoly no longer exists. In the digital world, data flows everywhere and Finance needs to collaborate and build relationships to gain access to all that data.

Further, many companies are creating analytics centers that will “compete” with Finance to serve the business. Unless Finance gets into the analytics and AI game, Finance risks being replaced in its FP&A functions.

The most valuable CFO competency today is knowledge of how to transform Finance from operating as a hindsight looking spreadsheet driven accounting/reporting center, to a value-add top line and forward-looking predictive powerhouse.

Traditional Finance Transformation has focused on better and more efficient reporting, building relationships, communications with impact, and developing a strong understanding of the business. Competencies like Analysis, Communication, Business Acumen and Teamwork are the skillsets sought as depicted on the figure on the next page.

Next Generation Finance Transformation builds upon these skill sets with the addition to empower Finance with value-add analytics tools and techniques that yield predictive insights for risk and opportunity management that can impact strategic decisions.

FOUNDATIONAL VS ASPIRATIONAL

It is important to emphasize that the Analytics Business Partner builds upon the core foundational competencies. Without being able to communicate clearly and concisely, report numbers timely and accurately, and understand business operations, Finance cannot start the Analytics Business Partner journey. The core skills of reporting and analysis, communication, business acumen, teamwork and collaboration fulfill the Basics and Acumen competencies for the business partner type who Support and Contribute to decision making. These are the first two steps on the Capability Ladder depicted below and the foundation for business partnering.

To rise to Influence and Impact decisions, an additional skill set and toolbox is needed to achieve the aspirational competency of Finance. Here, Finance needs a Mindset that moves from reporting hindsight information to providing insight and foresight from the use of advanced analytics including predictive and prescriptive analytics. New competencies within Intelligence and Strategy are adopted to influence decisions and impact the strategic direction for the business. These capabilities will assist Finance to challenge business decisions and play a strategic role that will transform the function from a Finance Business Partner (FBP) into achieving the Analytics Business Partner (APB).

Finance needs to act fast to incorporate Analytics/AI to turn data into insights and foresight for data driven decisions and become the Analytics Business Partner

3. Capabilities for the Analytics Business Partner

The four competencies have two capabilities each, thus totaling eight capability categories to be mastered by the Analytics Business Partner. The notation of Analytics Business Partner is achieved when Finance masters all of the 20 boxes in the capability ladder. This implies that Finance needs to develop both its “soft” and “hard” capabilities.

Soft Skill sets for the Analytics Business Partner

The soft skill sets for the Analytics Business Partner include Communication, Teamwork, Business Acumen

and Strategic Leadership.

• Communication ranges from providing a clear, concise, and transparent message, both verbal and written, using business terminologies to gain credibility by being able to simplify complexity when communicating an advanced analytics message.
  
• Teamwork ranges from being a relationship builder who gains buy-in to drive change management to being seen as the glue in the organization who is among the most active in the business leadership team when setting the strategic direction.
• Business Acumen ranges from understanding the business operating model to deep insight into how changes in other lines of business, the competitive landscape, or industrial and economic factors impact performance.
• Strategic Leadership include grasping the complexity, ambiguity, and interplay of the internal and external environment to guide the business on decisions that will impact the strategic direction.

Understanding the 20 Capabilities and how to walk up the Capability Ladder is essential for Finance to transform from a Trusted Scorekeeper to an Analytics Business Partner

Hard skill sets for the Analytics Business Partnering

The hard skill sets for Analytics Business Partner include Reporting & Analysis, Business Insight, Risk Management, and Innovating Finance.

• Report & Analysis ranges from being able to provide standard reporting compliant, accurate, and timely to use of advanced analytics for unbiased forecasting, long range modelling, and being able to predict future events.
  
• Business Insight builds upon predictive reporting with elements like cluster analysis, correlations, etc. that tell the business something not known, but if known, is valuable and used to take data driven decisions from.
• Risk Management models the future using advanced techniques such as predictive analytics and Monte Carlo Simulation to have a probabilistic conversation with the business on its high and low scenarios.
• Innovating Finance means going beyond hindsight dashboards, BI, and spreadsheet tools to more powerful analytics tools utilizing AI. Even if Finance has the most advanced Mindset it cannot do the role of the Analytics Business Partner without the advanced toolbox.

Transformation to an Analytics Business Partner who provides insight and foresight for data driven decisions is, well, a pot-of-gold! Our research of public companies shows that companies that continuously deliver reliable revenue and earnings growth are rewarded, on average, with a forward PE multiple 27% higher than the average PE multiple of a comparable market basket of companies.

Find details of the Temperature of Finance 2020 Global Survey Report HERE.

Receive the 2021 report in January, take the survey by clicking below:

Temperature of Finance 2021 Global Survey

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