Uncovering the ‘How’ of Finance Digital Transformation

Changemakers: Philip Peck, VP of Finance Transformation and Advisory Services, Peloton Consulting

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We asked Philip Peck, Vice President of Finance Transformation and Advisory Services at Peloton Consulting, to share his thoughts on change drivers across the finance department and the building blocks for successful digital transformation. 

Read on as we go deep into what Philip had to say: 

What are some of the key drivers for digital transformation within the finance department?

The past three years have accelerated a change already bubbling in the background. Drivers for transformation are happening across three primary vectors that are all interlinked:

• Expectation: Finance and accounting professionals are being asked to up their game and do more with less. The wider business is looking for more analysis, greater insights, and forward-looking estimates, and they’re asking for all of that at what I like to call the speed of thought. The pandemic amplified the need for real-time information, and business leaders are now asking the finance department to help them make the best decisions in this highly complex business environment. Expectations are higher, but teams must deliver with the same base of people and, in many cases, the same legacy processes or technologies. 

• Technology: By investing in modern, cloud-based, digitally enabled platforms, finance departments can streamline and automate many processes that were previously highly manual, heavily people-intensive, and Excel-driven. Many of these new tools are built around best-practice business processes where the processes should be relatively consistent from one organization to the next. Wherever possible, businesses must try to slay the dragon of believing their requirements will always be unique. Sure, some customization may be required here and there, but that should remain relatively rare. If you’re serious about digital transformation, you need to show flexibility when the best practice-based technology solutions can optimally deliver the balance of what’s essential and address company-specific requirements with normal configuration vs. one-off customization aligned to your overall objectives. 

• Skillsets: We’re used to thinking about practitioners in terms of a relatively narrow skillset built around things like Access Databases, Excel, SQL, or the ability to manipulate data from disparate sources and create formatted output reports. Now, we’re asking the same people to be much more digitally savvy, but more broadly, for them to be indispensable business partners. That means cultivating softer skills such as intellectual curiosity, empathy, negotiation, and a deep understanding of the end-to-end business value chain. Many of these skills weren’t at the forefront when finance practitioners were spending the balance of their time collecting, wrangling, and reconciling data. We tend to think about transformation in terms of technology, but don’t underestimate the investment in human capital required to make transformation stick.

If businesses can get these three elements working together, then what’s the “nirvana” state they should be aiming for?

If you go back 20 years, teams were spending around 70% of their time purely on data wrangling versus value-added activities such as analyzing the business, developing insights, and making recommendations to drive business performance. In a nirvana state, the pendulum radically swings so that teams are spending 80% of their time on value-adding activities.

Another big step change is job fulfillment, which is partly linked to skillsets. The old way in finance was that people needed to get their fulfillment from being proficient in data wrangling. No, we’re changing the paradigm, giving practitioners the chance to change and drive the business. The nirvana state is going to be a lot more job-enriching and satisfying for practitioners willing to take that step up.  

Do you think finance leaders as a whole have a firm grasp of what digital transformation really means?

The tension arises between the ‘what’ and the ‘how’ of digital transformation. Most finance leaders understand what transformation means in terms of greater efficiency and effectiveness, better decision-making, and overall increased business performance. But what they don’t necessarily have is an acute appreciation of their landscape; how do you properly define a digital transformation roadmap and then execute against it?

What advice do you have for finance leaders grappling with the ‘how’ of transformation?

Don’t wait to get started. Most organizations have a certain appetite for change and will be receptive to good ideas when properly framed. There are a few critical steps that we advise leaders to take to build an effective business case and roadmap to get transformation-ready : 

1. Understand the status quo: Every journey needs a point of departure. For finance leaders, that means thoroughly understanding the current state landscape of where they are today regarding fundamental pain points, improvement opportunities, and core business requirements. 
2. Set the North Star: Define the end-state vision for how finance will operate in the business and the kind of value it needs to deliver for the organization overall. This vision should ultimately serve as the ‘North Star’ for every subsequent decision related to the overall transformation. 
3. Visualize the delta: Using a maturity model, plot out where you are today versus where you need to get to. What you’ll end up with is a kind of heat map that helps to visualize the areas where you might be lagging and where your processes are working very well. This allows you to identify, prioritize, and target the areas you may want to focus on first. It also informs the dependencies between those different areas.

Be realistic about where you want to end up. For most organizations, it’s unlikely that you’ll be able to achieve the top percentile or decile across every core metric. So, prioritize the areas that will make the most significant impact according to your North Star goals. 

Once those elements are in place, developing the transformation roadmap becomes a question of defining the initiatives required to close the delta between where the team is today and where they need to go to reach the end state.

Talk to us more about setting the North Star. Who should be involved in that process?

It should be a very collaborative process. Leaders should be highly inclusive in soliciting input from various stakeholders across the organization, including different functions.

In most organizations, you will have ambassadors or change agents who are going to embrace change and drive it forward fully. In the middle, you’ll have people who are somewhat open to change and willing to accept it. And then you’ll have the resistors.

As a finance leader, you need to find ways to navigate that landscape in a very inclusive manner. That iterative socialization and refinement you do up front gives you a better chance of building consensus and alignment. Giving stakeholders a chance to weigh in early means they can be part of the solution.

What should leaders bear in mind when transitioning from vision to transformation execution?

Step into the shoes of the individuals at all levels of the organization who are likely to be impacted by any transformation and make sure you can articulate what the end-state vision looks like for them. 

At the highest levels, success means leaders can justify the value of their investment to the organization as a whole. But you need to be able to cascade this down so that the AP manager, for example, understands very clearly how the world will be different for them as a byproduct of transformation. 

Above all, recognize that digital transformation doesn’t happen with the click of a finger. There’s a common misconception that change begins and ends with implementing a new piece of technology. As much as most businesses will say they are committed to change management, many fail to appreciate the resources, time, and investment required to do transformation well. It’s an ongoing commitment, but it’s a commitment that makes the difference between success and failure.

What tangible metrics do you recommend finance leaders put in place to measure the success of the digital transformation projects we’ve been discussing?

Finance leaders should concentrate on success metrics that look at the amount of time and effort required to achieve outputs, whether that’s processing an invoice or pulling together a report. On the quantitative side, that means criteria such as: 

• Process standardization – standardize x% of business processes across segments in brand
• Data integrity and efficiency – eliminate x% of manual data exchanges
• Process optimization – reduce close cycle time to X days
• Cost avoidance (technology debt; reduce time and investment required to update and maintain legacy systems)

On the qualitative side, I recommend looking at metrics that point to the increased opportunities for value creation that come from reductions in time and effort, including: 

• Collaboration – the degree to which business partnering is happening between departments
• Reducing people dependencies – ensuring knowledge and information are well codified does not reside exclusively with one individual.
• Decision making – quality and accuracy of planning, forecasting, and estimates.

Interestingly, cost savings don’t feature in your list of key success metrics. Is that intentional?

Cost-savings should absolutely be part of the overall value proposition around digital transformation, particularly when it comes to justifying the upfront investment you are making. 

But the bigger opportunity, from a people perspective, is to have the finance function take on more value-adding tasks as the technology around them transforms the day-to-day activities. The true value of transformation comes from how you’re enabling better decision-making and better business partnering. The first step in that process is to stop seeing finance as a pure cost center, and start changing the conversation to one where the finance department is a generator of value deserving of investment.