Every profession needs thought leaders to challenge the status quo and set the bar to enable the rest of us to be better versions of our professional selves. To help put this into perspective let’s look at my profession, the world of corporate finance. Over the last decade, finance has experienced incremental improvements in technology, leading to innovative advances in financial processes. Finance leaders that are ahead of the pack are starting to see the exponential benefits of not thinking incrementally. A recent study by the SAP Center for Business Insight, conducted in collaboration with Oxford Economics, indicates that when it comes to digital transformation, companies that fail to get beyond an incremental mindset – and view technology merely as a tool, rather than an integrated part of their business – risk their very survival.
The survey found that a large majority of companies understand the importance of digital transformation, but just three percent of businesses have completed digital transformations. In finance, most executives prioritize digital technologies more than other respondents, and 96 percent believe digital transformation is a core business goal. The problem? While the importance of digital transformation is known, most have not begun their digital transformation journey because they don’t know where to start.
Where do you start the digital transformation journey? The following explores three crucial steps.
Step 1: Move at two speeds
The digital economy is here to stay and the first step in transforming the finance function is moving from the month-end cycle to a real-time business model. By investing in a digital core – an end-to-end IT infrastructure that provides real-time transactional and analytical capabilities across all business segments – finance executives can overcome complexity and establish a real-time platform to accelerate the cycle time of their organization. Transforming the core can take time, so while this is happening, finance can rapidly innovate on the edges with capabilities like cloud based purchasing, T&E systems, machine learning applications, or predictive analytics. In this way, finance can show innovation and ROI in the short term, while building the digital platform needed for long term success.
Over the medium term, an integrated digital system removes silos from business units across sales, marketing, IT, HR and more, giving executives a live view of financial information. With this, they can predict, simulate, plan and even anticipate business outcomes. These in-the-moment insights enable finance to deliver actionable information and make smarter decisions to effectively and resourcefully manage performance for both the near- and long-term. It also allows the businesses to move faster, providing a better user experience for finance executives. With visibility across the enterprise, finance can become a better strategic partner to the business.
Step 2: Partner with IT
Findings from the digital transformation study revealed that IT is held most responsible for digital transformation projects, and less than five percent of finance executives are involved in the process. This is why the next step in digitally transforming is partnering with IT. Top performing finance executives understand that they need to be in the driver’s seat in determining how they want to run their organizations in the future. Finance executives need IT's support to choose and implement a dynamic IT infrastructure that can support their ambitions. Working together, finance and their IT counterparts can develop a plan that allows them to thrive in this modern business environment. Finance needs to take responsibility of outlining the future processes and analytics of the organization, while IT can help make the long-term technology choices to support that vision. Making the right decisions will allow finance organizations to invest in dynamic platforms that will adapt to support their changing business requirements over the next decade or more.
Step 3: Don’t shy away from advanced technologies
The study also found that financial professionals believe investing in technology will allow their teams to unlock insight, improve efficiencies, and reduce complexity. The study found that over the next 10 years finance executives will invest most heavily in big data and analytics, as well as other trending technologies such as cloud, machine learning, and mobile.
Investing in big data and analytics software is great for educating the myriad of big decisions CFOs need to regularly make; however, extracting insights from that data can be very time intensive. By powering big data with machine learning technology, finance teams can replace timely, manual tasks to optimize time, value, and money. It’s important, however, that finance executives learn and experiment with these new technologies to understand how to best apply them. These new capabilities are as much about culture change as they are about technological evolution. The organizations that can adapt their culture to embrace new capabilities and the transformation that they can bring will create exponential improvements. The nature of the exponential benefit curve will make it very difficult for laggards to catch up, making it imperative that organizations begin experimenting and learning today.
The biggest benefit of digitally transforming is improving the bottom line – 85 percent of finance leaders surveyed said their digital transformation efforts increased market share and profits. It also creates a unified culture that encourages a digital mindset within finance and the wider business. CFOs that can become the digital leaders of their financial worlds have more competitive differentiation than their peers – an advantage that will continue into the future.