Digital transformation in finance: four key business priorities

By Gilles Bonelli, Associate Principal, and David Ketchin, Managing Director, Europe Practice,  The Hackett Group

Digital transformation – transitioning aspects of traditional business by applying technology to drive innovation — offers unprecedented opportunities to improve business and functional performance. Yet despite the promise of digital transformation, most finance functions are struggling with  budget constraints and more, making it difficult to execute on a digital transformation strategy. Consequently, most have only begun to reconfigure their talent mix, reallocate  resources, and implement new technologies. But they have ambitious plans for the next few years in all these areas.

The Hackett Group’s recent research report, entitled “The CFO Agenda: Finance’s Top 4 Strategic Priorities in 2017,” (available free with registration) is based on results gathered from global executives from more than 180 large companies. The study found 90% of all finance organisations believe that digital transformation will fundamentally change the way they deliver services. Yet, only 44% of finance organisations are guided by a formal digital strategy, and only 35% have the right people and processes they need to do the job. What’s more worrying is that only 15% plan to revise job profiles or competency models this year to address their digital business transformation needs.

Companies can leapfrog the competition by implementing forward-looking talent, analytics, and technology strategies to take advantage of digital transformation. The Hackett Group’s study warns that finance leaders without a comprehensive strategy in place will struggle to embrace new tools, adopt digital technologies and reshape talent profiles, while simultaneously meeting the need for ongoing cost-reduction. These companies will fall behind in performance and potentially compromise their ability to compete.

Focusing on the following four areas will enable  finance to adapt and contribute meaningfully to enterprise transformation.

Supporting enterprise strategy

The Hackett Group study found that finance functions are recognising a broad range of business risks, the top four being: cyber-security, intensified competition, disruptive innovation and access to critical talent. These challenges require that finance develops new partnerships within the business to design and implement lean and effective control systems. Organisations are retooling to meet these risks and capitalise on new opportunities. With the right technology on board, finance can help management formulate strategy and provide it with the information and insight it needs to make better business decisions.

Confronting cost pressures

Innovation is enabling finance organisations to pursue growth, while reducing costs and headcount in 2017. Projected revenue growth sits at 4.1% and yet, businesses expect their headcount will fall by 4.4% and budgets by 3.8%, requiring a significant increase in productivity.

However, cost cuts alone will not help finance deliver on enterprise goals. The study shows that finance leaders who consider themselves top value creators prioritise the development and implementation of finance KPIs and reporting strategies. They understand that a competitive finance organisation is not just lean, it’s fueled by data-driven decision-making. Digital transformation can support this effort. New technologies offer opportunities to improve productivity, efficiency and quality beyond what has been achieved with traditional, ERP based business process automation.

Preparing for digital transformation

There is nearly universal agreement that digital transformation will have a huge impact on the finance function’s performance, the way it services its internal customers, and the talent and leadership roles it must have. In addition, the business overall is being reshaped by technology-driven innovation. To successfully transition itself to the digital era, finance needs a roadmap for how to adopt new technologies and adapt itself to the requirements of the transforming enterprise. It must also redesign processes for strategy formulation and analysis to incorporate the use of new technologies.

Finance executives strongly believe digital transformation will have a big impact on the function. They are starting their journey by putting their “data” house in order and embarking on master data management initiatives which lay the groundwork for any future digital initiative, while aggressively rolling out business intelligence applications and rationalizing existing technologies. Concurrently, they are moving to adopt advanced analytics and other new tools and technologies that will propel them into the digital world.

The same emphasis is also evident in a comparison of the types of technologies companies have now and those they are planning to adopt within the next two to three years. Mainstream adoption of cloud-based (software-as-a-service) applications is expected to grow dramatically, from just 15% today to 39%  in the next two to three years. Mainstream adoption of advanced analytics is expected to grow similarly, from  8% to 38%.

Reshaping the Finance Organisation Talent Profile

When it comes to digital transformation, there is a large difference between what finance organisations think needs to happen and what their current capabilities allow. Only 35% believe they have the right talent strategy for the digital era. Finance leaders must take steps to deploy new, more appropriate competency models. They need to adopt a strategic approach to workforce planning and talent development.

The finance professionals of tomorrow need to significantly improve their technological expertise. They must become familiar with core tools and able to collaborate with IT. They need to be curious and possess advanced analytical skills as well as in-depth business acumen. As more and more data becomes available, finance leaders must become skilled storytellers, presenting insights and information in engaging and visual ways.

Finance leaders who develop digital transformation strategies to leverage emerging technologies will  significantly improve their organisation’s status and value within their company, and help their company gain an impressive competitive advantage over any rivals.