the strategic cfo

The Strategic CFO Harnessing the Disruptive Power of Big Data and Advanced Analytics

Jack Klinck

EVP, Head of Global Strategy and New Ventures

Tom Barkin

Global CFO, McKinsey & Company

MIT CFO Summit

November 20, 2014

2

Big Data and Advanced Analytics as a Disruptive Technology

A Leadership Role for the CFO

State Street Case Study: Global Exchange

A Discussion with Tom Barkin, Global CFO, McKinsey and Company

Questions

Agenda

3 Used with permission of eQuest

Do we really need more data and analytics?

4

So what is “Big Data and Advanced Analytics”?

Advanced Analytics

: an accumulation of data that

is too large and complex for

processing by traditional

database management tools

Merriam- Webster

: use of techniques which are

impossible to replicate in scale,

accuracy or scope with

traditional methods

McKinsey & Company

Volume

Variety

Velocity

BIG DATA

Big Data

Reporting

Analysis

Monitoring

Predictive Analytics

Prescriptive Analytics

This information is for illustrative purposes only.

5

Technology shifts in the last 30 years

Big Data has been identified as a disruptive technology

Image courtesy of Significance (significancemagazine.com) © 2012 The Royal

Statistical Society. Republished with permission.

© The Economist Newspaper Limited, London (February 27, 2010)

Used with permission of Popular Science Copyright© 2014. All rights reserved.

Source: Harvard Business Review, October 2012

Image Credit: Dion Hinchcliffe via ZDNet


6

Gartner, 2014 Hype Cycle

Are we are near the “Peak of Inflated Expectations”?

Prescriptive Analytics Big Data

Data Science

Innovation

Trigger

Peak of

Inflated

Expectations

Trough of

Disillusionment

Slope of

Enlightenment

time

expectations

As of July 2014

Quantum Computing

Speech Recognition

Cloud Computing

Enterprise 3D Printing

Virtual Reality

Smart Robots

Internet of Things

Source: Gartner 2013

Plateau of

Productivity


7

Investment is climbing with the exponential growth in data

Source: IDG Enterprise Big Data Survey, 2014

8

Survey Results

34% 54% 12%

MIT Sloan Management Review: The Analytics Mandate, May 2014

Analytically

Challenged

Analytical

Practitioners

Analytical

Innovators

Used with permission of MIT Sloan Management Review. All rights reserved. Sloanreview.mit.edu

My organization treats data as a core asset

The use of analytics has changed the way we conduct our business

There is pressure from the senior management to become more data-driven and analytical

82%

82%

75%

MIT CFO Summit Survey

Analytical

Innovators

9

● Traditionally responsible for providing data and insight for decision making

– Experience and controls to provide high-quality information (garbage in, garbage out)

● Understand how to manage and protect an asset

– Proprietary data and analytical models

● Responsible for key management processes that need data and insights

– Performance management, forecasting, allocation of capital, challenging assumptions

● Finance considered an objective, independent source of the truth

● Oversight of other corporate functions – risk, compliance, strategy, technology

CFOs are uniquely positioned to take a leadership role

10

CFOs can be more strategic and add more value

Internal + External

Structured + Unstructured

Historical + Real-Time

MORE DATA

Social Media

Text / Video

Market Data

3rd Party Data

BETTER ANALYTICS

Statistics

Predictive Models

Machine Learning

Prescriptive

• Business Insight

• Ability to Challenge

• Forward Looking

• Agility

ENABLES VALUE CREATION

Optimize the Business

• Decision Support

• Forecasting

• Resource Allocation

• Cost Management

• Pricing

• Risk Management

Grow the Business

• Capital Allocation

• Investment Decisions


11

State Street Case Study: Global Exchange

Delivering Solutions to Manage & Integrate Data, Optimize Investment & Trading Strategies and Strengthen Insights, Reporting & Analytics

Big Data

Electronification

of Trading

Information

& Insights

Investment

Analytics

Strategic Growth Themes

Getting insights from a new,

data-driven investment paradigm

Improving insights through

enhanced reporting and analytics

Managing an unprecedented

scale of data

Accelerating effective

investment decision-making

Client Needs


Tom Barkin

CFO, McKinsey and Company

13

BDAA provides opportunity to dramatically enhance Finance function’s capabilities

