What Is Finance Transformation - and What Does It Achieve?

Whether they realize it or not, many finance organizations are beginning a multiyear journey toward a futuristic but inevitable autonomous finance function. With autonomous finance, governance and guidance processes are significantly augmented by artificial intelligence (AI) and automated through blockchain and robotics. The majority of day-to-day finance activities are location-agnostic and performed through shared delivery models with little to no human intervention.

CFOs must (re)define their functional strategy in terms of value-adding opportunities as autonomous finance becomes table stakes. Finance function strategic plans should incorporate significant technology adoption in areas of waning strength (analytics and reporting) and redeploy employees toward activities that require a portfolio-level view (balance sheet and cash flow analytics). Everyone on the finance team will need to become more data literate.

Questions finance leaders are asking related to strategy:

• How are emerging external trends affecting the finance function?
• How should we set goals for our finance transformation, and what functional strategy will best position my finance function to achieve them?
• How should we describe and present our functional strategy and finance transformation roadmap?

At a time when CFOs and their organizations are all, to varying degrees, experiencing uncertainty, few CFOs prove to be personally effective and ready to embrace change. According to a recent Gartner survey, only 20% of CFOs are personally effective, meaning they deliver on short-term financial performance and also promote behaviors for long-term profitable growth. 

Personally effective CFOs are customer-oriented, build constructive tension with the CEO and the board, are more involved with the business and allocate time — like capital — with rigor. They also understand that finance technologies are quickly evolving from automated processes to autonomous capabilities and must shift their mindsets to experiment broadly, trust the outputs of autonomous capabilities and lead by example in the transition. 

CFOs must overcome digital conservatism when it comes to adopting new technologies, lean budgets, skills shortages, change fatigue and preferences for legacy ways of working, especially in the controllership, financial planning and analysis (FP&A), and among finance business partners.

CFOs are battling legacy departmentalized structures and complex role designs that inhibit analytics quality and activity scopes that shortchange any scale in finance technology management and governance. Plus, economic volatility, digital acceleration and rapidly evolving finance technology and outsourcing markets are fundamentally reshaping finance’s opportunities for unique value creation. 

Because of this, finance organization designs are increasingly out of step with how finance organizations actually operate to deliver support and insight to internal and external stakeholders. Organizational design is the process of creating structures that align roles, workflows, networks and procedures with an organization’s goals. 

Well-applied organizational design is critical to achieving autonomous finance because it increases transparency and representation in the finance function, aligns roles with digital changes and improves cross-finance communication — all of which empower digital investments to have a greater impact.

Future-forward finance leaders expect by 2025 for the teams to be far more skilled in providing counsel to business partners and services to stakeholders in a digital world. The skills they’ll need include strong business acumen, digital skills in robotic process automation (RPA), machine learning (ML) and natural language processing (NLP), as well as complex problem-solving skills. These capabilities will also ensure that finance employees can execute the judgment-based, ambiguous work that will become more of a focus for finance as transactional tasks are automated.

CFOs will need to be proactive, however, in acquiring and integrating digital skills into their finance teams. They must think beyond immediate digital needs and (re)define finance’s digital value proposition to make sure they attract and retain top talent for a digital enterprise and autonomous finance function. 

Gartner research suggests digital talent often feels out of place in today’s finance function —  where digital proficiency as a whole can be low. 

Consider this:

• Sixty-four percent of finance leaders believe their teams are not effective at using digital technologies.
• Twenty-three percent of finance leaders rate their teams as proficient at digital competencies.
• Nearly 19% percent of finance talent with digital skills are actively looking for new jobs, compared to 11% of finance talent without digital finance competencies.

CFOs who can retain their digital finance talent and develop the core digital competencies within their teams have a distinct advantage in ensuring their finance teams drive efficiency and generate high-quality insights quickly and support enterprise digital transformation and optimization initiatives. 

Eighty percent of finance leaders agree finance must significantly accelerate its implementation of digital finance technology to effectively support the business by 2025. If they don’t succeed, they anticipate a range of adverse effects, including the losses of their standing with decision makers, finance’s business foresight and finance’s operational efficiency.

However, accelerating digital technology implementation within finance is easier said than done. In fact, only 37% of finance leaders agree their functions have a clearly defined, two-to-three-year digital technology investment strategy functionwide.

It’s imperative that finance executives deploy, pilot and explore cutting-edge technologies, such as digital twins, Internet of Things (IoT) and blockchain. These technologies are more frequently associated with revenue generation than the technologies we categorize under advanced data and analytics.

Keep in mind, the number and type of technologies being used to drive efficiency, agility and productivity are expanding. Finance leaders are starting to understand that there are other types of decision, process and task automation tools that enable hyperautomation alongside robotic process automation (RPA), machine learning (ML), workflow automation and intelligent document processing (IDP).

Advanced data and analytics (including AI) is the category where most technologies are delivering high value and where finance executives expect to increase investments. These technologies include self-service data analytics, automated ML and ML, cloud analytics, big data analytics and predictive analytics.

Inform finance’s digital technology strategy, investment and execution decisions, and consider three main components:

• Finance technology strategy: Champion and develop a technology roadmap that enables finance to measure progress and gain visibility into the total cost of ownership (TCO) of technology investments over time.
• Finance technology selection: Understand the solutions in the market, as well as what capabilities vendors are offering and how the market is expected to evolve, to ensure you select the right partner to accelerate your finance ambitions.
• Finance technology optimization: Maximize and extract value from existing technology investments while exploring tools beyond RPA to enable productivity and scale automation.