Finding it difficult to express the value of your digital transformation initiatives? This guide offers hands-on advice from our experience, showing you how to present your data-driven strategies effectively to your CFO.
Data is the new gold – and smart organisations know how to mine it. It unveils to you what your customers like, what’s happening in the market, and where things can be done quicker and cheaper. But it’s not always easy to explain to your CFO, who controls the budget, why putting money into making your company more data-savvy is important.
Making Your CFO Understand the Value of Data-Driven Decisions and Digital Change
You might believe that using data-driven strategies can help improve your marketing, create better products, and spot things that are slowing down your work. You may also see it as a way to save money, get rid of boring tasks, and make everything run smoother. But it can be hard when others, especially your CFO, don’t yet see this. So, how do you make it clear to your CFO?
7 Questions Your CFO Will Ask and How to Respond Effectively
To make your CFO more comfortable and address their concerns, follow the steps outlined in this guide. It will help you understand their perspective and tackle the main questions they often ask. Talking about these topics will become easier with this guide.
Use the seven steps provided to discuss your ideas for utilising data and achieving growth in a way that aligns with your CFO’s financial thinking. By clearly demonstrating the potential return on investment, you can quickly gain their support.
Now, let’s dive into the top seven questions CFOs commonly ask and learn how you can respond. This will make your CFO feel understood and give them a better grasp of the value of data and AI transformation.
1. “How long until our payback time?”
A company, let’s call them Retail Enterprise, decided to spend big on digital tech. But their CFO was worried about how long it would take to get their money back. So, what can you say to help? Here’s a way to reply:
Explaining when you’ll break even: Retail Enterprise realised the CFO was eager to understand when the benefits of increased efficiency would balance the costs of the new technology, or, when the break-even point would be achieved. They prepared concrete use cases and a detailed roadmap to present to the CFO, highlighting the anticipated business milestones.
Image: Business case calculation, ROI vs. Investment
Showcase real-life examples: To strengthen their argument, Retail Enterprise supported their case with tangible data and industry benchmarks. They showed how quicker progress in implementing data-driven initiatives could speed up the payback time. To find examples of other companies and their achievements, taking a look at Avaus’ customer references is one way to proceed. Asking stakeholders from other organisations to visit your company and share some experiences is also a good idea. Or why not listen to presentations at various industry events (Avaus Expert Talks has tens of client references available on YouTube).
The big idea: Answer the CFO’s worry about when they’ll get their money back by showing how savings from being more efficient balances out the cost of the tech. Use real-life examples and solid proof to back up what you’re saying.
2. “Can’t this wait?”
In discussing the timing of data-driven initiatives, CFOs may ask, “Can’t this wait?”. To address this, you will need to communicate the urgency and potential consequences of delaying. Begin by highlighting real-life case studies of companies that faced setbacks by postponing their data-driven transformations. The story of a company that found themselves lagging behind competitors who utilised data for informed decision-making is a potent illustration.
Calculate the impact of delaying: After establishing the urgency, it’s essential to articulate what’s at stake if data-driven initiatives are delayed. Explain to your CFO that postponing these initiatives means missing out on valuable insights, competitive advantages, and growth opportunities. Data-driven organisations are 23 times more likely to acquire customers, six times more likely to retain customers, and 19 times more likely to be profitable, according to McKinsey Global Institute.
Showcase the potential of data-driven strategies: Next, showcase how embracing data-driven strategies can directly impact the organisation’s bottom line. Highlight how data can unlock valuable insights into customer behaviour, preferences, and trends, which can in turn lead to increased revenue and cost efficiencies. This highlights the benefits of acting sooner rather than later. Don’t shy away from calculating different scenarios for proceeding slower or faster, depending on the approach taken.
Clarify the risks of delay: Finally, make it clear that delaying these initiatives carries risks, including hindering growth potential and falling behind competitors who have already embraced data-driven strategies. By emphasising the urgency and importance of digital transformation, you can help your organisation stay ahead of the curve and avoid the fate of falling behind competitors.
The big idea: When discussing data-driven transformation with your CFO, effectively communicate the urgency, highlight missed opportunities and competitive disadvantages, and emphasise the direct impact on the organisation’s bottom line. These points should underscore that, in today’s competitive landscape, data-driven initiatives can’t wait.
3. “How will it play out in reality?”
When CFOs ask “how will it play out in reality?”, they’re seeking clarity on the transformation process, resource requirements, and logistics of ongoing management. They need these details to evaluate the value, potential obstacles, and overall feasibility. So, how should you respond?
Walk them through it. Begin by outlining the steps of the transformation in a clear and concise manner, from the initial stages of planning and design to the final stages of implementation and evaluation. Using simple and clear language, free from excessive technical jargon, makes the process more relatable and easier to grasp.
Showcase the value points. It’s essential to make the benefits of the transformation tangible. Illustrate the potential improvements and efficiencies that the company can anticipate as a result of the transformation. These could range from streamlined processes to significant cost savings, or an increase in productivity.
