CFOs Beware: Don’t Get Caught Up In the Hype of New Technologies

In one of my articles, Finance Transformation: From Efficiency to Effectiveness, I recommended CFOs to first identify a business problem before investing in a new shiny piece of technology.  Today, there is so much talk about digital transformation and the immense potential of new technologies to drive business performance.

With a plethora of tools available on the market and all promising to deliver better results, one of the biggest challenges faced by many CFOs and finance executives  is identifying, evaluating and selecting the right tool for the business.

Compounding the problem are a myriad of  articles and blogs on finance digitization portraying messages such as,  “If you are not yet invested in digital, you have already missed the train or if  you are not using the cloud, be aware that everyone else is moving forward and moving faster than you are.”

For fear of missing out, some finance executives are leading their organizations on digital transformation initiatives without a clearly defined and articulated plan.

Too Many Unconnected Systems

Due to the lack of having a clearly mapped business strategy to address digitization, some finance executives are getting caught up in the hype that inevitably comes with every new piece of technology or software on the market. Instead of investing in technology or software that serves the business, they are investing in new tools that the consultants or software sellers recommend irrespective of whether the decision is rational or not. So often the end product is a disintegrated technological infrastructure.

New technology, combined with streamlined processes and talented people is supposed to transform finance from an inefficient function into an effective team player in the business. Unfortunately, this is not always the case. Technology is acting as a hindrance. Businesses are superimposing automation on broken or marginally improved processes in turn expecting magical results. In other instances, finance teams are spending a significant amount of time reconciling and aggregating data from different systems.

Today there is an increasing call on finance to play the role of a strategic advisor to business teams yet when it comes to answering basic performance questions, most finance teams are hard pressed to do so.  One of the reasons being that the information required to answer such important questions is housed in different systems all over the organization.

Further, the individuals responsible for partnering with the business to support decision making lack access to some of the systems. They have to rely on information on spreadsheets or reports produced by those with access and most of the time this information is not readily available.

Imagine the frustration of having to wait on someone for days or weeks to send you information and when the information finally arrives you realize that it is not what you expected. For example, the report is not for the business unit you are reviewing or the period selected for the report is incorrect. Because you don’t have access to the system you have to go back to the report compiler and explain again your information requirements.

This back and forth process slows down decision making at a time when accuracy, speed and agility are increasingly important.

Looking at the same information

One of the keys to have meaningful performance conversations is have everyone look at the same information. For example, if the business wants to review the level and nature of capital investments for a given period it is imperative to ensure that the source of this information is common across the organization.

I have come across situations whereby more than one system is used to record capital expenditures often with major record differences between the systems in use. Time and resources are then redirected to focus on reconciling and resolving the reporting differences. It is therefore imperative for CFOs and finance executives to understand that technology alone will not drive transformation.

The data you input into a system will determine the output of that system. That’s why it is important to make sure that everyone is working from a central data repository. Having multiple copies of solutions is inefficient and counterproductive.

As an organization, you do not need too many systems to look at the same information. Thus, before acquiring that new piece of technology always ask yourself, “What is the problem that this new technology will resolve and also how will the investment enhance or strengthen your existing technological capabilities?” Many at times, we are quick to point out the limitations of the current system and use that as the reason for investing in an alternative solution.

Instead of taking a holistic view of the technological needs of the business, we take a piecemeal approach. For example, if AP is not happy with the current system we invest in another AP-focused system. If another team identifies system deficiencies, we look around on the market for a specific tool that addresses that function. This cycle continues over a period of time and ultimately the organization is left with a handful of siloed pieces of systems not completely integrated into the overall technological infrastructure of the business.

As the business and its information needs evolve, sometimes a reconfiguration of the current system(s) as compared to implementing a new one is what is needed. That is why it is important, from the onset, to evaluate the suitability of each piece of technology against the various growth phases of the business. Ask the software seller, “If our business continues to grow, will your product still be able to support our business needs and help us deliver our unique value proposition?”

Considering all the plausible scenarios and options available will help you determine if the technology will serve you for the short or long-term future.

Fear of missing out

Studies have revealed that as individuals we are prone to mimicking people’s actions and their product choices instead of applying our own independent assessment and best judgement. This not only happens at a personal level but also at a professional level.

For example, imagine as a CFO you recently attended an industry conference and the majority of finance executives you met spoke about investing in AI capabilities. Some have already implemented pilot projects and others are at an advanced planning stage. Since your organization hasn’t made plans yet, you make a hasty decision to invest in AI to avoid missing out and keep pace with what others are doing.

The problem with this simple approach is that rather than initially evaluate AI investment from an internal point of view and your business’s strategy perspective, you are now investing in AI from an external point of view based on what other businesses are doing.

I am not saying it is wrong to collaborate and get ideas from industry peers. In fact, this is one of the key reasons for attending conferences. To get informed about emerging trends and disruptive technologies and prepare for an uncertain future.

What is important is that you don’t allow competitor behaviours to drive technology investments in your business. Rather, clarify your business questions first, fix any broken processes before looking into technology and assess how the investment aligns with your overall business strategy.