Is actual finance transformation activity as ubiquitous as the discussion around it?
According to just-completed research from The Hackett Group, the answer is a resounding yes. In a study of whether, why, and how finance organizations are reinventing themselves, we found a whopping 88% are in the middle of a major transformation effort, and 96% plan to launch one over the next 12 to 24 months.
This finding begs the question: What is driving so many finance functions to embrace major change initiatives? While there’s more than one answer, our research reveals that the introduction of smart automation technologies grabs the top spot by a significant margin (see image below).
The next two catalysts are closely related to the first. The introduction of disruptive technologies and prospects of a weaker economy have intensified competition and put pressure on finance to reduce cost in order to protect margins. Preliminary results of our 2020 Key Issues study reveal that supporting digital transformation and optimizing the company’s cost structure are the two biggest management “asks” from finance for the next year.
Meanwhile, to become a trusted business partner, finance must leverage digital tools to enhance its efficiency, effectiveness, and the experience of its stakeholders; e.g., create dynamic reporting presented in an interactive, digital format.
Why is digitalization sparking such massive change? Because it affects everything: Finance’s service delivery model, finance’s talent profile, and finance’s overall performance. Over 85% of respondents to our 2019 Key Issues Study said they expect digitalization to have a high or very high impact on these three areas over the next 2 to 3 years. And we’re already a year into it.
The rising role of technology
Technological advances are not just the biggest trigger for transformations; they are also a critical enabler of their success. In our research and extensive work with clients, we’ve seen that most major transformation initiatives headline a significant technological component.
To identify the role of technology, we divided respondents into two populations, based on their ability (or lack thereof) to meet and exceed management’s expectations (i.e., top performers and peers, or typical organizations). We then looked at what differentiates one group from the other. What stood out immediately was top performers’ greater tendency to rationalize existing systems and adopt new technologies.
We drilled further to identify top performers vs. peers’ adoption rates of specific smart automation technologies. The results were striking, particularly in the use of advanced analytics solutions, modern data management platforms, and AI/cognitive. In the case of the latter, transformation top performers were three times more likely to have adopted the technology compared to the peer group. Clearly, embracing digital tools has a lot to do with the success of the transformation effort.
Finance transformation is pervasive. We’re frequently approached by companies looking for help creating the roadmap and rolling out transformation initiatives. This interest reflects a strong trend toward the continuous reinvention of the finance function that is primarily sparked – and largely enabled – by the technology innovation.
While in the past, the prevailing wisdom was to redesign processes first and only then incorporate the technology element, the two are now happening simultaneously; new system functionalities are sparking process redesign. But that’s not the only difference between past and current transformations. Our research also shows that top performers are dramatically upping their emphasis on cultural and talent issues. Technology is a critical element. But without staff that embraces change and leverages new capabilities, finance cannot realize its objectives.
The Hackett Group is an SAP platinum partner.
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