Specify the resources needed. Be clear about the resources that will be required for a successful transformation. This includes financial investment, workforce commitment, and any necessary technology infrastructure. Detailing this ensures the CFO can better understand the return on investment and budget implications.
Communicate the timeline. Giving a realistic timeline for the transformation can set clear expectations. It provides an idea of when specific milestones will be reached and when the organisation can start seeing results. This also allows the CFO to understand the logistics of ongoing management post-implementation.
Address any concerns. Your CFO may have concerns about internal resource allocation, ongoing maintenance, and support needed for the new system. Assuring them that you have considered these factors in your planning and have robust contingency plans in place can alleviate these concerns.
Share case studies. Offering examples of successful implementations can provide reassurance. Case studies that highlight the steps taken, the challenges encountered, and how they were overcome can help the CFO visualise the journey ahead.
The big idea: Present clear implementation steps, using relatable language and case studies. Share information about timelines, roles, tasks, and resources. By adopting this approach, you can set your CFO’s mind at ease about the transformation process, making it feel more tangible and manageable.
4. “How can we be sure that this will succeed?”
Use the success of other businesses as an example. Highlight case studies of businesses that have successfully implemented similar strategies. Share their achievements, outcomes, and the positive impact on their operations. Emphasise how these success stories align with your plan and approach.
Highlight anticipated benefits. Clearly outline the potential benefits of the data-driven transformation. Discuss how it can positively impact revenue growth, cost efficiencies, customer satisfaction, or other relevant metrics. According to a study led by Erik Brynjolfsson at the Sloan School of Management at MIT, businesses that adopted data-driven decision making saw a productivity boost of 5 to 6% beyond what could be explained by other factors. This compelling statistic underlines the potential value and impact that a data-driven initiative can bring to the organisation.
Outline risk mitigation strategies. To alleviate the CFO’s concerns regarding potential risks and pitfalls, outline the strategies and measures you have implemented for risk mitigation. This approach showcases your proactive planning and dedication to addressing potential obstacles. Additionally, establish clear milestones or “evaluation points” at which you can assess progress and results. These checkpoints will make it easier to make informed decisions about future investments.
Image: Risks and potential mitigation graph and table for data-driven transformation.
Finally, don’t overlook the importance of ethics and privacy. It’s essential to address the potential ethical and privacy concerns associated with a data-driven transformation. These considerations are crucial for a CFO as they can impact the company’s reputation and compliance requirements. Assure your CFO that both internal and external teams will adhere to the highest ethical standards and data privacy regulations. For instance, all data used will be anonymized and used purely for business improvement. The external team will also comply with regulations like the GDPR and CCPA, ensuring the protection of sensitive information.
The big idea: Reassure the CFO by highlighting the success of other businesses, outlining anticipated benefits, addressing potential risks through risk mitigation strategies, and addressing any potential ethical or privacy concerns. By presenting a well-rounded plan, you can increase the CFO’s confidence in the likelihood of success for the data-driven transformation.
5. “Who will be responsible for this if it fails?”
When CFOs pose this question, they are trying to understand the accountability structure and what happens if the transformation fails. They want reassurance that you’ve taken into consideration all potential outcomes, including failure. How should you respond?
Address potential outcomes. When CFOs pose this question, they are trying to understand the accountability structure and what happens if the transformation fails. They want reassurance that you’ve taken into consideration all potential outcomes, including failure. As an initial step, outline your contingency plans and fallback options, clearly detailing how you would manage potential risks, mitigate the impacts of failure, and ensure business continuity.
Accountability is key, show your commitment to it. After laying out potential outcomes, it’s important to reassure the CFO about your willingness and readiness to step up. Your partnership model should ensure shared success and clear accountability. This assurance will ease the CFO’s mind, making clear who’s in charge if problems come up.
Now, let’s consider some recent research. The Workplace Accountability Study by Partners In Leadership found that less than 20% of people can effectively hold others accountable for meeting workplace expectations. Interestingly, 82% admitted they have limited success in holding others accountable. Additionally, 91% identified improving accountability as a top leadership development need in their organisation.
These findings show how vital accountability is for business success, especially when driving data-driven transformation. Here’s why: if only a small fraction of people can successfully hold others accountable, this could potentially limit the success of any major change, including our data-driven transformation. Furthermore, the fact that a large majority of people believe improving accountability is crucial for their organisation’s leadership development indicates how central accountability is to overall organisational effectiveness.
By taking a strong stance on accountability, you’re taking steps to overcome this common challenge. You’re showing the CFO that you’re ready to be one of the few who can successfully hold others accountable, giving them more confidence in the success of the data-driven transformation. Plus, by focusing on accountability, you’re directly addressing a top leadership development need, which could lead to wider organisational improvements.
Demonstrate you’ve taken the time to learn about other company’s failures. As you discuss accountability, remind them of the lessons learned from leading companies whose data-driven strategies fell short due to the lack of a clear chain of accountability. These real-world examples can provide valuable insights.
