The Digital Finance Revolution: The Road to Data-Driven Decision ...
Digital Transformation Leadership Is the Key to the Business Intelligence Castle
The term digital transformation is a bit of a misnomer. To the uninitiated, it might equate to the latest and greatest digital solutions, the new technologies that everyone's talking about. But while such solutions are instrumental, they don't work alone in a genuine, strategically-minded transformation. Or at least they shouldn't.
Unfortunately, a haphazard, incomplete approach – whether intentional or not – is the biggest reason why a staggering 70% of transformation initiatives fail to meet their goals and find business intelligence bliss.
And like it or not, you can usually point the finger at a specific group behind such shortcomings – leadership. But we're going to put a stop to that trend starting now.
What Is Digital Transformation?
So why did we start by saying digital transformation is a misnomer? Because no matter what the name might imply or conjure, digital technology is only a piece of the puzzle.
For example, a CFO can implement a few automation tools, forget they exist, and still reap some modest rewards. But the differences those digital tools make won't generate the type of business intelligence that sets you apart from the competition.
A finance transformation is comprehensive and overarching, utilizing a finely-tuned combination of people, processes, and technology that, when working together, drive efficiency, value, and business intelligence for your enterprise.
Wow. That was really well said. Now, to drill down a bit deeper, who is responsible for creating such a comprehensive digital transformation strategy that, in the case of a finance organization, generates tantalizing business intelligence? Yep, the digital leader of the party – the CFO.
Defining a Digital Transformation Leader
All companies are different. Like snowflakes. So what a digital transformation exactly entails for one enterprise might miss the mark for another.
However, despite the variances between industries and organizations, a few common leadership traits separate effective business transformation initiatives from those that peter out on the runway and never take flight. And many of them revolve around a robust data culture.
Building a Data Culture
A finance transformation doesn't exist in a vacuum. In fact, it's probably going to flail around if it's not rooted in a data culture that makes data-driven decisions a way of life and not an option.
In our previous insights on building a data culture, we emphasized how important it is to lead by example, where the C-suite and key stakeholders build trust in data-driven decision-making that permeates the entire organization.
To that point, it's not a coincidence that the best CFOs are also the best business partners throughout every level of the enterprise. Therefore, if a fine, upstanding CFO – along with other leaders – walks the data-oriented talk, it's far more likely to take root and flourish.
That means it's essential to take old-school intuition with a grain of salt. Yes, there's something to be said for the gut instinct leaders develop as they climb the corporate ladder. However, you should use intuition in conjunction with empirical data to drive the best outcomes for an organization.
Quick Use Case: Remote Working and the Pandemic
Speaking of old-school, plenty of leaders have resisted remote working with every fiber of their being. Now, we're not saying that wanting employees to work in a designated office environment is right or wrong. In fact, in a robust data culture, information makes that determination, not personal biases or perspectives.
For example, if you were more of an old-school leader – the sort relying on intuition and bucking the remote working model – the pandemic might've put you in a bit of a pickle. Suddenly, quarantine orders forced massive swaths of society to stay put and work from home (WFH), whether anyone was actually prepared for it or not.
Obviously, companies that had already embraced remote working had a massive advantage over those that hadn’t. Still, many traditional perspectives looked at social distancing and WFH models as a stopgap measure until things got back to normal.
However, a funny thing happened when researchers started to look at productivity rates once we were all neck-deep in the pandemic and its repercussions – average productivity actually increased. According to research published by the University of Chicago, 40% of workers said they were more productive at home during the pandemic, with only 15% stating the opposite.
Ultimately, that same research estimated continued use of WFH models would yield a 5% increase in worker productivity relative to pre-pandemic figures. And in a marketplace where just slight differences in performance metrics often separate the haves from the have-nots, a 5% boost to productivity is certainly nothing to scoff at.
But this paints our aforementioned old-school leaders in a corner – do they follow the data and take advantage of increased productivity through remote working, or stick to their guns and maintain a strictly traditional, sometimes antiquated business model and work environment?
Naturally, the answer is going to vary from company to company. However, the statistics highlight a predicament many leaders face right now, one that really distills a key trait in effective digital transformation leadership and data culture. Do you keep to what you know or let the data guide you, even if it takes you into uncharted territory?
