The term “digital transformation” is often discussed in technical terms. However, the implications of digital transformation on business models are immense and taking on adding importance as the comparative results play out in record speed in front of us.
COVID-19 is just one of the many events and realities reinforcing the need for digital transformation. Companies that don’t transform in a determined way – along with CFOs who don’t modernize and upgrade – will be even more vulnerable to their constantly evolving competitors.
Digital transformation doesn’t mean modernizing for the sake of modernizing. There are typically three key business objectives that prompt the need for digital transformation: To reduce transactional friction; to be closer to stakeholders; and to obtain and transform enterprise data.
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All around us are examples of smart companies and CFOs making significant investments to transform digitally.
McDonalds has spent millions of dollars in digital transformation to increase service speed and reduce friction. It has implemented touch-screen kiosks with millions of permutations, instituted mobile order and payments, arranged for curbside pickups ordered through its McApp (and this was even before COVID-19), uses time, weather and data trends to improve drive-thru menus, invested in software developer Plexure to better engage diners on their mobile phones and acquired Silicon Valley startup Apparent for its voice recognition technology for use in drive-thru orders.
And McDonald’s isn’t alone in its digital transformation journey. Think about Whirlpool’s smart dishwashers, Fitbit’s smart wearable personal tech as well as smaXtec, which manufactures sensors placed on cows that optimizes milk production by monitoring the animal’s glucose, acidity and temperature.
Naturally, these transformational investments were approved by CFOs who think beyond standard CAPEX business cases and invest in data and analytics platforms – and even in machine learning and Internet of Things (IoT) – where it makes both business and financial sense.
Steps on the digital transformation journey
Within the walls of the enterprise, the benefits of a digitally transformed workforce are also obvious. COVID-19 has highlighted this beyond comparison.
Many enterprises were simply not ready for a mass move to remote working. Traditional cost-focused CFOs thought a desktop-based setup with on-premise IT infrastructure would suffice. But the same leaders are now scrambling to connect and run their business remotely amidst COVID-19. Many businesses had to condense years worth of their digital transformation journey into weeks by buying/upgrading laptops as well as investing in technologies for bigger bandwidth, virtual private networks (VPN), Microsoft cloud and Teams for collaboration as well as e-commerce – giving a boost to Zoom, Amazon, Wayfair and of course Shopify, to name a few.
Smart CFOs are also realizing that strategic digital transformation does more than increase convenience – it reduces labour costs, increases accuracy and processing speeds, improves compliance, controls and auditability, provides real-time analytics and business intelligence and increases employee satisfaction and engagement.
Digital transformation is even more important within the accounting and finance functions of the enterprise. There will continue to be constant pressure to increase efficiency, improve speed and quality of services and move away from static, manual financial processing. Today’s CFOs are also required to predict revenue vulnerability due ineffective delivery, downtime/delay and poor direct experience. Tracking operational metrics and having the right data available for decision-making is now essential.
So how can a model CFO lead the digital transform of both the finance function and the enterprise business models?
First and foremost, a smart CFO must start by reducing friction with the customer/consumer. After all, there are no revenues without them. This requires an investment in a robust customer relationship management system (e.g. Dynamics CRM and e-commerce, where it makes business sense) that goes beyond acting as an online rolodex and contact management system by providing, keeping, tracking and allowing for monitoring every metric that affects the net promoter scores, including tracking social media chatter about the company.
Next, assess and invest in technology that allows for an “always on, anywhere” workforce. This requires moving from an “on-premise” world to either a private or public cloud and investing in collaboration tools such as Office 365 and Microsoft Teams – basically everything that is required for a modern workplace.
Third, invest in “technology of management,” which includes modern ERP systems that can allow access and information for faster decision making. Fourth, assess how efficient you are in moving goods and data/information from and to your customers/consumers and suppliers/partners and be prepared to invest in systems to reduce the bottlenecks.
Fifth, effective digital transformation requires enterprise data from every source to come together into one single version of the truth that can be trusted for real-time analytics. This requires investments in data warehousing, technical data integrations and business intelligence tools such as Power BI.
Sixth, within the finance function, assess every transactional process and evaluate opportunities to automate it and adopt (if cost effective) in new and affordable technologies such as OCRs, artificial intelligence and rapid process automation (RPA) tools.
The final and most important action is to change the DNA of the C-suite by educating and working with executives to provide the right advice and capital to digitally transform the enterprise to be ready not just for another systematic event, but to be ready to compete every day in the marketplace.
Vijay Jog is the founder and president of Corporate Renaissance Group (CRGroup), an Ottawa-based firm dedicated to transforming business management and performance. He has led CRGroup’s growth in areas of strategic finance, corporate performance and dashboards, strategy design and execution and helping clients bridge the gap between technology and finance. Jog consults with organizations around the world and is a leading author and speaker in the areas of corporate performance and the office of the CFO.
For additional resources, visit crgroup.com/Ottawa-CFO