CFOs' Guide to Digital Finance: Unpacking Trends, Insights, and Effective Strategies
Drive the pace of digital finance initiatives throughout your department to reach a future characterized by autonomy.
Construct a transformative strategy for digital finance that produces tangible results.
While CFOs envision a highly automated, AI-powered finance function, the reality is that nearly 70% of transformation projects are progressing at a slower pace than anticipated. Forward-thinking leaders expedite progress by focusing on five critical areas.
Digitalization Plan
Centre your strategy for digital finance on fostering innovation, making strategic investments, and cultivating a culture conducive to transformation.
To realize the envisioned digital finance transformation, CFOs must align finance functions with a strategy that places a strong emphasis on innovation. Notably, two prominent obstacles hinder innovation:
Immediate Goal Focus: A significant hindrance to innovation success is employees being overly focused on immediate goals. Organizations with high innovation maturity are markedly more effective in organizing time and resources for innovation activities.
Organizational Silos: Limited collaboration is identified by nearly half of business leaders as a major barrier to innovation. Overcoming this challenge involves breaking down silos, enabling teams to seek help, expertise, perspective, or buy-in from various parts of the organization during experimentation or implementation of new initiatives.
In managing digital change, fostering employee understanding and buy-in for innovation is crucial. This entails reinforcing the finance transformation vision and providing clarity on how staff should prioritize their time. Simultaneously, breaking down silos involves creating internal workflows that support horizontal and agile ways of working.
A successful digital strategy also involves strategic spending on digital technology. Our survey of over 500 finance leaders highlights that business objectives tied to performance and profitability are the primary drivers behind finance tech solution purchases. Navigating the rapidly evolving digital landscape requires a deep understanding of market solutions, vendor capabilities, and anticipated market evolution.
In addition to fostering innovation and strategic technology investments, leaders in successful digital finance transformations cultivate a digital finance culture from the top down.
Establishing a digital culture necessitates clear expectations for the entire finance leadership team, emphasizing continuous development of personal digital leadership skills. Leaders are particularly urged to be proficient in developing their teams' digital delivery skills and fostering personal proficiency in leading technology delivery initiatives.
Learning and development play a pivotal role in successful digital finance transformations, offering tailored opportunities for diverse audiences linked directly to transformation objectives. Furthermore, change management is indispensable — seamlessly integrating transformation initiatives with daily responsibilities, addressing change fatigue, and aiding employees in adapting to new work methodologies. A comprehensive change management approach must be ingrained in every aspect of the digital finance transformation strategy.
Financial Innovations
Develop a strategic plan that maximizes and enhances the yield from technology investments, ensuring optimal returns.
The increasing significance of finance technology in driving improved business outcomes has led CFOs to actively participate in shaping the strategy, planning, and execution of finance technology initiatives.
A substantial 80% of CFOs are prioritizing "setting finance's strategy and roadmap" for the upcoming year, with 45% concentrating on optimizing the finance technology stack.
However, the rapidly evolving landscape of finance technology renders traditional selection and implementation practices obsolete. To navigate this, it's crucial to stay informed about technology and market trends, validating finance technology roadmaps with peer data when exploring new technologies and vendors. Emphasize understanding how emerging technology trends can reshape the finance role and future digital finance initiatives, and leverage this insight to:
Advocate for a composable technology strategy.
Develop a robust framework for assessing and selecting the most suitable technology solutions.
Enhance the finance organization's IT capabilities to maximize technology investments.
Understanding the technology and vendor landscape is pivotal in the selection process.
Here are key steps to consider when making new technology investments:
Differentiate between the hype and the reality of the technologies under consideration.
Fully grasp the value proposition of adopting various technologies.
Assess vendors meticulously during the Request for Proposal (RFP) process to determine the most suitable investment choices.
Enhance returns on digital investments:
Chart the course for the future by taking ownership of technology within the finance function, steering away from dependence on IT. Many finance teams are contemplating the establishment of a dedicated finance IT team. For successful implementation, outline the scope of finance IT in alignment with business requirements, pinpoint the necessary competencies, and develop a staffing plan that clearly articulates the value, structure, roles, and responsibilities of the dedicated finance IT team.
Harness the advantages of a diverse range of tech solutions:
Rather than questioning the value of AI, actively seek out vendors and acquire the skills needed to capitalize on the benefits demonstrated by early AI adopters.
Key themes from recent innovations in digital finance technology include:
Decision Support: Merging human intuition with modern technology to assess scenarios and drive informed decisions.
Process Efficiency: Elevating teams facing challenges in achieving economies of scale.
Dynamic Applications: Streamlining the management of interconnected application landscapes and simplifying platform customization efforts.
Data Integrity: Elevating data quality with minimal manual intervention.
Digital Work Model
Construct a functional model that sustains a digitally prepared finance organization for the future.
Forward-thinking CFOs ensure that fellow finance leaders comprehend the comprehensive changes genuine transformation demands. The utilization of a digital operating model framework serves as a valuable tool to acquaint stakeholders with the intricate components of substantial transformations.