Forecasting &

scenario modeling

Enhance near- and

long-term visibility into

performance

Working capital

optimization

Reduce working

capital levels

Capital and resources

allocation

Make better informed

growth & project

prioritization decisions

Revenue

maximization

Take on a more active

revenue manager role

Risk management

Enhance near- and

long-term visibility into

performance

Cost management

Implement more

rigorous cost

management

techniques

Human capital

management

Maximize return on

human capital

investment

Visualization and

transparency

Arm the organization

with the right tools for

decision making

Source: McKinsey & Company

http://www.google.com/url?url=http://tvtropes.org/pmwiki/pmwiki.php/Main/PiggyBank&rct=j&frm=1&q=&esrc=s&sa=U&ei=yPNkVOiYB4uFyQSEq4HABA&ved=0CBwQ9QEwAw&usg=AFQjCNGPoy5ckn3ym6DStZSo5PTJvxlc4Q

http://www.google.com/url?url=http://blog.tmcnet.com/blog/rich-tehrani/wireless/consumers-tell-mobile-carriers-how-to-save-millions.html&rct=j&frm=1&q=&esrc=s&sa=U&ei=YUVlVN3TG6PLsAT1qIDYBA&ved=0CBwQ9QEwAw&usg=AFQjCNFBt8jWGR3aKqPyTpMULLRViSXMpg

http://www.google.com/url?url=http://ideationz.me/tag/human-capital-management/&rct=j&frm=1&q=&esrc=s&sa=U&ei=lEVlVOyIK8GRsQSCqYGgDg&ved=0CCAQ9QEwBQ&usg=AFQjCNG153lvss9JoclySVGDABQ65-uhUw

http://www.google.com/url?url=http://www.michaelrees.co.uk/applications/business-planning-forecasting-and-valuation/&rct=j&frm=1&q=&esrc=s&sa=U&ei=h0xlVN_fNcqxyASSr4GoDQ&ved=0CDIQ9QEwDg&usg=AFQjCNFlMV2CxapJisWXAXueSQqwF-pBAA

http://www.google.com/url?url=http://info.protecode.com/bid/67504/How-Open-Source-Software-Helps-Decrease-Development-Costs&rct=j&frm=1&q=&esrc=s&sa=U&ei=-UxlVMKKGIWhyQTW9YGwAg&ved=0CCAQ9QEwBQ&usg=AFQjCNHjpt4TTyt9HnBnYk8MKjFbm4jVog

http://www.google.com/url?url=http://centralreservations.gatewayreservations.com/increase-revenue-and-cut-costs/&rct=j&frm=1&q=&esrc=s&sa=U&ei=VE1lVODqJIeQyQSC9IK4Ag&ved=0CCwQ9QEwCw&usg=AFQjCNFFoyqXU3-zvufBDbPK7A3_VuRhfg

http://www.google.com/url?url=http://www.michaelrees.co.uk/applications/business-planning-forecasting-and-valuation/&rct=j&frm=1&q=&esrc=s&sa=U&ei=h0xlVN_fNcqxyASSr4GoDQ&ved=0CDIQ9QEwDg&usg=AFQjCNFlMV2CxapJisWXAXueSQqwF-pBAA

http://www.google.com/url?url=http://en.wikipedia.org/wiki/Wikipedia:Don't_draw_misleading_graphs&rct=j&frm=1&q=&esrc=s&sa=U&ei=UE5lVPnlB5WtyATl74KQDg&ved=0CCQQ9QEwBw&usg=AFQjCNFOX5lSaHv0hjJ72ekp1T-0w_fpdQ

15

Important Risk Disclosure

Investing involves risk including the risk of loss of principal.

The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.

The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street's express written consent.

Survey results featured on slide 8 are from a survey of 2,037 individuals conducted by MIT Sloan Management Review and SAS Institute Inc., the results of which were published in May 2014. Used with permission of MIT Sloan Management Review. All rights reserved.

CORP-1177

Expiration Date: 11/30/2015

the strategic cfo

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