The role of the FD is expanding. More than ever, businesses look to Finance to provide relevant, up-to-date and discerning insight. According to the 2019 Finance Key Issues research by The Hackett Group, digital transformation is a key strategy to deliver this.
Digital transformation enhances finance’s capacity to meet business objectives. From improving customer focus to reducing operational costs, digital initiatives can provide strategic value across an organisation. But, it’s not just about improving efficiency or shortening lead times. The goal is to streamline the information value chain; delivering data more accurately and insights more quickly. Unfortunately, the same research found that progress is slow.
Here we look digital transformation and its role for finance departments in 2020 and beyond.
Defining digital transformation
Digital transformation is essential for all businesses large and small. In a digital world, organisations need technology to enable them to stay competitive and relevant. But the term is so broad, a ‘catch all’ slogan, that it’s not clear what it means. Exactly what steps are required? How does our strategy need to change? Will it be worth the investment?
Digital transformation is the integration of technology into all areas of a business. It sounds simple but is far from it. The objectives behind it are to rethink operating models, to innovate, to become more agile in your response to customers and rivals.
• 66% expect to generate more revenue
• 48% predict that more business will arrive via digital channels
• 40% want to empower employees with digital tools
• 30% will reduce costs
Companies working on digital transformation, Gartner
Done right it’s likely to fundamentally change how you operate and deliver value to customers. The need is clear; a Forrester study says that a large percentage of leaders believe that by 2020 almost half of their revenue will be influenced by digital.
Meanwhile, Gartner found that 66% of companies doing digital transformation expect to generate more revenue from their operations, while 48% predict that more business will arrive through digital channels. Other reasons for doing it were to empower employees with digital tools (cited by 40%) and to reduce costs (cited by 39%).
The path to digital transformation
The Hackett research found that progress toward digital transformation has been slow. This is largely down to the complexity of adopting and implementing new technologies.
Finance are in a unique position to drive transformation; employing a company-wide strategic view. Tools such as process automation and cloud-based apps can drive down operational costs, while advanced data analytics will enable strategic, predicative insight, benefiting finance teams in the long term.
Mapping a strategic pathway to transformation is crucial. Manoj Shroff, Managing Director at Accenture Operations suggests three main objectives: harnessing the power of data, leading with new digital technologies, and developing future F&A talent.
“The CFO’s greatest area of potential strength is the ability to capture, structure, and make better use of data to increase the efficiency and effectiveness of their own function and the broader organization. But the biggest barrier is that much of this data is inaccessible. In fact, our research shows nearly 80% of C-suite respondents say that 50 to 90% of their data is unstructured and inaccessible.” Manoj Shroff, Managing Director at Accenture Operations
With advanced data systems, it becomes possible to connect and analyse data across a company’s ecosystem. This provides the necessary insights to improve performance and grow; enabling FD’s to make faster, more informed and responsive decisions.
Achieving the three objectives gives the potential for significant growth, positioning Finance as leaders in digital transformation.
The importance of digital transformation strategy
One thing to bear in mind is the importance of strategy in making transformation happen. McKinsey reports that less than 30% of digital transformation initiatives succeed. A MITSloan report counters that it’s strategy, not technology, which drives digital transformation. And this makes sense.
Strategy drives digital maturity. The report found that only 15% of companies that are at the early stages of going digital say that they have a clear digital transformation strategy. Meanwhile 80% of companies who are digitally mature do have a clear strategy.
Simply the act of going digital isn’t enough. It doesn’t imply innovation, customer centricity or strategic value. So before you forge ahead with your digital transformation strategy, remember;
• Embrace innovation and think fast
• Watch and be ready to adopt trends
• Harness the power of data
• Be ready for change, embrace the Internet of Things
• Adapt to the new needs of customers
Digital transformation is about more than digital; its strategy and culture. If you think your company will embrace digital slowly, think again. Your competitors will be moving quickly.
It is here that we see the biggest differences between start-ups and established companies. Start-ups are agile, and have a unique opportunity to build digital systems and processes into their business from the start. More established companies need to embrace new cultures and technologies before they’re disrupted by innovative newcomers.
• 70% of respondents indicated their companies had a digital transformation strategy in place [2018 survey by Tech Pro Research]
• 64% of businesses are introducing more automation to improve process efficiency [2018 IDG survey]
• Less than 30% of digital transformation initiatives succeed [McKinsey]
Accenture found that 77% of CFOs believe that their main responsibilities include driving business-wide operational transformation. Finance leaders are now also digital architects and strategic enablers. As well as digitising the finance function they must also lead the business through digital transformation.
Organisations with a forward-thinking finance function stand to become more agile, more responsive and more competitive. With the finance function at the heart of the business, at the beginning and end of processes, FD’s are in a unique position to both enable organisational change and measure its impact.
How we can help
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