Data-Driven Decision-Making in the Real World
So let's fast-forward a bit and assume you're committed to providing outstanding leadership for your pending digital transformation efforts and creating a sound data culture for your people. But besides waxing poetic on honed change management skillsets and other essential traits of effective leaders, what practical insights on data-driven decision-making and digital leadership can we give you?
Well, it obviously depends on the needs involved, your industry, and several other factors. However, we've culled together some best practices and additional insights to give you a better idea of what to expect or, at the very least, provide some food for thought.
Think Beyond the Monthly Close
If anyone understands the importance a CFO places on monthly close data, it's us. We get it, and then some. But we'll also be the first to admit the close process can still be lengthy for a finance organization yet to begin or just starting a transformation. Unfortunately, any delay allows that precious data to go stale.
For a CFO trying to utilize timely data and make quick, emphatic decisions based on real-time information, waiting for your financial close could very well be the difference between leading the league in decision-making batting average and fighting to stay in the majors.
That said, if you know the real-time data coming out of your systems is 90-95% accurate relative to your close data – something far more feasible once you're aboard the financial data management and data dashboard trains – then waiting for your close will probably do more harm than good.
As the old saying goes, perfection is the enemy of progress. So, in this case, near-perfect data will almost always be more beneficial to your decision-making than perfect data, letting you be faster and more agile in the process.
More Data, More Problems
Some industries remain slow to the digital transformation dance, even when they're incredibly dependent on massive amounts of data. If you happen to be in oil and gas, consider yourself part of this potentially behind-the-curve club.
Using our friends in the energy sector as an example, a single well now generates over 10 TB of data per day. With nearly a million producing wells in the US alone, it's easy to see that even your trusty HP 17BII might struggle to calculate the volumes of data that oil and gas companies generate and rely on.
Of course, with such a massive fire hose of data blasting through each day, the entire energy sector lends itself extraordinarily well to the benefits and efficiencies of digital transformation and advanced data analytics. However, despite an intense need, the industry has never exactly been a vanguard of data innovation.
For leadership in oil and gas companies still wondering if digital transformation and big data are the right ways to go, performance statistics might swing a convincing hammer:
- Companies embracing data analytics are twice as likely to be an elite financial performer in the industry
- Successful digital transformations result in oil and gas companies that are five times more likely to have faster decision-making capabilities than competitors
- Transformed companies are three times more likely to execute business strategies on time
In the case of the energy sector and similar data-heavy industries, to the transformational victor go the spoils. Simply put, without transformation, just trying to manage such data volume can quickly get unwieldy, explaining why petroleum engineers spend up to 50% of their time collecting and cleaning data rather than actually analyzing it.
Start by Playing Small Ball
People talk about things like artificial intelligence, the Internet of Things (IoT), Blockchain, and other dazzling digital innovations as if they're commonplace in this digital age. And in some industries – but definitely not all – they're the norm.
However, you need to walk before you can run, so our advice is to forget about those highly advanced, often overwhelming concepts for now and focus on the fundamentals. In the case of a digital transformation, sound leadership doesn't mean you must go out and hire a CIO and data scientist today. Instead, it's going for small, quick wins at first and building momentum to something bigger and better.
For example, what does your roadmap to transformation success even look like? What can you do to merge the employee experience and a data-centric culture? How can you start combining your disparate data sources into a single source of truth or upgrade your ERP? As a leader, you're initially creating a solid foundation to build everything on top of and working from there, not manufacturing a fleet of sentient robots.
Digital Leaders Aren't Born
We don't want to imply that companies still mulling over a transformation are hopelessly behind with no chance to catch up. Nor are we saying a CFO still learning about digital finance transformation has already put their finance organization behind the proverbial eightball.
However, the clock is indeed ticking, so the time to act is now. Hopefully, CFOs and other business leaders can take heart knowing that truly successful digital leadership isn't born but made. Every leader in every company in this digital world faces the same learning curve, running the same business intelligence race. But that's why Embark's digital finance transformation team exists – to ensure your company realizes transformation success and wins that oh-so important race.