In somewhat of an irony, the demands placed on traditional firms in the digital age are evolving the often-untrusting parties of the chief information officer and the chief financial officer.
This relationship is forced into overdrive with the imperative to become flexible, adaptable and value driven. And with good reason.
Over a quarter of budgets are spent on transformation and for those doing it well, the payback can occur within 12 month, according to a Forbes Insight Report.
A healthy relationship between these C-suite leaders can lead to significant payoffs when it comes to digital transformation.
Removing friction between the CIO and the CFO, building strong working relationships and avoiding counter-behaviors can unlock a reduced IT cost, increase an enterprise's ability to generate new opportunities and get them to market quicker.
The business can then reallocate money to greater value-generation activities, something both parties will benefit from.
Unfortunately, one of the biggest sources of friction between IT and finance preventing benefits is trust. Erosion of trust often can be traced back to conversations around annual budgets, something that many IT departments struggle with.
It is extremely difficult for IT to accurately forecast a traditional annual budget since the pace of change is so fast and the adoption of technology can be difficult. IT tends to add buffers.
What you end up with is an IT budget that seems gratuitous and is full of hedging. This then becomes an annual source of conflict between IT and finance, which too often creates ongoing friction. The best way to dissolve this friction is to build trust using transparency, visibility and appropriate measures.
Once a CIO has their budget, they should avoid immediately allocating all the funds to different projects. Rather, CIOs should break the work down into smaller chunks of autonomous value that can be delivered more often, providing an opportunity to present results more frequently and show incremental progress toward the agreed upon outcome.
In return, the CFO will focus more on the value delivered rather than completion of scope. That way, when results are not heading the way both parties expected, there is an open door to collaborate and chart a new course.
This type of pivot should not be considered a failure but rather an opportunity to evolve and adapt to ensure the results match the resources invested.
As for measures, traditionally IT provides measures after they decide what work to do, or present false measures into business cases. Instead, by starting with a measure of value and creating work from that, the CFO and CIO can remain in sync and IT work will have direct alignment to the business outcomes.
CIOs should use experiments to build knowledge and only scale what is proven to achieve the desired result. This creates a visibility and traceability that finance would have never seen before, improving the relationship between these two departments.
Of course, these things are easier said than done. For the CIO, it's critical to be honest and transparent about outcomes and cost, and to rule out elaborate business cases and dashboards that show exaggerated results.
Let the work be born from the desired outcomes of the entire organization, which often aligns with financial goals. CFOs should focus on value measures, not scope of spend, and use shorter funding cycles to allow for more flexibility.
CFOs should also fund experiments that are designed to test what will work and what won't, and any resulting failures should be celebrated as a new learning and money saved from blind investments.
While the CFO and CIO are crucial to digital transformation success, all C-level executives need to accept they are in it too and recognize the changes needed in their functions for the business to become truly responsive. The structure, the measures, the planning cycles, the budgets and the technology — it's all in if your organization wants to compete in a fast-paced digital age.
An unlikely duo, the CIO and CFO, but cooperation is needed between the two to create sustainable change and drive sustainable transformation.