CFOs / Finance leaders increasingly find themselves in the thick of transformation efforts, whether they involve overhauling the finance function, reshaping the business model, or reimagining other functions. In the process, they are expected to elevate the performance of their organization and ensure there is strong leadership and a financial backbone to support and sustain the efforts, sometimes for years.
In finance transformations, CFOs are typically the sponsor and leader. But finance chiefs also are being asked to play a significant role in transformations that aren’t purely finance-related—as sponsor, enabler, or co-leader—especially as their companies embrace digital and business model transformation. These areas may lie outside of many CFOs’ comfort zones. But today they are expected to elevate their roles as Strategists and Catalysts in order to deliver more impactful change and stronger Performance at the corporate level.
However, according to various surveys, more than 70% of the finance transformation efforts are unable to bring forecast benefits to the business and the cost creep back to the business partners, making them unsatisfied.
Therefore, we need some universal guiding principles which can be applied in order to orchestrate successful and legitimate business transformation projects, not only finance transformation.
By working on various transformation projects, HOFT is delighted to present its six guiding principle in the form of an acronym THRIVE that can be used to really thrive your business and digital finance transformation efforts.
Let’s explore each of these six principles.
Firstly, it is really important to understand the difference between change and the transformation. Change fixes the past whereas transformation creates the new future and adds new value to the business. Many finance organizations are in the delusion of transformation whereas they only undertake some changes by focusing on improving efficiencies and doing things faster, cheaper and better. If you implement RPA to automate your core accounting processes in order to save some cost without re-allocating your resources to high value adding activities, you are just going through a change, it’s not transformation.
Transformation efforts are not expected to be an incremental change to performance or procedures-a transformation must be ‘revolutionary,’ not evolutionary. and it must bring a company to a fundamentally different place—often a step function change. Otherwise, you’re just putting new paint on the walls, and it’s going to peel in six months.”
While planning finance transformation, it is really important to take a very holistic view of the entire finance organization (including all 3 dimensions- functional finance, external finance & strategic finance) as well as the overall business model of the organization and how finance transformation project can help to innovate and adds new value to the business model.
There is a tendency to orchestrate transformation in functional finance or external finance (automating routine / repetitive tasks) and expecting results that are more aligned with strategic finance generating insights and foresights for the business.
Therefore, It’s important to be able to take the strategic vision and set milestones to guide and measure progress from the beginning point to where we want to be, looking three to five years ahead. Having those target milestones helps to know whether we’re on the right path versus just having a vision so that we can be agile in adjusting while keeping the end goal in sight.
The ultimate aim of finance transformation should be to make organization more informed, efficient and strategic.
Transformation should have a very strategic response to organization’s external offerings and internal capabilities. Before hiring a technology firm / consultant or a solution provider for digital transformation project, it is really important to formulate internally transformation vision, mission and strategy using SWOT/PESTLE analysis and then look for technology and solutions which can fit into your transformation vision, as the purpose of tech firms is to just sell their solutions to clients and compel them to align their business processes and systems to those solutions.
Finance digital transformation can only add true value to the business when we make innovative use of digital technologies. For instance, If analytics are deployed only to analyze financial data, it cannot generate and uncover hidden business insights and build holistic business stories until and unless we integrate financial data with non-financial data using correlation, regression, clustering, simulation etc.. then it can be used to determine the financial ramifications of various operational and strategic decisions.
New growth comes from new (innovative) ways of thinking, not just from new technology.
Transformation is all about value creation, not only in the finance function but also for the entire business, that’s why we have Holistic principle above.
Finance plays direct and indirect role in value creation.
Direct value creation is through the finance value chain where finance adds value via accounting, treasury, finance and other core activities for example by streamlining P2P, OTC, O2C and budgeting / forecasting / cash flow management.
Indirect value creation is where finance adds value using company value chain, its operating model, strategy, resource allocation, launching of new products, entering into new markets, R&D projects and conducting simulation and scenario planning for various strategic initiates and projects.
Therefore, finance transformation efforts should focus both on enhancing finance function capabilities in terms of direct as well as indirect value creation, for example RPA can be implemented to automate core accounting processes to free up resources for high-value adding activities and analytics can be leveraged to generate business insights influencing operational and strategic decision making.
Enterprise is made up of Mindset, People, Processes & Systems (Technology), either it’s a finance enterprise or business enterprise.
Therefore, in order to plan and orchestrate successful finance transformation, it is really important to consider all these enablers of transformation, as one of the biggest reason of failure of business transformation projects is the excessive focus on systems / technologies and taking other enables for granted.
It is very important to first align the mindset of top leadership team with finance leadership as well as with the mindset of finance staff working on the ground, taking buy-in with effective change management process is crucial.
Then, it’s also important to take into consideration existing competencies and skills set of people in the finance function and identity and fill any skills gap to successfully orchestrate finance transformation project as well as operational capabilities required post-transformation. For instance, finance team should be well trained in business partnering, tech savvy and understand how to leverage analytics.
Then, re-engineering of core accounting and business processes is really important to successfully implement new technologies, with good data governance, infrastructure etc..
Author : Muhammad Zeeshan Taqi
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