February 4, 2021
Published: The Accountant
Unprecedented business disruption forced organisations to delay many 2020 plans and operate in a reactive mode. Respondents to the 2021 Key Issues Study expect stability to remain elusive, write Nilly Essaides, Gilles Bonelli, Tom Willman and Jim O’Connor at The Hackett Group
The crisis and its fallout will continue to shape finance priorities in 2021, and beyond other local challenges.
For example, between the UK and the EU, Brexit is increasing the complexity and cost of trading, often leading to the re-engineering of supply chains, tax and settlement issues, with a consequence on intercompany trading. Together these European challenges, are causing new demands for broader business partnering in Finance, for example, in profitability management across products, services, customers and channels dimensions.
As most Finance transformations should be self-funding, these new demands underscore the need for efficiency and cost reduction being achieved with greater automation in Finance and more agile resourcing.
According to the study, four emerging enterprise themes will influence the 2021 finance transformation agenda:
– People: The shift to virtual work will require significant reskilling and innovation of management techniques. Companies will tap into an increasingly global talent pool. Performance management will evolve from measuring activity- and task-based productivity to quantifying business outcomes based on teamwork and collaboration. Diversity and inclusion have become a top priority;
– Risk: The 2021 Key Issues Study highlights a major increase in business risks across the board – from supply chain disruption to cybersecurity to regulatory change (e.g. GDPR in Europe), to the economic implications of prolonged pandemic-related restrictions. All parts of the organisation, including finance, will feel the effects of this high-risk business environment and need to factor this into their 2021 transformation agenda;
– Cost: Under prevailing crisis-recovery conditions, cost takes centre stage. Finance must manage both its own operating cost and support broader enterprise cost-management initiatives. The combination of significant 2020 cost cuts and increased workloads is straining many organisations, and this will continue into 2021;
– Digital acceleration: Digital maturity was a major factor in companies’ ability to respond effectively to the crisis, creating competitive differentiation. Most companies have taken the lessons to heart and plan to accelerate enterprise digital transformation in 2021. Finance must support the enterprise digital agenda while accelerating its own digital transformation significantly. In particular, cloud-based computing, collaboration technologies and digitisation of processes, assets and content will be significant focus areas throughout the enterprise.
Understanding the hurdles
According to the research, the biggest obstacle to success is the process and technology complexity. CFOs and their teams must simplify and drive better integration between the finance and enterprise system architecture, prioritising automation coupled with standardisation of processes wherever possible.
The second biggest impediment is access to skills and talent. This is an area of great concern because finance has a history of overlooking the importance of people to drive transformation successfully. It is encouraging that executives identify talent as a major issue, but only 41% plan to launch a talent development programme.
The call to digital action
Regardless of finance’s plans and priorities for the coming year, CFOs will ultimately be judged on what they will accomplish. Digital acceleration will be key – so here is The Hackett Group’s perspective on the six steps that finance must take to fast-track digital transformation and, thus, its ability to deliver on enterprise expectations.
1- Do not wait. Many organisations have been stymied by the notion that they must take a linear approach to digitisation, but this mindset can perpetually delay the implementation of new technologies. With the help of cloud-based technologies and modern data management solutions, finance can overcome these hurdles and lead its own efforts, with IT as a partner;
2- Take a cross-functional approach. Digital success cannot be achieved solely within the finance function. It should be a cross-functional effort involving all G&A functions. Organisations at the forefront of digital transformation see this cross-functional digital capability as a machine for creating value by infusing technology-powered change across the back office to generate greater value, faster;
3- Establish a dedicated transformation capability. Digital transformation cannot be a part-time assignment. It requires specific skills and formal project management. Establish a team with dedicated skills, for example, in a center of excellence or global business services environment;
4- Start small and scale up. Adopt best practices for developing a digital strategy to build a portfolio of initiatives. Then leverage the data generated through these small-scale implementations to scale up;
5- Manage initiatives on a portfolio basis. By understanding the value profile of different initiatives (e.g. cost, impact, duration), organisations can review their relative merits and combine longer-term projects (e.g. cloud migration) with bursts of quicker initiatives such as RPA
6. Utilise a rigorous, value-based methodology to prioritise projects. Companies are under pressure to reduce cost while at the same time, making improvements to their operating model for the future. Management’s demand for robust use cases before allocating digital pounds means that digital initiatives must be understood in terms of the planned or realised value delivered within a defined time frame.