Operating models vary between companies and functions due to distinctions in business context, talent, regulatory environments, and history. However, the following overarching themes are crucial to consider:
Technology Integration: Future digital finance teams will function more like technology teams, necessitating increased collaboration between finance and IT for technology deployment, customization, and ongoing management.
Machine Involvement: Machines will extend beyond automating tasks to play a more substantial role in judgment-based decisions and offer prescriptive advice to humans.
Technology Proficiency: All teams, not just corporate IT or finance IT will require technology expertise as various organizational areas demand profound engineering or software development skills.
Centralization and Standardization: The advantages of the corporate finance centre will expand, while regional teams may experience a narrowing of comparative advantages as technology and standardization progress.
A pivotal element in constructing a digital operating model is the digital organizational structure. While most CFOs anticipate an increase in digital finance talent, scarcity and costliness present challenges. Organizing the digital finance team effectively hinges on two factors:
Availability of Digital Talent
Scale of Digitalization in the Finance Function
Supporting "citizen digital talent" (digital talent within non-digital roles) involves establishing a matrixed organizational structure with a secondary, dotted reporting line into a digital manager.
Flexibility in the technology portfolio is integral to a successful digital operating model. Unlike the traditional finance technology paradigm, which revolves around large, complex systems and inflexible designs, future digital finance technology adopts a composable architecture. This approach enhances modularity and flexibility by organizing technology into application building blocks that cater to specific business outcomes.
As large-scale transformation entails increased responsibility, CFOs should move beyond mere engagement with IT to collaborative leadership in digital delivery activities. This involves identifying and roadmapping technologies, collaborating with vendors, developing or implementing technologies, ensuring security and compliance, managing the technology life cycle, and more.
Overcoming historical friction between finance and IT requires building an empathetic partnership with the CIO. Establishing a collaborative relationship based on mutual discovery of common ground can mitigate perceived competing interests and facilitate crucial decisions on digital investments.
Data Interpretation
Develop metrics and governance structures that propel high-quality analytics within the digital finance domain.
Finance leaders possess a unique opportunity to leverage the expanding pool of analytically proficient talent and the emergence of user-friendly AI-based tools that reduce technical barriers to adopting predictive and prescriptive analytics.
Finance Metrics, Insights, and Storytelling:
In the transition from reporting data and information to delivering insights, successful organizations ensure that the insights provided are comprehensible, trusted, and actively utilized by business leaders in their decision-making.
To fully harness the capabilities of AI and machine learning analytics, concentrate on the following:
Identify the appropriate metrics for evaluating business performance and digital transformation.
Enhance the effectiveness of data-driven storytelling.
Elevate data storytelling in digital, self-service environments.
Develop a metrics cascade to visually demonstrate the relationships between operational-level metrics and strategic business outcomes.
Make performance metrics more future-oriented.
Data and Analytics Governance and Data Integration:
The accuracy, timeliness, and reliability of financial data play a crucial role in the successful deployment of digital technologies and advanced analytics, supporting data-driven insights for business decision-making.
To ensure effective governance and optimize data quality, implement the following measures:
Break down traditional data silos by recognizing the interconnected nature of data and its significance in conveying the complete story behind financial performance.
Embrace an enterprise-wide, collaborative approach to Data and Analytics (D&A) management, positioning finance as a steward of financial data and an advocate for technology-driven data governance.
Identify the most suitable data infrastructures that align with the organization's requirements.
Digital Finance Experts
Prioritize efforts to attract, develop and retain top digital talent
Possessing the right skills is paramount for successful digital transformation execution. On average, CFOs estimate that only 17% of their finance staff currently qualifies as digital finance talent, but they aim to expand this pool to 46% by 2027. CFOs who proactively develop their teams' digital capabilities fare significantly better than those solely relying on IT.
To lay the groundwork for an effective digital talent strategy, consider the following key questions:
What percentage of full-time equivalents (FTEs) is currently dedicated to digital delivery work?
What percentage of current FTEs possess the capability to support digital delivery work?
How many employees in traditional finance roles can realistically be upskilled for digital delivery work soon?
How much support can IT provide to prepare finance employees for digital delivery work?
How much external talent can be attracted to support digital delivery work within finance?
Addressing these questions sets the stage for ongoing efforts to attract, develop, and retain digital competencies, a critical endeavour considering that the costs of digital staff attrition are approximately 69% higher than comparable turnover costs for core finance staff.
Digital finance talent has distinct expectations compared to core finance talent. When crafting a talent acquisition and retention strategy, consider the following factors:
Freedom to Innovate: Digital talent desires the freedom to innovate, often at odds with risk-averse managers. Define potential worst-case outcomes for an initiative, outlining preventive measures, benefits, and costs of inaction.
Technology Level Attraction: The technology level at an organization is the most crucial Employee Value Proposition (EVP) driver for attracting digital finance talent.
Sense of Belonging: The strongest factor influencing digital talent's intent to stay is their sense of belonging within the organization. Strengthen this connection by aligning digital talent with the purpose and possibilities of the finance function, fostering mutual learning, creating flexible career paths, and prioritizing a sense of community and shared values.
So, unlock the future of finance with augsta's CFO guide, decoding digital trends for optimized financial strategies.
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