Finance Digital Transformation – The Power of Starting Small

A CFO’s efforts to digitize the Finance function do not need to be ‘all-in’ or ‘nothing’. Instead,
an incremental and results-driven approach can drive higher success

A global high-tech industry leader unified all its digital transformation efforts under one umbrella — the
organization’s Digital unit. The aim was to accelerate its enterprise-wide digitization efforts. An estimated
$7 billion was poured into the initiative, however, within a few years it had to be shut down. A Wall Street
Journal report attributed this failure to a lack of business necessity for such a complex unit when a smaller
team could have achieved better results.

This is not an isolated instance. The last few decades have been filled with such digitization failures.
Research suggests that an average of 87.5% of Digital Transformations (DT) fail to meet their objective.
With estimated global spending on DT expected to reach $ 2.3 trillion in 2023 (Source: Gartner), such a
high failure rate is alarming!

In a 2023 Deloitte CFO survey, 64% of CFOs attributed an inadequate tech-stack as the biggest challenge
they will be facing in 2023/24. This implies an increased investment in data, infrastructure and technology
within the Finance space. However, whether these investments will generate tangible operational or
business value, remains uncertain.

Partly, this is due to a fear of missing out on the Digital bandwagon. Unification of Data, AI/ML deployment, and Advanced analytics are all popular terms every finance leader wants to be associated with — and rightly so! A digital mindset requires us to stay ahead of these developments. However, the problem arises when a disproportionate amount of resources are committed to these initiatives without a clear roadmap, alignment to business strategy, and identifiable business benefits.

The solution lies in adopting an incremental approach to DT aligning with a framework like Discovery
Driven Transformation (by Rita McGrath – a Professor at Columbia Business School and Ryan McManus –
CEO of techtonic.io), tailored to the needs of the Finance function.

Instead of focusing investments on huge multi-year digital projects straight away, start small. Identify and
execute a few 3-6 months agile projects with a measurable business benefit or an operating value. Define
specific measures to track progress and Return on Digital Investment (RODI) while mobilizing the finance

Let’s explore the 5 basic elements of such an approach:

Define Business Value

As a rule of thumb, measure the business value first and think about IT later. Initiatives must be anchored
into a business need and create either an enhanced operating experience or a measurable value.
In 2017, an alcoholic beverages company sued its implementation partners after investing nearly $100M
over 3 years in an unfinished ERP implementation. Amongst other, a lack of clear business value the new
ERP will bring and a gap in expectations around its benefits was a major reason for the failure.
Remember, DT is not about technology, it is about what technology can unlock for your finance function
and eventually wider business.

Simplify processes

DT often creates minimal value if tech solutions are implemented without removing the underlying
complexity in the processes. For instance, in Finance we often witness adding a layer of advanced Data
Visualization tools on top of an intricate, disparate stack of manual Excel files. In the short-term it does
deliver visibility and creates a ‘quick-win’, however, it is seldom sustainable. The incremental approach would mean simplifying the underlying processes of data flow and Excel files. Then creating a simple uniform dataset, feeding into the data visualization solution would be a good start.

This would not only demonstrate a measurable business value (e.g. hours saved) but also lay the
foundations for a bigger Data Lake initiative. Bill Gates once said that the early phases of a digitization journey are process optimization and basic workflow automation — do not go for AI/ML deployment if you have not done that.

Establish measurable Quick-wins

An effort to transform your finance function does not have to be an all-in or nothing effort. Instead, there is merit in going for short and agile sprints, delivering quick wins. It helps in two ways — Firstly, it creates an Executive buy-in since everyone can see tangible results. Secondly, it helps mobilize your finance function behind the digitization efforts.

For instance, rather than investing in a multi-year myriad project of Intelligent automation, engage existing tech-savvy finance talent to upskill and use low/no-code tools to create basic workflow automation (e.g. using Microsoft PowerApps and Power Automate). The measurable and discrete ROI will enable you to solicit further investments into more sophisticated and high-tech Intelligent Automation tools.

Visible impact tracking

The key governance challenges CFOs face today are tracking the progress of Digital Initiatives and
measuring the RODI. A Global media giant had to write down nearly $150 million of its assets due to a
failed digital media initiative — the primary reason being, a lack of governance around the investment.
SLA-driven ‘on-time’ and ‘on-budget’ metrics are not enough anymore. The complexity of digital initiatives requires a more ‘Balanced Scorecard’ approach. Apart from the above, some other elements of the scorecard can be; Adoption rates, Net Promoter Score, Visibility Index, Employee engagement, Financial RODI etc. A visible tracking of investments and returns ensures an organization-wide engagement and mobilization of Digital initiatives.

Mobilize the Finance Function

DT is not a one-off project. Instead, it is a continuous evolution of how we can use technology to unlock
value for business. This requires a new skill set and more importantly a new mindset. Without your Finance function being mobilized and ‘sold’ behind the digitization, there is not much value you can create.

Foster a digital mindset by encouraging teams to upskill. Lead from the front and empower your Finance
Leadership to create a reward system for digital learning. Encourage an experimentation mindset to solicit new ideas. Create psychological safety for the teams by acknowledging that ‘failure is ok’. As long as there is something to learn, do not hesitate to fail.

Finance’s Digital Transformation is more than just ERP or CRM implementation. It’s about the correct
orchestration of continuous improvement, creating tech-driven value, and achieving maximum ROI. This incremental and results-driven approach can help create the right momentum and scale for your Finance function’s digitization efforts.