The Rise of the Modern Product Development CFO
The biggest reason why product development company CFOs have neither noticed nor embraced product lifecycle management (PLM) may be because their roles have historically been limited to accounting practices, such as ensuring company compliance with financial reporting and control requirements — rather than any direct involvement in specific IT strategic initiatives.
Of course, CFOs naturally see clear ROI when it comes to financial systems, such as enterprise resource planning (ERP), but PLM – at its core – is a bill of materials (BOM) and intellectual property management system with huge value not normally measured in a balance sheet. Simply put: CFOs see how inventory translates to dollars in an ERP system but don’t always have complete clarity as to how product quality and time to market translates to tremendous cost savings and earnings.
Historically speaking, identifying financial benefits in a PLM system is not as obvious as in an ERP system.
But that may all soon be in the past. A new manufacturing economy requires new champions with a broader, more holistic view of the enterprise.
The treacherous waters of a competitive global economy require savvy fleet commandeers who can heroically navigate their business away from dangerous rocky shoals and into profitable new ports; because of this, the role of CFOs at innovative product companies has quickly evolved from “bean counter” to powerful agent of change and business leader.
Today, strategic-minded CFOs are now asking such questions as:
- “What dominant new product introduction (NPI) challenges are restricting business growth?”
- “What manufacturing tools can help overcome these obstacles?”
- “What emerging supply chain business trends risk impeding our success and how can finance help out?”
According to a recent quarterly report by Deloitte, “As companies continue to adapt to volatility while boosting their pursuit of growth, CFOs are gaining an increased role in strategy.”
The aforementioned Deloitte report included a survey in which CFOs claimed to have strategic input in which industries their companies should enter/exit (78%), and what businesses to grow/shrink (73%). The report also discovered that CFOs are most likely to spearhead decision-making processes, including where to focus cost-reduction efforts (57%), which performance measures to track (58%), which businesses to acquire/divest (41%) and how to create value (40%).
So what do all of these statistics, some of which have increased by upwards of 50% over the last few years, add up to?
For one thing, these findings indicate (whether fiefdom-conscious CIOs like it or not) there’s an increasing trend for CFOs, especially at small to midsize manufacturers, to vet – daresay – drive technology investments.
Arena, the pioneer in cloud PLM software, has witnessed firsthand the positive impact strategic-oriented executives like CFOs can have on the technology decisions innovative product companies make to maximize business results. In fact, we even created a whitepaper containing ROI numbers, that will pique your CFO's interest, that were obtained directly from Arena customers (Philips, Ruckus, Pixel Velocity, respectively).
To learn more about the evolving role of CFOs in modern product development companies, download the whitepaper Why Executives Are Banking on Cloud PLM to Save Money. Arena offers its own proprietary PLM analytics coupled with aggregated ROI metrics derived from case studies conducted by third parties, including Aberdeen, Accenture, AMR, CIMdata, Gartner, IBM, and Oracle, to provide a guideline for determining a potential range of measurable financial benefits PLM can offer your company. These findings highlight industry-specific efficiency improvements categorized into these three groups: Manufacturing and Internal Operations, Supply Chain Optimization, and Customer Satisfaction.