2022 Digital World Class™ Finance
A discussion of our 2022 Digital World Class Finance research findings with Principal & Global Finance Advisory Leader Jim O’Connor and Shawn Fitzgerald, who is a Senior Research Director in our Finance Advisory Practice.
Welcome to The Hackett Group’s “Business Excelleration Podcast,” where week after week we hear from experts on how to avoid obstacles, manage detours and celebrate milestones on the journey to world-class performance. This final episode of the four-part series in Digital World Class research is hosted by Gary Baker, Group Global Communications director at The Hackett Group. His guests are Jim O’Connor, principal and global finance advisor leader, and Shawn Fitzgerald, senior research director.
When it comes to the world of business today, Jim says, you have to either survive or die. For the last 18 years, The Hackett Group has conducted a study, and a top five goal of finance for the last five years has been to be an effective business partner. In a world with inflation, impending recession, talent shortages, etc., finance needs to be there to support a business.
The Hackett Group has developed the Hackett Value Grid™ to articulate what is meant by the term Digital World Class™. It is a 2 inches by 2 inches model that looks at the dimension of business value and operational excellence. Often, you’ll see companies who focus on one or the other dimension, but not both. The top 10% of companies performing across business value are called business value leaders. Digital World Class companies are those who have done a great job balancing the tensions and competing priorities of both dimensions. They are also in the top 25% performance of The Hackett Group’s criteria for both.
Transformation to Digital World Class can be broken down into a few big levers. These include technology enablement, data and analytics, and modernization of your overall architecture. In addition to these core levers, there are also core strategic best practices, which are more policy-related. First, you have to really think about your operating model and how and where you are deploying your services to the broader organization. Second, leaders orient themselves on an end-to-end process perspective, beginning with what the customer needs and drawing it in. This has become even more prevalent with the adoption of digital technology. At the end of the day, the most important thing is to find, develop and retain good talent.
Next, Shawn highlights the differences between Digital World Class finance organizations and their peers in terms of performance. We see Digital World Class finance organizations’ staff and resources fundamentally different from their peer groups. For example, they tend to have 25% more specialists and over 50% higher staffing levels focused on planning, forecast, and analysis. Turning toward automation, they also have less people focused on transaction work. On the finance side, they have 42% lower operational costs.
Finance cost is a percentage of revenue for all companies – not just those in Digital World Class. However, in Digital World Class, finance is seen as a business partner. In 2021, we saw these organizations operating at 44% of the 2011 index. While they have come down a bit in costs, they are also delivering more and upscaling capabilities. Great companies develop multiyear plans to undertake the Digital World Class finance transformation.
Addressing the top change activities organizations are undertaking, one of the most common is establishing a clear transformation road map and establishing executive support. You have to scale and be ready to go after it. The other thing Digital World Class organizations do better than their peers is measure their results. Change typically starts with a kind of process optimization – often digital.
As the episode draws to a close, Shawn offers a final piece of advice for organizations looking to raise the bar on their journey to Digital World Class finance. At The Hackett Group, clients are most often advised that the journey requires digital adoption and acceleration of these technologies. The advantage of using technology is that it gives you more contextual data in real time so you can make appropriate business decisions for the time.
- 00:45 – Welcome to this episode hosted by Gary Baker.
- 01:15 – Why should finance care about reimagining themselves?
- 02:07 – What is Digital World Class?
- 04:32 – Levers finance organizations can pull to affect transformation in Digital World Class.
- 07:15 – Key differences between Digital World Class finance organizations and peers.
- 10:48 – Which levers are most effective at driving Digital World Class performance?
- 13:20 – The impact of digital transformation on finance.
- 16:04 – The top change activities organizations are undertaking.
- 19:31 – Closing thoughts and advice.