Is finance ready for digital transformation? The answer is no, according to the results of The Hackett Group 2017 Key Issues Study. The study respondents expressed nearly universal agreement that digital transformation will dramatically affect the finance function performance, how it serves its internal customers, and its talent profile (see chart below). But the study also found major deficits in the capabilities finance has today to execute on the demands of digital transformation. What’s more worrisome, there’s little evidence finance is taking bold steps to build up its digital competencies for tomorrow.
The impact of digital transformation on the finance function
If you look at the top and bottom portions of the chart above, you’ll see the gap between the impact of digital transformation and finance’s execution capabilities today.
- Only 44% of companies have developed a digital transformation strategy
- Only 43% have a strategy that’s aligned with that of the enterprise
- Just 35% have the resources and competencies necessary to execute that strategy
To successfully transition itself to the digital era, finance needs a road map for how to adopt new technologies and adapt to the requirements of the transforming enterprise. It needs to align that strategy with that of the enterprise’s overall objectives. It must figure out what technologies it needs to adopt to enable it to service its internal customers by providing them with the insight they require to make smart business decisions. And it must have the right talent in place: it needs staff with not only top-rate analytics skills and technological savvy, but a strong understanding of the business and the interpersonal skills to work collaboratively outside its four walls.
The Hackett Group study shows that finance is hesitant to take the necessary actions. On the one end, it’s stuck in old ways of doing things. Its No. 1 and 2 improvement projects are cost reduction and moving more activities to global business services (GBS) centers. On the other, it’s failing to embrace new tools and reshape the talent profile of its workforce. When asked about its top technology initiatives for this year, adopting new technology innovation came in sixth at 34%, and only 22% of companies are planning major training and development programs this year.
Closing the gap
It’s imperative that finance organizations invest now in building their digital capabilities. The companies in the study dedicated on average only 16% of their resources to digitization and applied it to only a third of their processes. That’s not going to cut it. Technology is emerging at ever-quicker speed, and companies that embrace its promise and recondition their workforce are likely to shoot past the competition.
Finance needs to pick up the pace and:
- Develop a digital strategy. The strategy should outline how it will take advantage of new technologies to improve the way it services internal customers. That strategy might encompass creating more collaborative business partnering models and delivering more advanced insight faster to business leaders and management to enable them to make smarter decisions about running the business. That strategy needs to be aligned with the overall enterprise digital strategy.
- Review its existing processes. Some may be ripe for simple automation or need to be stripped out and moved to a GBS center. The rest need to be examined for opportunities for best-practice design based on new technology solutions such as cloud, Big Data, and predictive analytics.
- Start small. There’s no need to try and change everything at once. Pick a process and change it using a new tool and shorten the implementation to value cycle to show a quick win. Focus the selection process on a project that would make a difference to an internal customer. Deliver a better insight to help this customer make a better business decision. Or foster better collaboration between finance and the business by providing the business with self-service analytics to improve the quality of the conversation.
- Hire and train staff. Finally, the best technologies in the wrong hands are not going to make a difference. To be successful in this era, finance professionals have to be analytically minded; they need to ask the next “why” questions, to look for patterns in data and figure out what’s going to happen next and what to do about it. While they have to have superb modeling skills and technology savvy, they also have to have the right communication and influencing skills and business acumen to partner effectively with the operations. It’s not enough to liberate finance staff from low-value work. To redeploy them to higher-value tasks means retraining or hiring new talent with the right set of skills.
To learn more about how finance executives can empower themselves with the right tools and play a vital role in business innovation and value chain, please visit the SAP finance page for additional research and valuable insights.