CHIEF VALUE OFFICER – THE IMPORTANT EVOLUTION OF THE CFO | 1. WHAT DO WE MEAN BY ‘VALUE’
1.4 The converters of value The enablers of value are not themselves enough to create and sustain value in an organisation. Today’s organisations increasingly use a combination of people, process, technology and data to take the six capitals and create value from them (Figure 1.5). Some roundtable participants contended that the strategic importance of data to many organisations in creating and sustaining value meant that it should be considered as an additional capital in the IIRC’s <IR> framework. While that might be appropriate in certain circumstances, it is better to think of data, once retrieved from the technology platforms that facilitate its collection, being converted into information. This conversion is a stage in the value- creation process and interacts with each of the other capitals. Indeed, it is the processes through which that data passes that create information. As organisations increasingly integrate analysis and artificial intelligence (AI) into their processes, it is the human analysis and validation of the outputs that creates the value. If one considers developments such ChatGPT, while these are phenomenal as technical feats, they would not be very impressive without either the immense amount of human-created information on which they are trained, or effective use and verification on the output side. Data is an intermediate material on the way to realising and creating value, however it is processed in any particular organisation.
The value itself is only realised if there is an appropriate level of performance management and measurement in the organisation to benefit from it. Value cannot be created simply by having the data and processes on their own and it is the interpretation of the outputs and the resulting actions that produce results. Many roundtable participants reflected that the production of historical results, while of some benefit, was not always relevant to an organisation that was looking to create value. There are two dimensions to this. Firstly that, as the events of the first four years of the 2020s have shown, there is a significant level of uncertainty in geopolitical and economic conditions. Organisations need to respond dynamically to external threats. Reflecting upon what happened a month or six weeks ago may not facilitate adding value. Secondly, there is a desire by many stakeholders to receive information in as near real time as possible. Periodicity is no longer a valid concept. Waiting to get the ‘numbers right’
at a certain point in time does not add value. The decision made may not change. It should be noted that there is a counter argument to this assertion, which is that trends do need to develop, and constant changes of direction can destroy as much value as rigidly sticking to a course. In their roles as the providers of performance information across the organisation, finance teams need to understand the importance of the provision of real-time information, often through self-serve applications, across the capitals. This implies that information is needed that reflects performance across all the six capitals, which increasingly requires relating operational and financial information in an integrated manner. The democratisation of data across organisations is essential to creating value. The process of democratisation of data enables everybody in the organisation, irrespective of their technical know-how, to work with data comfortably, to be confident in talking about it and, as a result, make data-informed decisions and build customer experiences powered by this data, thereby creating value.
FIGURE 1.5: The converters of value
Performance management and measurement
Operations and processes
Data
Technology
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