The Enterprise of the Future: How Finance & Accounting is...

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The Enterprise of the Future: How Finance & Accounting is Positioned to Open the Door to Transformation

Scott Furlong, Partner, ISG

More than 170 years ago, Charles Darwin wrote, “In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment.” The keyword here is “adapting.” And this is what enterprises must do quickly if they are to survive and thrive in this new decade.

Enterprises face two significant challenges in the next five years. First, disruption is ubiquitous; and second, the pace of change will never be this slow again. Markets are being disrupted from all directions, including business model requirements, changes in consumer behavior, fundamental shifts in technology and dramatic product innovation.

Finance & Accounting Driving Enterprise Change

How can enterprises prepare for future disruptions? They need to transform themselves into an “enterprise of the future” by identifying what their more agile and resilient future state looks like, and then executing against that paradigm.

Empowered finance and accounting (F&A) organizations, with their vision for the use of technology and greater emphasis on data, can help open the door to transformation. By adding predictive analytics and AI into its planning processes, the F&A organization can model data-driven decision-making and serve as a champion of change for the entire enterprise.

The F&A organization of the future will include data scientists and behavioral experts. It will embrace business process-as-a-service (BPaaS) and software-as-a-service (SaaS) solutions for increased agility, and it will create and govern a supplier ecosystem for maximum efficiency and innovation.

The Role of the CFO

The CFO is in an optimal position to be the “champion of change,” using the finance organization as the model for transformation for the remainder of the enterprise. While not every finance organization will aspire to be the standard-bearer of the enterprise of the future, forward-looking CFOs will embrace the role in addressing the following areas:

• Strong predictive analytics capabilities and data interpretive skillsets

• Finance transformation and organizational change management capabilities

• Artificial intelligence-infused processes and systems

• Automated data modeling and reporting coupled with conversational AI

• Strong market and behavioral research

• Resources that incorporate data scientists, behavioral experts and automation center of excellence

The traditional role of the F&A organization is to report results, provide information to run the business and analyze the impact of business-building investments and other initiatives. When enterprises are focusing on end-to-end process improvement, the finance organization is often right in the middle of that end-to-end process and, thus, in a perfect position to influence transformation. But to drive true transformation, the CFO and the finance organization need to build credibility in the enterprise and earn a seat at the strategy table.

The CFO and finance organizations of leading enterprises will build new ways of working around five core elements: people, process, technology, leadership and organization (see Figure).

Figure: Characteristics of the F&A Organization of the Future

1. People: Not only must the CFO earn a seat at the strategy table, but the F&A organization must begin hiring and developing data scientists and behavioral experts. The team should be made up of people who are not just financially astute, but also tech-savvy and business-minded. A forward-looking culture in the finance organization will be focused less on scorekeeping and more on prognostication. This requires finding and maintaining the right skills and talent.

2. Process: F&A organizations will rethink the way they work to create true end-to-end process ownership and transformation. Real-time reporting and effective planning and analysis require continual cleaning of integrated master data and process standardization and regulation. Prioritize straight-through processing where possible. By applying insights from ongoing market and competitive research, companies can improve their working capital to increase the health of the business and provide proactive customer service.

3. Leadership: Somewhat paradoxically, finance leadership must maintain the traditional F&A agenda at the same time it shapes the innovation agenda and serves as a role model for digital transformation to the enterprise. It must drive a smaller, more variable cost structure and push a solid understanding of key innovations and how they will shape the marketplace. It’s not just rainbows in the sky. This is about using data to create a winning strategy.

4. Technology: Technology is a powerful lever for the F&A organization of the future. Putting technological advances such as AI and IoT to use in finance can provide the means to augment the workforce, monetize insights and manage risk. Aggregating data for predictive analytics and identifying new sources of revenue and opportunities to increase margins are critical for earning the F&A organization a leadership role. The use of BPaaS and SaaS solutions can drive a variable cost base, while hyperautomation and blockchain applications can move the whole enterprise forward.

5. Organization: A flatter organization that has less need for teams to process transactions and can embrace enterprise agility will improve efficiency and adaptability. An F&A organization that uses a change reward and recognition system to encourage innovation and data analytics will see significant results. And as processes become more digitized, teams can repatriate work that has been sent overseas and engage with customers and suppliers to create an ecosystem that drives down costs and increases revenue. 

Looking to the Future

Today’s disruptions are multi-dimensional. Decisions need to be made quickly and with less-than-perfect information. The COVID pandemic has created an even greater sense of urgency. Enterprise survivors will be those that prepare for the end of the pandemic by transforming their entire enterprise to take advantage of the “new normal.” This means increasing market share by becoming a disruptor rather than a disrupted enterprise.

The F&A organization has as much or more interaction with all aspects of the enterprise value stream as any other functional organization. This puts F&A in the optimal position to model and drive the enterprise of the future.

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