The relentless introduction of new technologies and innovative business models has accelerated the velocity of change in the business environment. To survive and thrive, companies must be attuned to shifts in market conditions and ready to make decisions fast – and implement them quickly – to alleviate their impact.
At The Hackett Group, we call this capability “agility.” Enterprise agility has been getting a lot of attention lately, and it’s no wonder. Our 2019 Agile Operating Model Performance Study identified a strong positive correlation between greater organizational agility and financial outperformance. While we see a lot of writing about what agility looks like, there’s a lot less, if any, about how to create it. Our view is that to achieve enterprise-level agility, companies must improve the dexterity of individual functions. And finance must do its part.
The role of technology
Our research shows that there is no single way to enable executives to make decisions more quickly and expedite their execution. To achieve a higher level of agility, finance organizations need to address multiple elements of their digital service-delivery model (SDM) – for example, streamlining organizational structure, increasing talent versatility, and adopting a more customer-centric mindset. However, when we asked finance executives where they focus the most attention, the response for both top performers and peers was technology. Overall, 88% reported that they are targeting technological advances, compared to the 65% who focus on analytics and service design – the next two most-often addressed SDM elements.
This choice makes sense when we take into consideration what finance executives say about the biggest obstacles to becoming more agile: organizational, process, and system complexity. Automation, particularly modern applications and digital tools like robotic process automation (RPA), disentangle the spaghetti-soup nature of most system landscapes and promote the use of best practices.
Deciding what to do first
We can learn a lot about what works and what doesn’t by plotting the adoption rate of agility-enabling, technology-related practices against their level of effectiveness.
We illustrate the results in the quadrant below. (Note that the X-axis shows adoption levels above 30% and the Y-axis shows effectiveness levels of over 60%.) The two most effective practices are consolidating business applications and deploying smart automation technologies. The first is widely adopted. The second is still an emerging practice; however, finance functions that have begun implementing tools like cognitive and modern data-management platforms are seeing great results. The upshot is that finance must continue to leverage already well-established approaches like system integration while accelerating the adoption of new solutions.
Measuring agility
Finance executives like hard data to measure progress. But agility is a more abstract concept. Coming up with performance metrics is a formidable challenge that companies are only now beginning to explore. In our study, we experimented with several KPIs. In some cases, we saw a significant difference between typical finance functions and agility top performers. For example, while 41% of top performers have adopted cloud-based applications, only 21% of peers have done the same. There’s also a big contrast in the use of self-service tools, which provide users with access to information and analysis and empower them to make decisions a lot faster. A total of 74% of top performers have implemented self-service tools in suitable processes, compared to only 27% of peers.
The pace of change won’t let up. If anything, it will become more frantic. Thus, the pressure to evolve finance’s agility quotient is growing. While this is certainly the general consensus, there’s less agreement, or even information, about the specifics. It’s imperative that finance organizations establish a foundational framework to assess how long it takes them to respond to different changes in business conditions (e.g., an acquisition, the rise of a new competitor, or the launch of a whole new business segment). They should consider the role and importance of different agility enablers, and be creative in identifying ways to measure their progress.
For more insight on financial technology, read “Bringing Next-Generation Technological Intelligence To Finance.”
The post Leveraging Finance Technology To Boost Enterprise Agility appeared first on Business Intelligence Info.