Underscore the value of continuous learning. Finally, underscore your commitment to continuous learning and adjustment. Reinforce the idea that you see failure not as a dead-end but as an opportunity for course corrections and improvement. This perspective can illustrate how these lessons can lead to improvements in the process and prevent similar failures in the future.
The big idea: Accountability matters and your CFO needs assurance. Highlight contingency plans, demonstrate risk mitigation strategies, and emphasise the value of learning from failure. By demonstrating your preparedness and commitment, and outlining your risk management plan, you’ll quell the CFO’s concerns and gain their trust for the data-driven transformation. Through this approach, you’ll illustrate that you’ve learned from others’ mistakes and are ready to lead the company to success.
6. “What’s the impact on our people?”
When this question arises, the first step is to acknowledge the underlying concerns. The objective is to steer the conversation from focusing solely on job cuts towards the broader benefits of digital transformation.
Reframe the narrative. Highlight that the transformation offers an opportunity to shift resources to tasks that add more value, rather than merely reducing the headcount. This shift in perception is crucial as the core goal of a data-driven transformation is to increase productivity and open avenues for business growth, not just to cut jobs.
Outline the positive changes that technology can bring. Show that automation and AI can free up employees to focus on the tasks they excel in and which that directly contribute to business growth. Underline the fact that these changes can lead to better job satisfaction and contribute to strategic growth, not just job reduction.
Support your points with real-life success stories. Supporting your points with real-life success stories is an effective way to demonstrate the potential benefits of a data-driven transformation. These stories provide concrete examples of how businesses have achieved success, overcome challenges, and implemented solutions in their own data-driven journeys. They make the concepts more relatable and practical for your CFO. For instance, Viking Line is a company that has prioritised involving personnel throughout their data-driven journey. They have taken steps to ensure that “no one is left in the terminal.” You can learn more about Viking Line’s approach and strategies by exploring their Chief Digital Officer Tom Lindberg’s expert advice on how to start the journey on becoming data-driven.
The big idea: data-driven transformation isn’t just about job cuts. It’s about improving business performance, developing employee skills, and enhancing job satisfaction. By shifting the conversation in this direction, you can reassure your CFO that it’s about strategic changes and productivity, not just cutting jobs.
Image: Systematic change management process.
Just as building an electric vehicle requires specific skills, adopting data-driven strategies demands a different set of capabilities. So, how do you explain to the CFO the need for external help?
Start by acknowledging the capabilities of your in-house team. Before discussing the need for external expertise, it is important to acknowledge and support the capabilities of your in-house team. Recognizing their skills and successes nurtures morale, teamwork, and trust within the organisation. Starting with a positive approach establishes a constructive atmosphere and ensures a balanced perspective when considering the potential advantages of seeking external assistance.
Explain the value that external experts bring. External expertise brings new ideas, improved methods, and unique tools that can significantly enhance your data-driven transformation. Their expertise complements your team’s skills and adds fresh perspectives to achieve desired outcomes, and ensures that you are mitigating risks related to quality, progress and people dependency.
Strengthen your case with real-life examples. Consider Telia Lithuania’s experience. Despite having a skilled team managing their marketing tech stack, they faced challenges due to numerous changes across different departments. By partnering with a flexible and innovative expert like Avaus, they successfully implemented Salesforce Marketing Cloud Journeys, adopted new marketing tools, and built a CRM operational model. This helped Telia Lithuania get closer to their customers by giving them personal experiences and talking to them at the best time — when it helped the customer most.
The big idea: Just like building an electric vehicle requires specialised skills, transitioning to a data-driven model demands expertise beyond what the in-house team has. Highlighting the value of external assistance and providing real-life examples strengthen the case for strategic collaboration instead of downplaying the efforts of the internal team.
Conclusion
Successfully guiding your CFO towards embracing a data-driven transformation involves more than just countering their concerns. It’s about convincing them of the potential ROI and the strategic importance of data-driven decision-making in shaping the company’s future.
This guide has equipped you with the insights to effectively navigate your CFO’s crucial questions, bridging the gap between your data-driven objectives and the CFO’s financial perspective. To recap, we’ve covered:
- Explaining the payback period – an important point to communicate effectively.
- Highlighting the urgency of data-driven transformation – this needs to remain a priority in your conversations.
- Justifying the need for external expertise – evaluating the extra value that an outside consultant or agency can add to your team.
Remember, digital transformation isn’t solely about technology—it’s about people, about creating a shared vision, and about fostering partnerships that include your entire organisation, particularly your CFO.
This isn’t merely a tech update, but a strategic investment for long-term growth. As you facilitate conversations around your company’s data-driven future, use these insights to strengthen your relationship with your CFO and foster a collaborative culture where innovation thrives.
So, how will you now talk to your CFO about data-driven transformation?
We’d love to hear about your experiences. Feel free to share your thoughts, ask questions, or contact us for more in-depth help. We’re here to support you in making your digital transformation journey a successful one.