Robots are assisting humans to build cars, deliver packages and assemble computers. Blockchain is tracking diamond supply chains and monitoring construction equipment. Smart machines are showing up in hospitals, shipping containers, pharmacies, and more. For finance to meet the challenges of a digital world, CFOs need to transform their talent and use different tools and techniques.
Global market intelligence firm the International Data Corporation (IDC) estimates that between 2018 and 2021, companies will spend nearly $6 trillion on digital transformation. As digitalisation becomes a business imperative, CFOs will increasingly find themselves in the thick of these efforts. Their work may involve overhauling the finance function, reshaping the business model or providing the financial muscle to assist other business units embracing digitisation.
Philip Hechter, the finance and enterprise performance leader at Deloitte Consulting Africa, believes that CFOs are well-positioned to lead digital transformation initiatives because of their vantage point in the business. While these are technology projects, they tend not to be led by IT. To be truly transformational, the technological change must be material and impactful, and typically will take at least one year, and often up to three to five years to execute.
“Finance is best-placed to direct these projects because they understand which levers to pull to improve the return on equity. They are able to evaluate an investment in technology alongside the organisation’s other capital priorities. They don’t just like tech for tech’s sake, they have a broader, commercial view of the business.”
He predicts that digital transformation will move finance further away from working in insolation to collaborating with other divisions throughout the organisation. “The CFO role has expanded far beyond an accounting and treasury function. Today, they understand the business intimately. They contribute to many non-typical finance areas, for example, by using data to demand a higher return on every rand spent on marketing.”
Conversations taking us forward
For Philip, local commitment to digital transformation has lagged other markets, but interest is catching up. “Initially adoption started out slow. For example, the uptake of cloud was delayed by concerns about security and regulation. These fears have mostly dissipated. Now everyone looks into cloud to gain greater flexibility and scalability while reducing upfront investment.”
Local interest is centred on two areas. Firstly, process robotics to increase operational efficiencies and reduce risk. Secondly, advanced analytics to deliver deeper insights by processing more data and overlaying rigorous pattern recognition technologies.
In both areas, advancements including the adoption of the agile methodology (build, test and iterate as you go) and lower upfront investments due to cloud are de-risking tech engagements.
While digital transformation comes with a high price tag, Philip is adamant that the cost of not embracing technology is higher. “Brave leadership will need to drive the change. Waiting it out will mean loss of competitive advantage in the medium to long term.”
For Philip, the starting point for CFOs is to develop a vision and strategic objectives for finance. To do this effectively, he recommends that clients understand the aspirations of finance, the strategic context, the current performance and capabilities as well as the stakeholder expectation. “It is valuable to imagine the ‘art of the possible’ and then begin to piece the components together. It is about thinking big, starting small and learning fast.”
It is also important to ensure that transformation is supported with strong change management. “Never forget the people during this journey. Most people have a bias to all things familiar to them, moving into digital finance may not be welcomed by all.”
The liberation of finance
In 2011, Deloitte developed the concept of the ‘four faces of the CFO’ to illustrate the multi-faceted and challenging role of the modern CFO. The two traditional roles are the steward, preserving the organisation’s assets by minimising risk and getting the books right, and the operator running a tight, effective finance function.
While the two traditional roles are the ‘ticket to the game’, today it is also critical that CFOs embrace the role of the strategist, to shape overall strategy, and the catalyst, to entrench a financial approach to boost performance throughout the organisation.
This shift is made possible thanks to technology – senior finance people will no longer be paid to simply crunch the numbers. “Technology is at a point where machines can automate and monitor processes and highlight patterns of efficiency on their own. This allows the finance function to refocus its energy on revenue and value creation,” adds Philip.
Digital transformation efforts inevitably change the nature of work in the company. Some work may be automated or eliminated. Other work may require high levels of skill. These changes may require training and adaptation by the workforce.
Deloitte’s biannual CFO Sentiment survey released this March, shows that CFOs are concerned about the lack of workforce skills, including analytics capabilities, as slowing down the digital transformation of the finance space. Nearly 80 percent of respondents see the greatest skill shortage they faced was in people with advanced analytics capabilities, followed by financial planning and analysis then compliance.
Deloitte’s clients in the US and Europe are investing heavily in financial planning and analytics – the forward-looking aspects of finance. Many of these companies have made large strides with predictive analytics, cognitive and artificial intelligence applications in this space.
The forecasting process has evolved to allow leading companies to see ahead while laggers are still combing over the past. “Historically it was really difficult to do, but with advances in algorithmic forecasting has made this more accessible. The real lift comes when it’s combined with human intelligence. Machines help keep humans honest, and humans evaluate and translate the machine’s conclusions into decisions and actions.”
Philip encourages South African CFOs to not let the finance function get left behind in the digital transformation journey. “We see finance struggle to articulate the value case for its own transformation. It is generally perceived that more value can often be achieved from modernising client-facing platforms, leaving the core (middle and back-office systems) in legacy mode. It is critical to remember that finance is a catalyst for the business, if it doesn’t keep pace with the rest, the organisation’s overall performance will suffer.”
The man behind the machines
The world creates a staggering 2.5 quintillion bytes of data each day – a figure that will accelerate into the future. To understand what our digital future may hold, Philip reads avidly on the topic. He recommends the books Nonzero by Robert Wright, The AI Revolution: Our Immortality or Extinction by Tim Urban and In Our Own Image by George Zarkadakis.
Philip, has a Bachelor of Commerce Honours in Strategic Management and an MBA from the Gordon Institute of Business Science, has spent the past 16-plus years focused on finance technology implementations.
He has been with Deloitte for close to two years and enjoys the inclusive and collaborative nature of the firm. He has come to appreciate the enshrined set of ‘have to have’ principles that identify the behaviours encouraged across the firm. On the flip side, the ‘cannot afford to have’ principles flag the behaviours that are not conducive to the company’s values. “Having a common set of recorded principles ensures that we drive the correct behaviour and we are united behind a common purpose of making an impact.”
Philip is a devoted husband and father to a one-year-old daughter. While juggling work and parenting is tough, he squeezes in the time to cycle or train for ultra-endurance sport and has completed various triathlons including the full Ironman.
While training for the Ironman, he came across a slogan that stuck with him “Strength does not come from what you can do… It comes from the things you once thought you couldn’t do.” For Philip, this statement is true for both physical training and the future of work. “Finance teams need to understand that the world will continue to move even faster. We need to prepare ourselves to meet the demands of a business we haven’t even seen yet.”