The Fourth Industrial Revolution For Finance

Tony Klimas

Part 1 in the 3-part “Finance and Intelligent Technology” series by Tony Klimas of EY and Joel Bernstein of SAP.

The “Fourth Industrial Revolution” is the idea that intelligent technologies such as the Internet of Things (IoT), artificial intelligence (AI), blockchain, and many more are pulling the global economy into a new post-computing age digital era. In this “transformative age,” industry disruption is common, and transformation to become an intelligent enterprise is the road to business survival.

The order of the day in the Fourth Industrial Revolution is adaptability. “Agile” is on the lips of corporate leaders everywhere. But more than ever, being agile as an enterprise means enabling agility across organizational units in a way that creates adaptability, insight, and cost-effective operation. All lines of business need to come together and work in tandem to deliver the kinds of experiences customers expect in the digital economy.

For no line of business is this truer than for finance – which by its very nature touches so many parts of any business. Take payables and receivables, for example. Traditionally, accounts payable/receivable is a back-office function. But in the digital economy, how you pay out and collect money is integral to the way customers and partners experience their interactions with you. Ride-sharing companies can link to your credit card so you don’t have to exchange money with your driver. Insurance companies can use telematics to bill you according to actual driving performance rather than actuarial tables based on “people like you.” These are just a couple of examples.

Finance as a change facilitator

Recently, I had a discussion with Joel Bernstein, who leads finance for global customer operations at SAP. According to Joel, part of making SAP more agile is finding ways to unlock the value of its data to build an intelligent finance organization that acts as a facilitator of change rather than a bottleneck that impedes change.

The moves made by the finance team at SAP in this regard are well-documented. Today, finance supports a growing cloud-based business where SAP customers pay according to a subscription model. The finance team has also moved to a shared services model where financial services are delivered out of regional centers following streamlined processes, assisted by automation wherever possible.

However, this transformation has not stopped there. More recently, the finance team has implemented a new “Deal Health Index” tool. “Let’s say a salesperson is preparing a quote,” Joel told me. “The deal is complex, including multiple product and service components in different geographical locations all priced separately.”

In the past, the salesperson would rely on a mixture of on-the-job expertise, information stored in price books, and the assistance of the finance team to craft quotes that adequately preserved margin. As SAP expands, however, this is hardly a scalable solution. “One thing the Deal Health index does,” Joel said, “is track the margin of any quote as it’s being built. If your deal health is green, you’re okay. If it starts to turn red, you’ll want to take a look at things before the quote is flagged for finance review.”

Assistance on demand

This kind of on-demand, in-the-moment assistance is critical for supporting a growing and constantly changing organization that demands agility. Traditional training – where you learn a process in a multi-day workshop and then forget about 90% of it – does little to help organizations keep pace in the digital economy.

That’s why Joel’s team is planning to go even further with the help of chatbots and machine learning. When a salesperson is in the middle of building a quote and has a question about the process, a chatbot can pop up to provide in-context assistance. These chatbots, furthermore, will be undergirded by machine learning. Algorithms can analyze processes for usage patterns, identify where the problems occur, and provide insight on where to modify a process or proactively add assistance. Conceivably, these chatbots could put themselves out of business: the more they learn, the simpler processes can get.

This kind of an approach helps put finance organizations out in front of challenges and opportunities. “If you’re going to be an effective finance organization,” Joel told me, “you can’t put yourself in the position of catching the results from the rest of the business. You have to be present at the beginning of the process. Otherwise, if there’s anything broken along the way, you’ll be in a bad place. Whether it’s paying vendors, building deals, collecting cash, or whatever – you need to build in transparency, efficiency, and scalability from step one.”

A foundation of trusted data

All of this, of course, is predicated on a solid foundation of trusted data. Shared services at SAP, for example, are made possible with a single source of truth for the processes they support. The same can be said for the Deal Health Index and the chatbots to come. Only with a solid data platform backed by solid data governance can lines of business within organizations effectively align with one another to drive change and deliver the kinds of experiences customers expect as a result of the Fourth Industrial Revolution.

The next blog in this series explores cloud computing as the foundation for intelligent technologies.

Want to hear more how finance leaders are harnessing the power of technology innovations to transform their operations? Register today to attend the first-ever, complimentary online SAP Finance and Risk Management Virtual Event Tuesday, Feb. 5 for an insightful experience of customers, experts, partners, and SAP executives discussing today’s pressing challenges and opportunities.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.

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Tony Klimas

About Tony Klimas

Tony Klimas, global finance performance improvement leader with EY, LLP, is a member of EY’s Advisory Executive team with global responsibility for the Finance consulting practice. He is an experienced consultant with 20+ years of experience across a variety of industries. His areas of expertise include finance strategy and transformation, shared services/offshoring, and BPO advisory. Tony also has significant experience with finance and accounting systems and has traveled and worked extensively in Asia, Europe, and Latin America. He spent most of his consulting career in the Southeast U.S. before moving to the greater New York City area in 2009.