Why Finance’s Digital Transformation Has Not Fully Met Expectations

by Karl P. Mobile App Developer

At least half of finance executives in The Hackett Group 2018 Digital Transformation Performance Study said their digital transformation efforts have not met the expectations of management relative to progress or delivery of their ful projected business impact.

Why?

Many finance organizations are still busy developing rather than executing a digital strategy

In many cases, vendors have inflated expectations with talk of unrealistically quick ROI

IT investment in digital new projects remains relatively low

A reality check

It’s easy to get caught up in the buzz that digital technologies like artificial intelligence, robotic process automation (RPA), and advanced analytics are rapidly revolutionizing the way finance does its work. At some companies, this is certainly the case.

Through our research and interaction with clients, we’ve identified successful examples of digital implementation on a broad scale. We worked with a large telecom to overhaul its P&L forecasting process by adopting an advanced analytics solution that produced ranges of possible outcomes vs. a less reliable, single-point forecast. We also partnered with a European manufacturer with a global presence that has set up an RPA center of excellence to quickly scale up its deployment of robots in finance and accounting.

But at typical finance organizations, the story is different. Our study indicates that nearly 60% of typical finance organizations are still developing their digital roadmap. Only 21% have a plan already. Without a clear strategy, finance is holding off on launching digital initiatives. As a result, it’s not moving forward fast enough or producing expected business results.

There’s also evidence of a gap between finance’s digital adoption growth-rate expectations and the realization of such predictions. Every year, many studies project significant increases in broad-based adoption of digital tools. Our own research confirms it. Yet, year after year, we fail to see the kind of significant pickup in adoption forecasted the year before. Consequently, finance is not making as much progress toward truly transformative digitally enabled change. The predictions may be more aspirational than realistic.

Incorrect assumptions

One common hurdle to delivering meaningful business impact is starting with the wrong premise. Our study indicates that cost reduction is the most frequently cited business rationale for finance digital transformation. It outranks the next most likely driver – increasing business value – by 73%. However, in many cases, the value of digital transformation is not primarily cutting expenses; while some new technologies, primarily RPA, reduce cost by eliminating manual intervention, the biggest business impact comes from the ability to analyze vast amounts of data for better decision support.

Parsimonious funding

One more culprit is the continued lack of adequate investment. We found that technology spending on new digital projects remains only a small portion of the overall IT project budget. Many resources are still consumed by legacy systems and other modernization projects.

The good news is that most finance organizations anticipate an increase in funding dedicated to digital initiatives.

What does this mean?

As companies and finance organizations gain experience with digital experimentation, they realize they need to be more patient before they can see a positive impact. They also need to temper management expectations regarding the time it takes to complete a project and the degree of short-term influence on business performance. In some areas, we even see a slight retrenchment from earlier adoption intentions, as finance reevaluates the justification and specific utility of digital solutions. Yet overall, we also see how the growing experience of digital pioneers is helping others understand the potential and shift from experimentation to piloting and broader adoption.

Read original Article on

https://www.digitalistmag.com/finance/2018/12/13/why-finances-digital-transformation-has-not-fully-met-expectations-06194774

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