Kanwar Singh, Vice President - Finance, Oracle discusses the importance of enterprise-wide digital transformation and the role of finance function as an enabler in this transition.
Q: As enterprises adopt digital, the finance function is expected to lead the digital transformation. What are the specific expectations from finance in this transformation that companies have?
Kanwar Singh: Digital transformation is creating new demands on CFOs and their finance teams, which is driving finance to rethink their mission and operating model. CFOs are increasingly being asked to act as corporate strategists or “co-pilots” to the CEO to ensure the business adapts to the digital age. The finance function has to balance ‘operational efficiency’ with ‘operational agility’.
- ‘Operational efficiency’ is focused on cost, quality, perfecting transactional processing and workflow.
- ‘Operational agility’ is about harnessing the ability to manage hyper-growth, using predictive analytics and modeling to uncover insights. Robotic process automation (RPA) and machine learning further improve process efficiency, as well as securing skill sets required to be collaborative and partner with the business to help guide the business forward.
The finance function must provide forward-looking guidance to the business, helping their management and line of business executives make the right decisions on future investment avenues in order to drive profitable growth, mitigate risks, and maximise shareholder value.
Q: What are the primary compulsions/concerns that are forcing enterprises in India/globally to adopt digital? Are these concerns universal or are there some issues specific to Indian markets?
KS: The digital age and turbulent market conditions present opportunities and threats to all current business models.
There’s a perception that large organisations are built to survive by default due to their size, strength and history/legacy. It is believed that they become almost institutionalised in thought, processes and infrastructure; however, this limits their ability to innovate and adapt to change. Digital technology enables innovation, agility, efficiencies and, when leveraged appropriately, provides enterprises with a distinct competitive edge.
Adoption of digital technology and automation, leveraging cloud services, is a global trend. The challenge faced by all companies is to grow at, or above the pace of their industry without losing control of their operations. The Innosight (a growth strategy consulting firm) study shows that very few companies achieve this goal. Most corporations fade, meaning that most firms see their performance and their stock price fall as new technologies and startups with new business models enter and disrupt the economy.
Research suggests that many large companies have moved out of the Fortune 500 list in the past 10 years and in multiple instances, have been replaced by a company that would have started operations in the last 20 years or even less. We have examples of technology-driven businesses overtaking market capitalisation of corporations with a significant legacy.
Here at Oracle, we believe that to survive and thrive, organisations need to be increasingly agile. Companies should be able to make informed decisions swiftly about how to adapt to rapid and constant changes and then implement new strategies. In addition, they need to be able to manage performance nimbly, constantly monitoring what is working and what is not working, as well as redeploying resources to where the returns or opportunities are best.
Q: Digital transformation is taking time in advanced countries like France despite the availability of various tools and technologies. Do you think Indian businesses are ready for it in such a scenario?
KS: Change is the new constant – 88 per cent of organisations are undergoing some type of transformation today (Altimeter Group The 2014 State of Digital Transformation (http://altimetergroupdigitaltransformation.com/img/dt-report.pdf). I don’t think Indian businesses have any choice but to embrace digital transformation. To secure their future, they need to radically reshape their business models. That has big implications on finance teams and the types of systems they use, in addition to the data needed to run the business. India’s transition to GST is a superb example of digital transformation for indirect taxation in India. Businesses large and small have to adopt “digital” to leverage GST.
"Finance transformation is a major change project. The starting point is to have three important properties: a clear understanding of the new role for finance; sponsorship from the leaders of the business; and buy-in from those going on the journey."
At Oracle, we’ve seen a big shift in our customers’ willingness to embrace cloud applications. This pace is accelerating and Indian companies can only benefit from this digital transformation. Very recently we announced the availability of Oracle Enterprise Resource Planning (ERP) Cloud in India. The GST Bill was passed in Parliament in March 2017, and Oracle was ready with the solution two months before it was to take effect nationally in India.
Q: What is the roadmap to digital transformation for businesses and finance? Is there a strategy companies must adopt? If so, what are the elements one should consider in developing such a strategy? Is digital transformation strategy adopted by a company cross-functional, or is each department including finance expected to develop its own strategy?
