Driving successful digital transformation and leveraging AI: A CFO's guide

Sanjay Sehgal, Advisory Head of Markets at KPMG US

Chief financial officers are well aware of the complex challenges that businesses face in today’s world. From geopolitical risks to emerging technologies, the list of potential threats to growth is long and ever-changing. As we continue to operate in an environment of decreased spending, the CFO has perhaps a more important role than ever in ensuring that an organization’s investments are directly aligned with its strategy. 

According to the 2023 KPMG U.S. CEO Outlook, geopolitical uncertainty and emerging, disruptive technology were the top expected threats to growth over the next three years. U.S. CEOs are confident in the growth prospects for their country (84%) and the global economy (77%) over the next three years, but their confidence in the growth prospects for their company (79%) is more subdued compared with their confidence in 2022 (95%). This era of unprecedented volatility calls for new approaches to strategy, planning, investing and talent. 

Business leaders, including CFOs, need a comprehensive transformation vision to create value, meet stakeholder and investor expectations and give businesses a competitive advantage. 

To keep up with shifting markets, rising customer expectations and new competition, companies may be running multiple, continuous transformations at once. Because all of this must be funded, CFOs are often one of the first C-suite leaders to have visibility across the full range of these transformations. They are uniquely positioned to help create a culture of collaboration, cross-functional strategy and integration. As different functions of an organization automate processes, redefine roles and build new operating models, an integrated strategy should bring distinct programs into an enterprise-wide transformation that aligns its objectives, ensures a shared vision, and ultimately remakes its organization, positioning it for long-term, sustainable growth. 

In our experience and in conversations with CFOs, the most successful enterprise-wide transformations that see long-term financial returns are those that consistently focus on value creation (not just cost savings), invest in people and culture, and equip organizations with the right technology and data foundations. 

 AI is expected to have a significant impact, both as a tool to help design and execute transformations and as a means of transforming operating models and processes. CFOs should tap into generative AI to help them quickly summarize enormous amounts of information to identify internal patterns and understand changing market conditions and emerging risks, enabling faster and better decision-making.

AI will be a powerful asset to help CFOs plan and invest confidently in long-term strategies yet remain flexible and nimble enough to respond to surprises and be prepared to take advantage of unforeseen opportunities.

The impact of AI

At KPMG, we have long believed that any competitive gains can be quickly undone if you aren’t operating with trust — the trust of your customers, employees, regulators and other stakeholders. Like many new technologies, genAI promises great benefits but also introduces new risks, such as bias, infringement on intellectual property, and concerns about personal data protection, safety, reliability and accuracy.

Business leaders should not wait for regulation to be introduced or for others to act when it comes to the ethical use of AI. Trust is key and requires a fundamental understanding from all actors, including tech companies, users and implementers such as regulators, academics and NGOs.

"Business leaders, including CFOs, need a comprehensive transformation vision to create value, meet stakeholder and investor expectations and give businesses a competitive advantage."

The immediate impact of AI is an augmentation of the human workforce, according to the March 2023 KPMG gen AI survey. We are certainly seeing an awakening among leaders who consider AI a productive way to increase the capability of their workforce.

• 72% say it will increase productivity. 

• 66% say it will change the way people work. 

• 62% say it will encourage innovation. 

Executive fluency with technology, data integrity and trusted AI systems will be critical to success.

Digital leadership in the C-suite is critical. Leaders who grasp the fundamental meaning, inner workings and use cases of disruptive technologies will be better positioned to accelerate innovation throughout their business and evolve their workforce to enable more employees to work comfortably alongside digital tools. ​As the pace of technological innovation quickens, all C-suite leaders must keep up with new developments instead of relying on others, and they must demand the same from their teams. They need to understand the technologies they are purchasing and the potential value in how new and emerging technology, such as generative AI, will disrupt their business — allowing them to find opportunities to drive growth and properly manage risk.

Achieving value through transformation

It is common for companies to prioritize digital transformation in certain functions over others, resulting in a capability and experience gap that can be noticeable to customers, stakeholders and employees. 

One KPMG study found that 69% of business and technology leaders believe that operational dysfunction due to functional silos must be diminished to create more innovation.

Individual teams that don’t look at the big picture and only focus on innovating for specific outcomes can add incremental value, but our research shows such siloed efforts are unlikely to yield the type of game-changing transformation needed for a sustainable, competitive advantage. Leading CFOs recognize that this disconnect can cost their company in the long run, whether it’s in reduced sales and customer loyalty, a lack of internal productivity or expensive tech investments that never create the intended value.

Leaders can capture and achieve lasting value from their transformation programs by focusing on four priorities:

Place value at the center. Transformations can create strategic, financial and operational value, but only if value is the north star of every project. 

Invest in people and culture. When transformations fall short or don’t last, culture and people issues are often to blame. Transformation leaders need to create buy-in, give people the necessary tools and resources, and maintain an active feedback loop to understand, iterate and adapt based on what is working. 

Orchestrate projects and the people's experience. Companies have, on average, three transformations running at the same time, according to the KPMG report, The New Transformation Agenda. With multiple transformation projects, it is critical to manage timelines, deadlines and resources. This underscores the importance and challenge of creating comprehensive, integrated plans to manage complex workstreams. 

Develop the right technology and data foundations. The transformation agenda paper also found that executives cite the technological capability gap as the top challenge during transformation. Almost any business process transformation or growth initiative today will involve a technology element. Companies need systems, data, talent and agility to develop and support new digital initiatives.

Organizations of all sizes need strategies and structures that encourage transformative innovation to grow, transform and compete in the long term while navigating an era of unprecedented volatility. Companies that keep pace with emerging tech and maintain a focus on digital transformation through uncertain times stand to gain a competitive advantage. Companies that lack a comprehensive digital transformation vision will eventually be exposed, either through poor customer experiences, lack of investor buy-in, low employee adoption or wasted spending.

CFOs have a critical role to play in ensuring that their organization is well-positioned to take advantage of digital transformation while managing the associated risks. By taking a holistic approach and investing in people, culture and technology, CFOs can help their organization thrive in the long term.

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