CFOs are breaking down silos to drive innovation

As part of our ongoing CFO research study, HFS recently interviewed Felix Langenbach, CFO of LVMH Japan. He leads the finance, technology, legal, facilities, and sustainability functions in his current role. LVMH is a luxury goods company best known for brands such as Louis Vuitton, Dior, Celine, Tiffany & Co, and many more. In Japan, it operates more than 500 stores and has 10,000 employees.

In his two decades of experience, he has consistently focused on driving results, building high-performing teams, and managing customer experience (CX) in various corporate finance leadership roles.

During the discussion, Felix emphasized the significance of innovative technologies and customer-centric operations in fostering exceptional CX, digitalization, and achieving remarkable business outcomes.

Finance leaders aim to be agile to react quickly in unpredictable macro-conditions

Enterprise finance leaders have many reasons to be concerned. They face macroeconomic challenges, including geopolitical tensions, currency fluctuations, supply chain disruptions, and societal polarization. The global climate has led to the company relying less on countries in military conflict, like Russia and Ukraine. Cash flow, prudent spending, and flexibility in leveraging digital tools are paramount to navigating these challenges.

LVMH centrally manages the finance, treasury, cash pooling, loans, risk policies, insurance programs, tax, and internal control systems to work with the brands effectively. Felix says, “The focus is on talent and skill development, which is always important. We need the agility to adjust to economies and dynamic global situations to react and ensure we don’t get surprises. With increasing interest rates, there is a focus on cash efficiency, working capital, and ensuring that we get good investment returns.”

Technology modernization with multiple vendors brings innovation and responsiveness

CFOs have realized the importance of modernizing their ERP (enterprise resource planning) systems, enabling the integration of emerging technologies to play a significant role in the entire value chain. Sourcing and procurement, distribution channels, after-sales, secondary market, and customer experience service platforms must be integrated, allowing control over every connection in the value chain. CFOs know leveraging technology is integral to success but are keen to make suitable investments. Thus, enterprise finance leaders actively participate in technology events and industry forums, create incubator programs, and invest in start-ups to validate technology-driven use cases before implementing new tech.

LVMH engages multiple vendors to help them upgrade their technology, especially compliance and customer-focused solutions. Regulatory compliance and control rules are crucial for the luxury goods industry due to the high-value nature of luxury goods, which are vulnerable to anti-money laundering (AML), data security, financial reporting, and identity theft. Locking into a single vendor potentially limits the flexibility and agility of technological innovations at enterprises.

Customer experience (CX) is one of the critical business metrics that finance leaders are looking to improve with technology and in partnering with service providers. By empowering the finance function to collect data in a structured manner, it can analyze and share the key performance metrics with cross-functional teams for data-driven decisions. Felix stated, “Technology has been advancing and contributing to operational efficiency through robotic process automation (RPA), AI, and digitalization of processes, documents, invoices, and approvals. LVMH is investing in creating a smart finance function with machine learning, forecasting, and scenario models for cross-collaboration.” He adds, “The company is investing in software solutions that allow store sales associates to communicate with customers directly in a safe data environment to improve the CX.”

Focusing on customer-centric technologies can open up new sources of value

CFOs are focusing on high-impact, customer-centric technologies to improve the customer experience. By adopting emerging technologies early, enterprises are acting based on customer feedback. While much of the metaverse hype has died down, it is still on the watchlist for retailers and CPGs; thus, luxury brands are exploring the potential of blockchain technology, next-generation payment systems, and non-fungible tokens (NFTs) as they have better use cases and can provide customers with a digital certificate, real-life exclusive experiences, and personalized events.

LVMH offers a range of high-end products, including limited editions of collectibles, luxury fashion and leather goods, premium perfumes and cosmetics, and high-end watches and jewelry. Felix commented, “LVMH invests in cloud, automation, AI, and payment technologies, collapsing the silos of the front-, middle-, and back-office operations. The seamless integration helps customer-centric technologies create a unique buying experience for luxury customers. It also enables customers to engage with personalized events and facilitates exchange interactions, creating an unforgettable customer experience.”

LVMH values decentralization and invests in vertical integration. This approach allows the company to maintain excellence in its independently operated brands while remaining close to the customer. Technology integration also improves traceability, authenticity certification, and customer experience. Additionally, LVMH has internal research teams that work alongside technology partners to explore and implement emerging technologies in its brands.

The Bottom Line: Today’s CFOs have a much broader remit than in the old days as they look beyond the finance function to drive innovation and growth through technology integration.

Forward-thinking CFOs look beyond the regulatory, tax, and compliance challenges. To drive growth and profitability, finance leaders are considering tech that can drive efficiency, innovation, and growth, including blockchain, NFTs, and next-generation payments.

Felix comments, “The Finance team is expanding its reach with integration into various functions, including supply chain, procurement, sales, and sustainability. The finance team exerts considerable influence by breaking the silos of cross-functional decision-making with innovative data-driven models.”

HFS is studying enterprise CFO priorities and how they leverage the technology ecosystem to achieve their personal and organizational goals. In collaboration with our cross-industry study partner, professional services firm Genpact, we highlight the opinions and thought leadership of Felix Langenbach and other CFOs. Our upcoming market report will outline how forward-thinking CFOs like Felix are changing the very nature of enterprise finance. Stay tuned!