Determining the true market value of an enterprise is becoming increasingly complex. Indeed, property, equipment and other tangible assets that once accounted for 80 percent of a business' total corporate value on the S&P 500 Index, now only count for 20 percent.
Instead, so-called "intangibles" such as data, talent and intellectual property have become the hallmarks of most successful organizations, and as such account for a sizeable portion of their market worth.
CFOs who continue to allocate almost all of their budgets to tangible assets and carry on using legacy systems, rather than investing in modern digital technologies, are putting their company's management and shareholders at serious risk. Essentially, they are guaranteeing that the business' performance will lag behind those competitors that have embraced the strategies and technologies required to excel in today's increasingly digital economy.
On the flip side of this, the shift to the digital enterprise presents a significant opportunity for CFOs to demonstrate their strong strategy and leadership skills, and to guide businesses through their digital transformation. According to Gartner Inc., CFOs still have more influence over IT spending than CEOs or CIOs.
It will therefore fall to them to rebalance investment portfolios toward the intangible assets that are proving to be the cornerstones of business success.
Ultimately, all organizations will become digital businesses. What remains to be seen is which ones will use the opportunity to become leaders in their respective industries.
Here's how CFOs can take charge of this digital transformation and maximize value for the entire organization while driving down risk:
Get a handle on the intangible * To begin, the CFO must play the role of educator. The definition of intangibles --in terms of what these represent for businesses today--remains elusive to many. In fact, some organizations don't even have a means to factor these elements into the balance sheet. It will be up to CFOs to help the business measure the worth of their intangible assets. This will help management teams develop a broader vision of the business and better quantify the organization's digital potential so leaders can make more-informed IT investment decisions.
Tap into the power of the cloud * While data and access are among the most valuable intangible assets for businesses today, the cloud is what helps organizations get the most value out of these...