Mike Smith is vice chairman and CFO of Voya Financial in New York City, which in 2013 spun off from ING Group and has since sold its retail annuities and individual life insurance businesses. Now the company is focusing on the growth of its insurance, asset management and retirement businesses for both workplace and institutional investor clients—and with that comes significant investments in technology.
We asked Smith why it’s important for companies to focus on digital transformation for the benefit of customers as well as the back office, and how CFOs can play a role in the management of technology, data and increased risk stemming from such a transformation.
Voya has been on quite a digital transformation.
We embarked on a series of investments back in 2015 totaling over $300 million, and a sizable portion was around digital. We did this for a few reasons—first, some capabilities were lagging after the spinoff, as we spent some time focusing on our IPO, so we had to play quite a bit of catch up with digital.
Second, customers were just demanding this kind of capability—they want to interact with a company in a simple and easy way. For us, that meant automating processes on our website and launching apps so customers could check their balances and do simple transactions via their phones. This has not only enhanced the customer experience, but it also reduced back-office costs and enabled our people to do more elevated tasks.
We have also made investments in back-office capabilities, including our financial reporting system, which is now in the cloud. This is much more efficient, easier and effective than maintaining an on-premise data center since there are far greater resources in the cloud.
When our financial reporting system was an on-premise software solution and the vendor routinely came up with a new version, we had a decision to make—should we implement the new version to keep up to speed or should we just do a lot of modifications to the older version?
It took a level of discipline to operate within the framework of the vendor’s software. When you customize software, it also increases compliance, so going to the cloud helps us take advantage of the vendor’s resources for compliance as well.
Why is it important for companies across industries to focus on digital transformation?
Ultimately, this is about making investments that will pay long-term dividends, whether that’s increased speed, improved compliance, greater controls or, perhaps most important, delivering what your clients want.
In our business, being able to quickly and easily plug into an employer’s benefits program and systems with the solutions and products we offer is key. We have invested quite a bit in not just keeping up with the requirements, but thinking ahead and developing solutions that anticipate what is going to be of critical importance to a client.
I think that, regardless of your business, understanding your customer, what their pain points are, and how you can uniquely help them solve problems is what will differentiate you. Great products are foundational but, in many industries, quickly become commoditized. Digital investments and capabilities, however, can help demonstrate the value you provide and how you are putting the customer at the center of what you do.
As CFO, tell me how you oversee digital investments and data analytics, as well as an organization’s technology and risk areas, in addition to finance.
In the last three or four years, we’ve shifted our focus to being a company that has capital-light businesses that are much more service and fee oriented, and we’ve needed technology investments to drive top line-growth. So it’s logical that finance and technology have been part of these decisions and the management of these investments.
Also, aligning data analytics with finance is becoming more and more the norm—trying to find operational efficiencies that impact customer experience in a way that can drive top-line and bottom-line growth.
For us, risk is a combination of things. As an insurance company, we make money by taking risk, pooling it and sharing it amongst the policyholders. As such, risk and finance are very tightly aligned and it’s core to how we operate. But there’s also an element of risk related to security that we view as a form of operational risk—how well our processes function and how well controlled they are. So the risk issue is very applicable in finance. There is utility in our group doing this.
What can other CFOs across industries learn from this? Any advice for them?
To me, there are two things to balance and keep in mind.
First, and this is especially true for any public company, is the balance between short and long-term returns. Some companies have shareholders that are very focused on the short term. So when you’re think about taking capital and using it to invest in your business—such as with digital capabilities—it’s really important that you help your owners understand the ‘why.’
In other words, be transparent and open in terms of why you are making an investment in a capability, what value it’s going to bring for your customers and, of course, what the long-term return on that investment will be. Shareholders that have invested in you because they value your long-term plan will understand this, and they’ll appreciate the transparency and detail that you provide.
Second, I would say that, regardless of your business, ensuring that your finance team is focused on the business goals and needs can go a long way. I always tell our team that we are the business partner, or the co-pilot, that is helping the CEO and business heads navigate through strategy, goals and several challenges. We’re providing data and insight that helps them understand how certain courses and factors can help and influence their growth objectives. This, too, helps ensure a common understanding of where you’re looking to drive growth, improve efficiencies and, ultimately, create value.