The promise of emerging technologies can offer cost savings that are especially needed at a time when their finance workload is increasing but headcount and operating budgets are predicted to decline, according to recent research from the Hackett Group.
However, while the likely disruptions stemming from digital transformation have weighed on executives for many years, executives need to keep their focus on the business problem the technology is trying to solve, said Shawn Fitzgerald, senior research director, finance executive practice for the Hackett Group.
He pointed to industries such as the restaurant space where digital competitors such as third-party delivery services have emerged to bring meals to customers even as the core business of selling food has remained intact.
“A restaurant or provider prepares a meal, a consumer buys and consumes — that fundamentally has not changed, but the modality and the technologies that are being utilized very much have evolved,” he said in an interview.
Being strategic with spending
Investments into new technology are one way CFOs and their fellow C-suiters are looking to both trim costs while also positioning their companies for growth in a rapidly changing environment; technology, both as a cost-saving instrument as well as a potential disruptor, can weigh heavy on executives’ minds.
A recent study by PwC found that CEOs cited “technology disrupters” as one of their top challenges to profitability over the next 10 years, for example. Forty nine percent of CEOs stated “technology disrupters” such as AI, the metaverse, and blockchain as a top challenge during that time, PwC’s study of over 4,410 CEOs across 105 countries found.
Being strategic with such spending is key, however. Both executive and financial leaders should think about digital transformation in a measured, risk-adjusted way, Fitzgerald said.
“I would look at where my organization spends time, energy and resources, versus where it creates values and if I have costs that outweigh that value, that’s where I would look to technology to potentially help me,” Fitzgerald said.
Determining the right investments to make when it comes to new technologies is especially critical as CFOs prepare for a probable recession.
Forty-five percent of executives surveyed by the Hackett Group said they planned to accelerate their digital transformation plans in preparation for a downturn.
Meanwhile, while a recent study by Gartner found setting a financial technology roadmap was a key priority for finance chiefs as they entered 2023, the “big challenge with CFOs is justifying the digital investments,” Marko Horvat, VP, research for Gartner told CFO Dive in a recent interview.
Bringing digital transformation to scale
Another key challenge faced by finance leaders is the problem of scale, Fitzgerald said; while digital transformation remains high on CFOs’ priority lists, many organizations are still deploying emerging technologies at a small-scale or pilot level, according to the Hackett Group.
These technologies remain in pilot “not because they don’t have the potential to be transformative,” but because management systems or other key parts of the business have not caught up with the new technology, Fitzgerald said. This can be tricky for bringing new technologies into the finance function especially, which still has to ensure “the numbers are right,” he said.
“You don’t get a pass if you get a quarter wrong or you miss your reporting requirements or regulatory filings,” he said. “That’s always job one.”
Finance leaders must therefore think about digital transformation in a way that still fits with their processes and allows for discipline and accountability, he said, rather than splurging on “tech for tech’s sake,” he said.
“I think technology does offer the potential for transformative differentiation, but again, it’s got it be in the context of a business case,” he said.