Nonfinancial dimensions, such as environmental, social, and governance (ESG) factors, are gaining importance owing to regulatory and legislative developments and new societal demands. Traditional financial indicators (such as sales, costs, margins, and operating assets) are no longer the only decisive factors in measuring a company's success at creating value. SAP has observed that companies struggle to design the best combinations of product and service offerings and to set optimal prices because they are unable to consider a product’s entire lifetime when forecasting revenues and margins.Įxpanded Scope of Value Creation. But the financial metrics available for a particular product usually cover only short periods. Companies are combining product and service offerings to generate additional revenues and profits over the product lifetime. Most companies do not have the detailed information required for individualization because the manual workloads and costs necessary to obtain and process it are prohibitively high.Ĭombined Product and Service Offerings. Customers increasingly demand individualized product and service offerings. Finance professionals need transparent access to data and KPIs and often require real-time analyses and recommendations in order to take appropriate action. To adapt to digital business models and greater volatility, companies must make decisions quickly and implement them effectively. Digitization has led to ever-shorter product development cycles in various industries, including automotive, technology, and life sciences. By implementing a similar capability, finance functions can facilitate comparisons of granular data across functions and boost the efficiency and quality of decision making at the enterprise level. Production and supply chain functions are already using digital twins to gain transparency into granular, real-time operational data. (See Exhibit 1.) It precisely allocates these metrics to products, services, suppliers, customers, and employees. The twin is a digital representation of financial and selected nonfinancial metrics, including those measuring relationships, structures, and processes across the entire product lifetime and value chain. Existing data typically does not span the entire product lifetime, provide detailed information down to the product level, or allow for the correlation of financial and nonfinancial metrics.Ī concept called the “digital financial twin” offers a solution. But they often lack access to the data needed to make rapid and precise decisions in the evolving environment. Technology, Media, and Telecommunicationsįinance functions can use a virtual representation of key metrics to facilitate analyses of granular data and improve decision making at the enterprise level.įinance functions must fulfill new management requirements arising from digitization, advanced business models, changing expectations and regulations, and nontraditional value drivers.
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