A recent Gartner study finds the CFO is a top technology decision maker – if not the leading decision maker – in many organizations. Not surprisingly, the CFO is becoming an integral stakeholder in digital analytics investments as well. Anametrix CFO, Jeff Chase, shares his thoughts on this emerging trend and discusses how CFOs can use their expanded power to further drive predictable revenue for their companies.
In your recent article, The CFO in an Age of Digital Analytics, you refer to a famous quote from Einstein: “Information isn’t knowledge”. How has this concept guided your thinking as a CFO?
It’s astounding how much time and resources we expend compiling data, managing spreadsheets and crunching numbers. There’s little time left to analyze and dive down to a deeper level of insight, knowledge and understanding. But that’s where the value really is: the “whys” and “hows” and “whats” that lie buried within the data.
The path from information to knowledge requires mastery of your subject matter. It is essential to focus on root causes and impacts, not just data itself. To do this, you need tools that allow you to focus your resources on analysis, rather than data compilation and number crunching. You need to push for not just understanding performance, but also establishing predictability, reliability, and communication of metrics across your organization. That’s vital for creating forecasts as well as giving insights and information to the CEO, the board, and the management team, so you can truly be a partner to the business in all those aspects. Many CFOs stop at the level of ERP, warehouse, and CRM data. I’m finding out there’s much more we can do in areas such as marketing effectiveness.
Why do you care about digital analytics as a CFO?
There are four broad categories of analytics we spend most of our time on: financial, operational, HR, and customer. Historically CFOs have maintained most of their focus on the first three. When finance folks get together, we often talk about corporate performance management. Some is future looking, but a lot of it is historical. Yet businesses really only exist for their customers – acquiring and retaining them. So, shouldn’t digital analytics about the customer come first?
New digital analytics tools help us key in on two of the most important business questions: how do we get more customers? and how do we keep the ones we have? I don’t think CFOs have focused sufficiently on these things in the past. Marketing has been a black box and unexplored territory for finance to a large degree. As the flood of data from social media, web and other digital channels continues to grow, we can no longer afford to stand back. It is critical for the organization to analyze marketing spend to understand where we are throwing away money and where we should spend more. We need to have a good handle on both the lagging and leading indicators to ensure marketing is a predictable driver of revenue.
How can the office of the CFO support investments in digital analytics?
CFOs have to adapt and learn about these new technologies that, for a small incremental cost, can lower costs, deliver higher revenue – or both!
Marketing effectiveness needs to go from being qualitatively assessed, to being quantitatively measured to achieve accountability and predictability. The CFO should partner with the CMO to make that happen. The CFO should advocate the need for digital analytics tools with IT, the management team, and marketing departments. This way, you’ll help establish a more data-driven approach across your company, and everyone will thank you for it down the road.
How do you think CFOs can be more informed on the “do’s and don’ts” of cloud-based solutions and digital analytics options?
• Look into the data security of whatever cloud-based analytics tools you’re using. Things like the technology platform, the encryption model, the content, and privacy policies are important. Also, what happens in case of failure? Cloud-based analytics vendors should be transparent about these things and have policies in place.
• Pay attention to the accelerating trend to move data to the cloud. There’s an inevitable move to become faster and more nimble, and if not real-time, “as-fast-as-needed” time.
• Don’t stress/focus so much about lagging indicators, or historical data. We need to measure and understand marketing effectiveness in real-time so we can rapidly course correct before wasting precious resources.
• Don’t ignore growth opportunities within e-commerce, social media, and web traffic. Even if you don’t sell your goods and services through the web, you really need to quantify and track what’s happening online with respect to your business and your market segment.
• Don’t underestimate the power and value of simplifying the collection of all your data using a single tool. It will be tremendously cost-effective. And, these savings will allow you to reallocate your resources for more important things, like analysis, strategy, prediction, and execution.
• Don’t wait. Barriers to entry are low for collecting and leveraging data, so the smaller, more nimble players will start taking market share from the bigger players who haven’t been taking advantage of the information available to them.
Why is it important to look at everything together, to discover “new truths”?
When you pull different types of data together, you see – often for the first time ever – all your information in one place. You find yourself answering questions you’ve never even thought to ask before. You might find out a certain low-priority product drives great customer lifetime value, while a high-priority one actually creates problems. You might learn a campaign shows high ROI for one type of customer but not another. There are a great number of things you now have visibility into to uncover new relationships, gain unique insights, and truly increase marketing effectiveness.
Any words of wisdom for your CFO colleagues based on your recent experiences in digital analytics?
The new digital analytics paradigm delivers greater accessibility into – as well as crucial insights around – customer-related data for all stakeholders.
The costs are minimal; and the payback is potentially great. So, if you haven’t considered digital analytics before, I say, the time is now.