KS: Every business is unique in terms of their digital transformation journey. Their vision, driving force, how they leverage their existing set up & resources, scalability, security/reliability, ability/cost and readiness to adapt with the latest technologies are some of the factors that could impact their digital transformation roadmap. We often help our customers define such a digital roadmap.
During these disruptive transformations, finance leaders and their teams might find it challenging to assess such a transformation could impact. Would it be sales or marketing or even the service side of the business? At Oracle, we believe that digital transformation helps companies to step into the future, and it enables them to be more competitive. The wonderful benefit of an enlightened digital enterprise, aside from making better decisions and optimising assets, is spending less on initiatives and programs that don’t advance the agenda of the company or empower employees/ customers, and spending more on core strengths.
Q: What are the key elements to be considered in digital transformation of finance?
KS: While factors like leadership and having a mandate are undoubtedly important, technology is overwhelmingly the most important enabler of financial transformation. As appropriate cloud-based solutions are available, technology is not the biggest challenge. Far from it – cloud technologies put the new operating model for modern finance within the reach of most businesses. The challenge then is to implement a change program and to develop or recruit the talent that’s needed to do so.
"I don't think Indian businesses have any choice but to embrace digital transformation. To secure their future, they need to radically reshape their business models. That has big implication on finance teams."
Oracle recently partnered with the Association of International Certified Professional Accountants in the US to conduct a study on finance transformation and business agility, and that study made the following recommendations on how CFOs and their finance teams can jumpstart their digital transformation strategy. Some of the findings included:
• Finance transformation is a major change project. The starting point is to have three important properties: a clear understanding of the new role for finance; sponsorship from the leaders of the business; and buy-in from those going on the journey. In addition, success stories that provide proof of concept by showing what finance can contribute may improve finance’s credibility.
• A gap analysis should also be carried out. Where are we now relative to where we want to get to? What resources will we need? What capabilities do we need to develop? Do we have the capacity and culture to be flexible and implement change?
• The CFO must agree to a map for the journey, the milestones to be achieved, and the measures of performance. The software-as-a-service cloud-computing model limits the level of capital expenditure required. But, as this will inevitably be a major project, sign-off will be required on the business case.
• Partners with experience of similar projects and expertise in technology must be selected on merit, based on their track record and reference clients.
• Project and change management disciplines must always be applied.
• To manage the transformation, organisations will need measures of their progress towards the new operating model for modern finance.
• To build credibility and maintain buy-in from internal customers across the business, organisations will need measures or evidence of how finance supports business agility.
Q: While automation provides agility, there are concerns around it especially in an era which is witnessing massive job cuts. How will it affect the finance function in India?
KS: New tools such as machine learning and artificial intelligence (AI) enhance human decision-making, they do not replace it. Automation has always served to free up people to focus time and energy on what matters most and the new era of digital automation is no different. We believe that an enlightened digital enterprise allows you to focus on your customers and new innovations that can advance the well-being of everyone. We continue to be positive on finance talent in India.
Q: What are the technologies and tools available for digital transformation of finance?
KS: Digital transformation of finance leads to “Agile Finance” and has three broad KPIs:
i. Greater Efficiency : through relentless automation:
a. Simplify, standardise, and automate transactional processes using cloud, machine learning, artificial intelligence and robotic process automation
b. Centralise subject matter expertise in integrated business services, shared services, and centers of excellence
ii. Better Information : to predict the future:
a. Manage performance with planning and driver based forecasting
b. Stretch FP&A into a powerhouse to develop innovative strategies
c. Unleash potential in big data, advanced analytics, and artificial intelligence
iii. More Influence : to drive business outcomes:
a. Develop new skill sets in statistics, data analysis, and data visualisation
b. Implement cross-functional teams with multidisciplinary and business partnering skills
c. Support rapid decision making and strategic guidance to lines of business.
Q: Your advice to our CFOs on digital transformation?
KS: Digital transformation is critical to securing a competitive edge. CFOs should consider the following to effectively manage the transformation journey:
- Secure an executive mandate to implement transformation
- Simplify operations as much as possible before embarking
- Develop optimised business processes and then deploy using modern systems that follow vendor best practices
- Implement a shared services or outsourced model that follows these standardised processes globally
- Transform customer experience to stay ahead of the competition
- Empower the workforce with collaborative tools and modern, socially-enabled self-service applications
- Move fast and stay on the course
- Commit to continuous transformation.