CFOs must be prepared to lead on new technologies or lose relevance
May 2018 | SPECIAL REPORT: BUSINESS STRATEGY & OPERATIONS
Financier Worldwide Magazine
May 2018 Issue
We live in an age of constantly evolving skill sets. Barely a day seems to go by without a fresh business headline announcing how technology will make whole professions obsolete or will ‘change everything’. For many years, the ethos of influential Silicon Valley entrepreneurs was to ‘move fast and break things’ when it came to developing ever more disruptive tech.
It can be easy for business leaders to feel that they themselves will soon be obsolete. Yet research seems to suggest that the age of the global C-suite has been rising in recent years, even as digital technology becomes increasingly integrated into business as usual functions.
This should provide an important pause for thought. In an age of increasingly automated processes and rapid change, the role of human judgement and experience at senior levels has grown with it. The challenge for the contemporary executive skill set is not just to grapple with new technology, but also about how to combine that knowledge with a firm understanding of strategy and implementation.
Yet while that should provide some positive encouragement, the reality is that digital adaptation is now more urgent than ever. In the corporate race for relevance, the revolution has already started, and recognising the opportunity is essential. By 2020, Forrester expects organisations to gain $1.2 trillion in business from their slower-to-adapt peers.
At the end of 2017, we released a report, ‘Race of relevance: technology opportunities for the finance function’, which details how chief financial officers (CFOs) have the opportunity to adopt new technologies to drive business growth. Failure to embrace these opportunities risks losing competitiveness and remaining relevant within a fast-moving digital landscape.
Embracing new technologies can enable a better, more efficient process in the workplace, provide more protection for information assets and support communication, both internally and externally.
CFOs (or other senior individuals) need to appreciate that there are significant opportunities to be gained from the use of new technologies in finance, and other professions. The six key areas that the report recommends companies focus on are robotic process automation (RPA), analytics, cloud computing, cyber, artificial intelligence and social.
Rather than diving in head first, however, companies must make sure that they have a plan in place. They should identify business goals and explore what technologies they could use to help reach those goals.
In realising the finance technology strategy, it should be remembered that this is often a partnership between the information technology (IT) teams and the finance function. As business partnering has affected the relationship between finance and its customers, so the same process can be replicated in the relationship between finance and IT. Executives interviewed for the report claimed that an increasingly fruitful relationship was being developed and while some technologies, such as RPA, can be implemented by finance, they still require a partnership with the IT team to be effective.
Developing your professional skill set involves more than just learning the right technical terms to use or making sure you are aware of the latest trends, however. It also requires vision and experience. It is difficult to judge with some new technologies whether they represent a revolutionary shift or simply the newest fad.
More than anything else, it requires what every great leader needs to have: courage. Business leaders need to accept that with these technologies it is often better to fail fast and be able to move on, rather than to not try at all. That open-minded approach needs to not just extend to the individual, but also the teams of people they manage and lead.
That also extends to another increasingly vital 21st century skill: communication and emotional intelligence. As you plan for business evolution, you should make sure you are communicating this process to staff and help them improve their own digital literacy, so they do not fall behind in the company. Do not assume everyone, whether highly experienced or digital native, will have the same understanding of where your strategy is going.
Everything we do is a learning curve, but embracing new technologies requires a particular approach. Increasingly, it is not just about understanding how technology directly impacts the daily activities of the finance function. It calls for a holistic view of the whole organisation – how consumer habits and expectations of same-day delivery may affect the supply chain or whether you should hire a ‘white hat’ hacker to future-proof your security infrastructure.
Some of these challenges will be primarily technical. The question of whether to count investment in your digital infrastructure as capital or operational expenditure, for instance, very much depends on what the technology is and how it will be used in the future.
When it comes to using cloud computing, meanwhile, there are enormous differences between moving to ‘software as a service’ or ‘infrastructure as a service’ models. Judging which is correct for your organisation requires a strong understanding of both how the technology works and the implications for your business in the future.
Other new technologies may raise new ethical questions which go beyond the bottom line. The rise of cryptocurrencies, and the blockchain technology which underpins them, could create entirely new ways of doing business. Yet they come with new questions about your organisation’s responsibilities to protecting client data and meeting anti-money laundering legislation.
In a quickly evolving landscape, there are no easy answers to such questions. Even as businesses adopt many of these innovations, we are only scratching the surface of what they could achieve and what unforeseen risks they could create.
The management theorist Michael Porter famously said the essence of strategy is choosing what not to do. What is clear for anyone seeking to lead the finance function today is that inaction or delegation to the digital team is no longer an option. Digital strategy is now a whole business concern, and leadership must come from the very top. Otherwise obsolescence is not just a risk, but an inevitable outcome.
Clive Webb is a senior professional insights manager at the Association of Chartered Certified Accountants. He can be contacted by email: firstname.lastname@example.org.
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