Nearly 90% of businesses of all types and sizes are applying cloud-based technologies to change, improve, innovate, and accelerate how they do business. Meanwhile, we also see that finance organizations tend to be working with technologies and systems that are less than half as effective as needed – just trying to keep up with current business methods and operations. As outward facing systems and ways of doing business change, improve, and accelerate, we see finance organizations at risk of falling further and further behind.
Many organizations are investigating new finance management software and systems, including cloud-based solutions. But many others still are taking a “wait and see” approach to changing or upgrading their systems. Caution is and should be the nature of finance leaders and organizations; but caution and delay are different. The former helps to reduce risk, while the latter frequently increases risk. Given the pace and pressures of the new business reality, and the capabilities of today’s advanced, cloud-based solutions, waiting to upgrade and improve finance management systems engenders increased business risk.
This research report uses research and analysis by Saugatuck Technology to explain how the pressures of global business change are pushing all Finance organizations and leaders to make the decision to rethink – and improve – what they do and how they do it, and the three types of risks that we see as most likely (and dangerous) when Finance and business leaders take a “wait and see” approach.
Risk #1 Finance Effectiveness Gaps
Regardless of new ways of doing business, our research indicates that most finance organizations have significant existing gaps between their core management priorities and their ability to achieve those priorities. Finance suffers already from what we call “Effectiveness Gaps” – the gaps between what needs to get done, and the relative ability of existing systems and
software to enable that.
The data show substantial gaps in almost every finance management area, including the ability to achieve core needs in performance measurement and decision making. These gaps can prevent any company from succeeding in its traditional business. As the complexities of the business increase while the pace of business accelerates, these gaps will grow and worsen. Not only will the firm become less able to compete in established markets, it will be less able to see and understand what is happening in new or emerging areas of opportunity, as it loses ability to gather, analyze, and report accurate and relevant data.
Risk #2 The Shifting of Finance Responsibility
While we see business models in all markets changing to emphasize more data driven capabilities and opportunities, and while old finance systems are preventing leadership from improving the value of the firm anywhere near the extent possible, the “footprint” of finance itself is growing and shifting. When we aggregate and analyze data from finance management surveys over time, we quickly see how Finance leaders’ areas of responsibility, and their relative priority, have not only shifted, but also expanded into new areas.
What we see is how the overall footprint of finance presence and associated management priorities has not just changed, but expanded substantially over the past several years. The shifting and reduction of boundaries has also increased visibility from Finance out to the business, and from the business into Finance as well, further increasing its role and involvement, and expanding expectations and responsibilities, including more involvement in areas like Revenue Growth and Identification, and Business Risk Management.
But that’s not the entire story. We don’t typically hear about a real reduction in the relative importance of those areas showing mostly blue above. Instead, we hear about how the new areas of responsibility are more of a current top priority. This suggests that while the strategic importance of these areas may not have decreased, the ability of Finance leaders and organizations to focus on them likely has. This leads to more risk of disassociation of finance from some areas of the business, and lapses in managing existing responsibilities, as attention turns toward the latest challenges and business changes while Finance must continue to “do more with less.”
Risk #3 Digital Success Gaps
As more market-facing and production organizations innovate with technology to drive growth and create competitive advantage, the shift toward digital business is on. More than 70% of all types and sizes of firms are attempting one or more digital business initiatives, from new methods of customer engagement to monetizing intellectual property to refocusing internal resources by automating departmental operations.
But while most firms are working at digital business in some form, only about a third of these report any relative success, and they see Finance as a primary factor in that. Current Finance systems – already inadequate in many areas – cannot enable the seamless data availability, standardization, and analysis required to plan, build, adapt and refine the new ways of doing business, or the ability to see and pursue new opportunities. As the pace and scope of business change grow, this breeds greater competitive risk for the company