Startup CFO Glenn Hopper recently published the book Deep Finance: Corporate Finance in the Information Age (Leaders Press, 2021), in which he asserts that cutting edge CFOs should take the lead in their companies’ digital transformations.
“The same skills that made you interested in – and good at – corporate finance are the skills needed to drive data science and analytics for your company,” Hopper said. “The pivot from finance to data science is not as great as you may think.”
At the risk of oversimplifying a relatively complex subject, Controllers Council Executive Director Neil Brown sat down with Glenn over Zoom and discussed his book and his vision for the future of the CFO role.
Brown: Your book is called Deep Finance. What does that title mean to you?
Hopper: If the finance function we know and love today is surface level finance, then the finance of the future is deep finance. Deep finance, to me, is the why behind the data. Those of us who’ve been in the industry for a while have seen how the role and duties of the finance department have changed over the years.
I remember monthly meetings with our CFO in my first finance gig back in the late 1990s. The CFO would read out the monthly financials in this really flat, monotone voice. “We saw year over year growth in revenue due primarily to the addition of new markets, but also due to greater market penetration in existing markets which resulted in an 11% increase in recurring revenue …” on and on for like 30 minutes. It was all data we could have read ourselves in a fraction of the time by just looking at the financials. The CFO’s job was to sign off on the numbers and ensure they were 100% accurate. He was the official scorekeeper, and I don’t really know what value he added to the company beyond that.
Fast forward to today’s CFO in the post Sarbanes Oxley world, where CFOs are heading up investor calls, prodding their c-level counterparts about their KPIs, and taking an increasingly strategic role among corporate leadership and there’s been a world of change. Many see the CFO role today as one that is in the path for direct ascension to the CEO role.
That shift was fueled in part, I think, by the changes that came about from SOX, but maybe even more so I think it came from this explosion of data. Finance has always been this objective observer of business operations with direct access to all of the departments within an organization. And I think as companies started to look to aggregate data and find correlations between inputs from the various functions that a lot of times it made sense to roll those up under finance. Just as they were with the numbers, I think it was understood that finance would be objective and not protective over any specific group when reporting those metrics.
So finance starts to house all of this information and all of this data, and when you give a bunch of analysts that kind of information, what are they going to do? They’re going to analyze it. And so you have these finance guys with math and statistics backgrounds going through and looking at this data and finding these correlations to explain the numbers. You start seeing finance ask and answer the WHY question much more clearly than just comparing numbers to budget or to prior period performance.
And in that time you also see ridiculous advancements in the tools that are available. Beyond the explosion of data, beyond the increase in computing power, you have architectures like Hadoop that allow companies to store and retrieve absurd amounts of data and what maybe started as a few analysts poking around a database becomes true data mining. And then you factor in advances in machine learning and artificial intelligence and we’re in this whole new world of business intelligence.
So deep finance is about going deeper into the numbers and it’s obviously also a play on “deep learning,” which is a tool that we’ve only scratched the surface on in the business world today.
Brown: Are you implying that finance groups should be using deep learning algorithms to close the books every month?
Hopper: Ha. Well … no. Not exactly. Not yet anyway. I don’t know. Maybe at Google they are. But I didn’t write this book for the Googles of the world. I wrote it for normal people like me and you. I guess the whole supposition is that the technology is out there and we’re starting to see the tip of the spear now. But the change is coming so quickly that we have to start looking at the application of artificial intelligence (AI) and machine learning (ML) to not just finance but to every aspect of our lives – in business and beyond. There are thousands of articles, books, YouTube videos, essays, and blog posts about what that means for society, but Deep Finance is really just focused on our little niche: corporate finance.
Brown: And what is the future of corporate finance? How is it different today than it was – say, 10 years ago?
Hopper: I guess let’s tackle where we are now first. We’ve definitely come a long way in the past decade. I think the easiest one we can all relate to is how many finance automation software packages there are out there now. Can you think of a single finance function that doesn’t have some kind of cloud-based off-the-shelf software solution? I’m not shilling for any specific products, but I know of multiple solutions that automate accounts payable, expense management, accounts receivable and collections, bank reconciliations, purchase orders, payroll and other HR functions, monthly close process, depreciation, treasury management, and I’m sure I’m forgetting half a dozen other finance tasks. The technology behind these tools are great, but most aren’t true AI. And that’s fine. It’s not needed to bring unprecedented levels of automation to us.
The technology behind most of these tools is something called robotic process automation (RPA), which is like a software robot that can learn and then execute rule-based tasks. Rule-based is the key there. You’re basically just training the software on rules vs. true machine learning where you’re training it on data. Probably a small point of difference, but it just shows how much more room there is for growth here.
Anyway, with RPA you have machines that can do what a person does, but they can do it much faster and around the clock and with 100% accuracy.
Brown: Are you saying that robots are coming for our jobs?
Hopper: Funny you should ask. There was very recently an article in the New York Times about this very topic. And maybe that’s true to some extent. Maybe just like autoworkers with the advent of robot assembly lines there will be some job loss, but I’m not an economist or a philosopher. I like to think – and what’s been my experience – is that we are not eliminating jobs. We’re finding ways to make the work people do more meaningful. Think about it. When we were in school studying finance and accounting were we thinking, “Oh man, I can’t wait to get into the work world where I can spend the majority of my time entering data into a system?” Of course not. We thought about the meaningful part of our work – about adding value to the numbers. And that’s what I think automation does. It frees us from these mundane, mindless tasks to focus on the meaningful and mindful work that really adds value to an organization.
Brown: But you do see more finance work being replaced by machines?
Hopper: I do. And I think that’s why we have to act on this now. Look back at that list of finance tasks that I mentioned as being replaced by automated systems. What are we going to do as a profession when robots really have taken over 90% or more of what we used to do? If you can be replaced by a dashboard, you’re not really bringing much to the table.
Brown: This sounds like doom and gloom?
Hopper: I think it would if we didn’t plan for it. If we didn’t address it head on. I truly believe now is the time to jump on the wave of automation. To truly dive in and understand the science and technology behind this. Because in short order the world is going to be divided into two kinds of people: those who caught the wave and those who were drowned by it.
Brown: So what do we need to do to not be left behind?
Hopper: Embrace change. Become a student of technology. Take in my new book, and check out the Controllers Council studies on changing roles and the Digital Controller/CFO.
DEEP FINANCE: Corporate Finance in the Information Age (Full Book on Amazon)
DEEP FINANCE: Corporate Finance in the Information Age (Book Preview)
The Digital Controllers/CFO – Study Report (Controllers Council)
The Contemporary Controllers: Changing Roles – Study Report (Controllers Council)
