The world around us has significantly changed and the rate at which this change is happening is terrifying. Established business models are under attack and subject to rapid displacement.
Digitization, increased regulatory demands, advanced technologies, the emergence of new business models, rapidly changing risk landscape and new challenges from global competition are all disrupting businesses from left, right and center.
Instead of viewing disruption as a threat, executives must rather, view disruptive forces as catalyst for change and great opportunities. Unfortunately, many executives are slowly responding to disruption because of fear of failure. All they see are the negatives, and not an opportunity to exploit the unseen possibilities.
In this rapidly changing climate, maintaining the status quo is not a recommended option. If you snooze, you lose. The organization must constantly be attentive to what is happening, both within and outside its walls. Which forces are driving and hampering value creation? What are the risks of and to the strategy? What are the strong beliefs that are significantly held in your industry; can these be challenged and reframed?
Answering the above questions will help you identify new forms and mechanisms of value creation. Finance is uniquely placed within the organization to provide solutions to these questions.
Leveraging on its analytical capabilities, the function can help decision makers spot and monitor leading indicators, model alternative scenarios and implement modern planning techniques to ensure long term success.
Data is the new oil of the digital economy
Data and analytics technologies are altering business models and transforming the way finance creates and adds value to the business. Data is expanding in volumes and variety and the challenge for many organizations is to harness data power to drive business performance.
In the past, implementing cost cuts across the board was more than enough to improve the bottom line. Unfortunately, in today’s digital economy, this approach is no longer feasible. You can only lower costs to a certain point, after that point, the exercise becomes self-defeating.
Digital technologies have reduced the cost of doing business and barriers of entry.
Because of these changes, finance has to find alternative ways of driving value up the value chain. Executives can longer rely to base strategic decisions on financial statements information alone. Doing so is a sure recipe for failure. They need better information that support decision-making and propel the company forward.
Finance can successfully fulfill this role by embracing analytics and providing data-driven insights. Cloud and subscription-based technologies are making it inexpensive for companies to invest in analytics. These technologies have the advantage of helping companies analyse larger and complex data sets and extract accurate and trusted actionable insights.
Any company, big or small, is now a suitable candidate of becoming an analytics powerhouse. However, to get an edge from data, it is critical that the organization has the right data talent, data governance and management processes and systems in place.
By combining the right technology with the right analytics and expertise, businesses can use both structured and unstructured data better to identify trends, derive real-time insights, facilitate decisions, and define actions that improve performance and deliver a critical competitive advantage.
Finance transformation is more than automation
When it comes to finance transformation, there is a general perception that the whole process is about automation. It goes beyond process automation. Technology is just another piece of the complete puzzle. Yes, it is true that technology enables you to standardize processes, eliminate redundancies, achieve operational agility and perform activities much faster and cheaper but it is not the only ingredient.
People and processes are also key ingredients. Traditional finance professionals are used to working in the back-office all day long. Gone are these days. Finance transformation calls for a different skill set. Front-line players. People with a brilliant understanding of business, great leadership, influential, collaborating and communication skills.
Fulfilling the catalyst and strategic advisory role requires a finance person with a great vision of the future, someone who has the ability to anticipate change, challenge widely held beliefs, innovate new business models and persuade peers to embrace change.
Now that you have automated your accounting and finance mundane processes, as a finance leader, has your contribution to the business increased? How more involved are you in the business now versus pre-automation? How much time do you spend on strategic issues and decision support versus financial reporting?
All three – people, processes and systems must be in sync in order to achieve the best outcomes.
Do not be afraid to take the first step
Done successfully, finance transformation is worth it and can yield positive results for the business. The opposite is true. Done badly, the business can end up incurring unnecessary costs and suffer badly.
The challenge for many companies is starting the transformation journey. Naturally, people are resistant to change and prefer the tried and tested methods of doing things. However, in today’s highly volatile environment, growth strategies that got you here will not get you to the next level. If your organization is to survive and grow, you need to adapt, develop and implement dynamic strategies.
Transitioning from the traditional finance status quo to finance business partnering is an ongoing process and not a once-off project with a defined start and end date. That won’t happen overnight. Finance transformation requires a joint effort, time and the adequate mix of talent and tools.
You therefore need to continuously re-evaluate transformation gains and flaws, and build lessons learned into the next stages of transformation. This is critical for large scale, long-term successes.
By making continuous improvement an everyday focus, you will certainly make great progress.
I welcome your thoughts and comments.