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Let’s take a moment to think about Fortune 500 companies. They’re pretty admirable, right? They move markets and drive industries—and just imagine the size of their finance staffs. (So many analysts!)
But, according to the Small Business & Entrepreneurship Council, even among this top .00008% of U.S.-based employer businesses, a lack of agility comes at a heavy price. Since 2000, more than half (52%) of the companies listed on the Fortune 500 have gone bankrupt, been acquired, or simply ceased to exist. The reason? Digital disruption.
For organizations uninterested in becoming the next victim of disruption, the solution is digital transformation. IDC estimates that 40% of all technology spending will go to fund digital transformations of some kind. But there are pitfalls. Some companies launch transformation efforts that aren’t integrated with their business operations, while, according to Forbes, others fail to factor in market shifts and economic upheaval in the environments they’re building. These errors not only threaten the success of transformation efforts but the future of the business itself.
Start with finance—and planning
I’d argue that digital transformation should start not as some skunk-works IT project, but as a new, modern way to plan as a business. And the best place for that to happen first is the office of finance.
The office of finance is where all the company’s financial and operational data ultimately resides. It’s where the company’s past is recorded, its present is monitored and measured, and its future is predicted. Finance is the perfect birthing place for a company-wide digital transformation.
It’s also the place where the destructive impacts of manual, siloed, inefficient planning processes come home to roost. You feel the impact in frequent data errors, torturous quarterly and annual close cycles, and late nights and lost weekends. When the information you run your business on sits in silos, you risk missing critical insights that could prevent missteps down the road. When forecasting and budgeting involve endless email exchanges, finance teams spend too much time manually chasing spreadsheet revisions and verifying data—leaving little time for the strategic planning projects on which the business needs them to focus.
Finance executives recognize they need this. In a recent survey, 75% of finance execs said they aren’t confident that their planning process gives them the agility to respond to economic and geopolitical changes. Not surprisingly, they cite a mix of reasons: a workforce lacking relevant skills, planning processes that are siloed and disjointed, and legacy planning platforms that slow them down.
More than technology
These three roadblocks offer a clue as to where CFOs can begin their transformation efforts. While it’s natural to assume that a planning reboot should be driven by new technology, your efforts should address all three areas.
- People. In the next five years, half of all finance executives surveyed said they plan to upskill at least half of their workforce. As finance becomes more of a force for agility, introducing new skills will be essential. In fact, as many as 8 out of 10 jobs that will exist in 2030 haven’t even been invented yet, according to a report by Dell Technologies and the Institute for the Future. How many of those new roles will live in finance? Though it’s impossible to know now, it’s clear that continuing to plan with yesterday’s skill sets will practically guarantee future failures.
- Process. In business, everybody plans. Which means planning processes must be integrated across business functions. This is nonnegotiable in the age of urgency, when the office of finance must have a comprehensive view of the business. Siloed processes lead to rogue planning and other destructive workarounds that prevent a holistic view of the business. A hard look at your planning processes, including where they are and where you want to take them, is a good start.
- Technology. For most companies, outdated tools not only calcify bad habits and processes but can create their own sets of problems. And it’s hard to imagine a successful digital transformation led by legacy technology and spreadsheets. Modern, cloud-based planning platforms address all of this. They automate previously manual tasks, they eliminate errors and improve plan accuracy by automatically integrating data from ERP, GL, HCM, and other back-end systems, and they enable collaboration not just between finance personnel, but with and among business partners across the organization. And the best of them are built to scale as your business grows.
A recent Workday survey showed companies that engage in continuous planning, outfit their critical functions with skilled employees, and create a culture of agility and responsiveness that embraces new technology are 10 times more likely to operate with agility and speed than organizations that can’t claim those traits.
The next decade will determine which businesses meet those criteria. Those that do are likely to shape the future of their industries. Those that don’t? Well, they’ll probably join those former Fortune 500 firms done in by digital disruption.
It’s easy to see which outcome most businesses would prefer. And the office of finance is the place where that future should begin.
The author, Kerman Lau, is director of Finance at Adaptive Insights, a Workday company.