You can’t take a robot or two, a new AI tool and a cloud point solution, and then throw them at finance and call it a digital transformation. Just initiating a handful of digital projects is not going to deliver transformative change.
“Digital transformation is not a science experiment,” in the words of one of the keynote speakers at The Hackett Group’s 2018 Best Practices Conference (BPC) on May 1. “It needs to have clear goals and objectives.”
Just trying out “stuff” without first setting a strategy, defining performance measures and governance structures, identifying roles, and selecting the right implementation approach is not a winning strategy. As Sun Tzu wrote in the Art of War, “… tactics without a strategy is the noise before defeat.”
Yet our 2018 Key Issues Study revealed only 56% of finance organizations have a digital transformation strategy. The others are experimenting with new tools like robotics and advanced analytics outside a comprehensive framework.
Such efforts are more likely to waste resources and produce frustration than create value and build agility. And agility is what digital transformation is all about, according to Sean Krackauer, Principal-in-Charge of Advisory Services and Research at The Hackett Group’s in his opening address.
Digital transformation can deliver step change improvement in finance and dramatically reduce costs and increase effectiveness. The Hackett Group’s proprietary Digital Opportunity Model shows that in 2018, typical finance functions can reduce their processes cost by 35% by going fully digital. And even finance organizations we rank at the top, or world-class (based on our extensive database and a series of value metrics), can cut cost by further by 21% (that includes a 5% increase in IT spend). There’s a lot riding on getting this right. Here are a few tips from corporate attendees and speakers during the first day of the The Hackett Group’s BPC conference:
- Nurture a digital workforce that is not only receptive to change, but fully embraces it. Too often, we underestimate the role of people in digital initiatives. While the change in workforce demographics is inevitably bringing in waves of digital natives, there are many existing finance professionals who must be brought on board, taught new skills and are get excited about doing new things in new ways. They need to view machines not just as “job killers” but as tools that augment their skills and make their jobs richer.
- Teach multiple skills. This is not just about learning data science skills. It’s as much about providing education in soft skills. Robots and AI will quickly take over many (or eventually all) transactional activities. What will be left for humans are roles like storytelling, negotiation, interpretation, influencing, communication and strategic thinking. Finance executives will have to have data fluency but also business acumen and advanced interpersonal skills. And they will need to be agile themselves, adaptable to changing roles and responsibilities.
- Remember: It takes a village. Eventually, smart technologies require less support from IT. But at the initial stages, it’s incumbent upon finance to have IT at the table. “We would have saved ourselves a lot of time later had we had IT with us at the start, when we were evaluating a strategy and selecting vendors,” admitted the VP of FP&A at one attending company. As it were, IT came in later in the game and raised many issues, including concerns about cyber security. And IT should not be the only one at the table. So should be other stakeholders. Audit. The internal customers who can help shape the business requirements. Cross-functional leaders who can provide a holistic view and speak to an eventual roll-out throughout the company.
- Develop a clear (but flexible) strategy. Each company must have a digital strategy to ensure it remains competitive in a volatile business environment and can keep pace with, or even exceed, the changing demands of its customer needs. Finance’s own digital strategy must support that enterprise objectives. It needs to be grounded in business context, through goals like cost reduction, or creating value through greater customer- centricity. Finance must tailor its digital strategy to the needs of its biggest clients – the business units and management, by improving process efficiency, or by providing actionable information through better insight. Some projects can be completed relatively quickly for fast returns. For example, one company at the conference implemented a robot in 8 weeks that shortened the time it took to create a critical report from a full month to 3-6 hours, and freed up multiple FTEs to do higher-value work. Other projects, like the implementation of cloud ERP, can take up to three years for large organizations. (It’s important to note that these projects need not happen in sequential manner. They can all be going on simultaneously, if the proper governance structure is in place, e.g., a digital center of excellence, or COE.)
- Define measurable results. Some old technology projects, like large installations of on-premises ERPs, had fuzzy business cases, because they had such long-term ROIs and were pervasive in nature. Because digital technology adoption often happens in short bursts, it’s easier to set clear performance targets and track results. Targets can be expressed in shortened cycle time. Reduced headcount. Increased accuracy. Reduced number of customer complaints. Increased quality of analysis which leads to decisions that yield greater returns. The measures of success must be set out in advance and captured throughout the lifecycle of the project. The cost of scaling up is often minimal once the environment is established.
- Adopt a new implementation methodology. Traditional, or waterfall, methodologies don’t apply here. Under the traditional approach, technology was implementation on a linear basis, in “Slow-Mo” and testing was done at the very end so bugs were identified late and the software was obsolete right out of the gate. New technologies use agile implementation. They are adopted in short bursts, tested within weeks sparking an iterative process that helps fix bugs and relaunch.
“Be prepared to fail, and fail again and recover quickly,” said one tech company executive with extensive robotics experience.
Finally, smart technologies layered on “stupid” processes are not going to bring about meaningful transformation. The Hackett Group’s 2018 ERP in the Cloud Survey showed the number-one initiative companies take alongside their cloud ERP implementations is process redesign. To ensure success, finance can’t just lift and shift antiquated processes to the cloud, or stick a robot between two systems that don’t speak to each other. Sometime the solution to the process problem is NOT a new technology but a change in the current process. A simplified process map can dramatically decrease the cost of existing technologies and basically self-fund the investment in new tools.