Many organisations over the last few years have been drumming on the need to become more data-driven and more “digital”. This short article looks at what potential implications that has for the Finance and Business Finance / FP&A function in particular.
Why is it important?
It is important to take one step back and understand why organisations are pressurizing themselves to be “more digital” and “more data” driven. There are two main reasons for this:
- With the arrival of new competitors, who are harnessing their technology to fundamentally disrupt the “analogue” status quo in many sectors, organisations need to be ready to defend themselves.
- With the rise of generations that are “digitally native”, organisations need to change in order to reach consumers in a more relevant way as well as to attract talent becomes critical.
Data is the new oil is the oft-quoted phrase these days. This is true in as much as technology facilitates the generation of information. The imperative for organisations is to understand how to harness the power contained within such data.
What is actually interesting is what has NOT changed:
- Organisations have always faced the pressure to stay relevant with generational and societal change. Only, today the sense is that this pace of change is accelerating significantly.
- Any organization movement to repurpose itself requires addressing culture considerations.
- Finance has always been at the heart of organization information. In that sense, the imperative for Finance to focus on the organization being increasingly more FACT-based has not changed. And this goes beyond just being DATA-driven, as we shall see in the next section.
Therefore, the reason why Finance functions are natural allies in helping the organization become more digital and data-minded is to do with their preoccupation with the information agenda and how that helps drive business decision making.
What are the key considerations?
Becoming more digital and more data-driven is a means to an end, knowing that the essence of both is harnessing the technological potential to support business objectives. What could some of these ends be?
- speed up decision making
- support faster execution
- support increased empowerment and accountability through the organization
- attract talent to the organization
Thus, a digital culture requires a move from, amongst other things:
- an internal to an external orientation (customer focus);
- a top-down control to a delegated approach (eliminate bureaucracy);
- a cautious to a bold approach (smart risk-taking);
- excessive planning to action orientation (agility);
- a focus on the individual to collaboration (breaking silos)
There are a number of ways in which a CFO and her function can help support such a change.
- Keep the organization focused. This means to bring initiatives back to supporting business decisions. Reframe from “what can we do to generate more data” to “what data do we need to solve this particular issue”.
- Be a role model. Use technology to automate core finance processes such as AP, AR, R2R. Ensure the business finance part of the function is effectively partnering with the business to enhance decision making.
- Increase transparency and awareness of the organization performance and help raise the level of financial analysis awareness in the business so people understand the financial implication of operational decisions.
- Lead organization data management. Establish more rules-based data governance (keep it clean) as well as encouraging innovation and entrepreneurship in the data usage (analytics and insight generation)
- Strengthen strategic resource allocation. As guardians of financial resources, ensure that resource allocation continues to be in line with the request to be more digital / data-driven.
- Create a safe environment. Both within the finance function but also broader in the organization in order to stimulate risk-taking, learning and more action orientation.
- Be a culture ambassador. This in particular for the CFO in her role as part of the Leadership Team. Ensure that cultural norms are reinforcing organization values. For example: if collaboration is a value, then fostering trust between employees becomes critical, which in turn implies driving cross-functional co-operation.
Are there any key challenges?
Given where the traditional finance function has come from – administration, reporting and compliance – a big challenge is how it forces itself to become less “controlling” without losing sight of “being in control”. This will require boldness, vision and resilience from the finance leadership.
A second challenge is going to be dealing with legacy technology infrastructure which is at some point going to require significant investment to address in order to move to harness the power of systems that can help the operations become more digital. Again, this will require boldness and resilience to stay on the long(er) term path.
A final word
I hope in this article has shown not just why organisations are striving to change their cultures to be more digital and data embracing but also how finance functions are in a great place to help actively support such a move.
The article was first published in Unit 4 Prevero Blog