In todays’ evolving world the role of a Chief Financial Officer (CFO) is changing dynamically. Its orientation is becoming futuristic with focus on strategy and value creation. But the role of CFO in e-commerce sector is changing faster than other sectors. The ambit of the e-commerce sector CFO is not only being reshaped by the overall transformation that is taking place in the CFO role but also by digital transformation, which is shifting the technological, market and customer context for companies in the sector. Evolving digital market is offering enormous opportunities for organizations to enter new markets, transform existing products and introduce new business and delivery models. And finance leaders who are
focused on growth, embracing these dynamics faster than the rest.
Traditional role of a CFO
Role of a CFO has always ranged from a fiduciary one (value preserver) to a visionary one (value creator). Traditionally, businesses have pushed the CFO role towards the fiduciary end of the spectrum rather than the visionary end. But nowadays, this role is becoming more and more about strategy than stewardship and even more about value realisation and optimisation.
Value in businesses has been traditionally created by a well-understood capital investment and commercial model with a strong emphasis on effective regulatory positioning, clear competitive strategies for each market segment and disciplined infrastructure development and deployment. But in e-commerce, it is all about digital innovation, data proliferation, volatile risks, tightening regulatory environment and a growing sphere of stakeholders.
CFO’s role in the era of digital disruption
CFOs who don’t proactively demarcate their role in response to all the forces mentioned above, are compromising their ability to shape organization’s strategy and drive the necessary innovations for sustainable growth. In e-commerce, digital disruption is like being caught between the promise of rain and the threat of drought. On one side, digitization offers the opportunity for new business models and revenue streams but on the other side, it makes the organization vulnerable to
competition from new players and agile incumbents and creates exposure to new risk.
However, in this space, value is likely to come through more diverse and less stable sources. This broader value creation and greater uncertainty requires a new strategic lens to be applied by the CFO – one that is capable of discerning ‘where to play’ strategically, ‘how to play’ commercially and ‘how to win’ competitively. Focus provided by this position on realisation of value complements the design of these strategies. The role will particularly be focused on creating congruence between the strategies developed for the enterprise and the financial imperatives established for the business. CFOs understands that strategic success can only be achieved with financial success, and linkage of these two key dimensions is fundamental to realising expected values from strategy to execution. As this technology, market and consumer preferences evolves further, this role will move from holding a perspective that effective execution is the primary driver of results to one that recognises that realised value is a function of congruence between strategy and operations.
Way ahead for finance leaders
To become successful in this new environment, CFOs need to develop a splendid set of key capabilities that can be leveraged to strengthen strategic, financial and market positioning. To help their organization profit from digital opportunities, finance leaders can use a traditional finance skill: striking a balance between innovation-led growth and prudent risk management. They need to collaborate with other domains to develop their understanding of how the technological landscape is evolving and what strategic investments should be encouraged to enable innovation and support the business’s growth.