New digital technologies and disruptive business models, coupled with growing economic unease, are forcing corporate finance enterprises to pay closer attention to their digital transformation strategy in 2019, comments Gilles Bonelli, Associate Principal, The Hackett Group
The Hackett Group’s Finance Key Issues 2019, CFO Agenda: Building Next-Generation Capabilities research asked finance executives to rank the importance of business objectives that finance must support in 2019. Ninety-one percent ranked digital transformation and cost-structure improvement as critical or highly important objectives.
However, the research revealed that finance organisations’ progress toward digital transformation has been hampered by the struggle to adopt and implement digital technologies. Despite this, they are still counting on enterprise digital transformation to help them prioritise customer-centricity and cost optimisation as their top initiatives for 2019.
Tools and technologies that define smart automation
Smart automation comprises five specific digital tools and technologies that are used to optimise the execution of work.
Smart data capture
The extraction of structured and unstructured information is driven by the evolution of technologies such as optical character recognition (OCR), handwriting recognition, speech-to-text machine reading and image recognition.
Conversational interfaces
These are tools that mimic human spoken and written communication via technologies that focus on linguistic interaction with people, particularly chatbots and virtual assistants.
Robotic process automation (RPA)
Any form of business process automation technology that emulates human execution of repetitive, administrative computer tasks.
Cognitive automation
Commonly associated with RPA, these are machine activities that mimic human judgment and perception by processing unstructured, complex or high-volume information in order to provide insights and predictions.
Orchestration
The coordination and execution of work by established systems, human workers and smart automation tools. Orchestration technologies enable ticketing, case management and performance improvement.
In summary, smart automation is a ‘toolkit’ comprising new cross-functional and cost-effective technologies that can be rapidly implemented to help fill current capability gaps in end-to-end finance processes.
Impact of digital transformation on finance
Digital transformation can dramatically improve the efficiency, effectiveness and the experience of the finance function for customers. However, the introduction of new technologies associated with digital transformation is also causing a spike in cyber risk such as fraud or theft. Yet, new digital technologies are still seen as enablers of better, more streamlined business operations that boost competence.
Digital tools such as RPA and cloud-based applications can drive down operational costs, while technologies like advanced analytics enable finance to fulfil its strategic mandate. Adoption rates for these tools are expected to increase dramatically over the next two to three years.
RPA, in particular, seems to be fast gaining traction among large finance enterprises where the scale of business processes exceeds human capacity. Adoption of RPA is expected to more than double (from 38 percent to 86 percent), with broad adoption skyrocketing by 18x, (from 3 percent to 55 percent). This highlights a concerted effort to eliminate errors and manual work, and unlock capacity for knowledge-based activities.
According to the research, digital transformation will drive substantial changes in finance’s talent needs, performance and operating model (i.e service delivery model). Ultimately, digital transformation dramatically enhances the ability to meet enterprise objectives. An additional factor is that budget cuts and personnel reduction will once again feature strongly in 2019, driving the need to reduce any productivity and effectiveness gaps in the face of significant revenue growth.
While finance organisations are making progress and seeing some benefit, they are seemingly finding it more challenging than expected to convert to digital. Progress has been hampered by issues such as a lack of a mature strategy, lack of internal IT support, and a lack of dedicated resources. Nevertheless, they are optimistic about their ability to rise above the challenge.
Finance organisations have an aggressive agenda for 2019, and they recognise that there are several important capability-development initiatives they must execute successfully to achieve this agenda. Given the anticipated contraction in resources, they must decide carefully what initiatives to undertake first.
Finance leaders can determine their improvement projects by asking three important prioritisation questions: Is the initiative aligned with the enterprise’s overall objectives? Does it reflect finance’s functional goals? And lastly, but perhaps most importantly, does finance currently have the relevant execution capacity and capabilities? If it does not, it must quickly focus its efforts, narrowing or closing the difference between current and future requirements.