The role of data in digital transformation

The age of big data offers businesses unparalleled insight into their operations and the broader economy. This means more power to make accurate forecasts and course-correct early if needed. And that, in turn, can help streamline operations, capture more sales, avoid unproductive investments, and boost profitability.

Realizing these benefits requires finance departments to stretch beyond their traditional practices. They need to think more broadly and strategically about the role they play in the overall company and adopt new processes to support it.

This can be a challenge for finance leaders. Until recently, they haven’t had to think much about issues outside the narrow definition of “finance” – questions such as: “How well do I understand my company’s customers and how they use and perceive our products? How does my company create value for customers? How efficient are our processes?” However, today’s finance leaders know their roles encompass various ways a company can use its resources to become as competitive as possible.

Many of the answers to those questions lurk in the terabytes of data companies sift through every day. In my career, before joining Anaplan, I’ve seen how the contribution the finance organization can make increases dramatically when it has the tools to access and analyze data easily.

So, growth-minded finance leaders know part of their job is leading the digital transformation in areas that stretch beyond their traditional practices.

Before you move ahead, figure out where you are now

Before you start planning new processes and technologies, you need to know what your department is capable of now and what capabilities you’ll need to add or evolve.

The first step: Think about how finance is positioning itself within the business. Is it seen merely as a back-office engine for accounting, transactions, and regulatory compliance? Or does the business turn to finance to help craft a strategic path forward?

To uncover the specific capabilities that you need to drive that strategic impact, ask yourself — and your team — the following questions:

• What are the strategic goals for the next 3–5 years, including how we make and spend money? Do our strategic plans align to and drive both financial plans and operational plans?
• How will we optimize capital expenditure?
• How do we collect and analyze data in a consistent, meaningful way understood by different functions and allows us to make informed decisions?
• What are the methods of collaboration and feedback between the finance team and other functions?
• How are longer-term goals and initiatives planned and tracked?
• Do we use rolling forecasting to understand the impact beyond the next quarter and fiscal year?
• What alert systems are in place to spot divergence and anomalies?
• When financial plans don’t align with strategic plans, what mechanisms do we use to evaluate scenarios and trade-offs like mergers and acquisitions, product development, or new go-to-market strategies?

Collectively, those answers should outline where you currently have gaps. You and your team will then need to identify the top priorities for modernization, whether adding a single new tool or overhauling entire systems.

Start small to overcome objections

The next step is to put together a transformation proposal for your leadership – pain points, the new abilities you plan to gain, the solution(s) you have in mind, ROI, timing, budget, and people and resources needed.

It’s true; this will probably add up to a substantial investment, and getting executive approval can be an uphill battle. One tactic I suggest is to move incrementally.

Look for areas where your ideas for transformation can be implemented on a small scale in one well-defined project. Monitor results and collect feedback. If that phase goes well, extend your experiment to one or two other test areas. If the feedback is positive, start developing a plan to scale the implementation to its full potential.

Three stages of digital transformation

The transformation process typically goes through three phases, each adding more sophisticated capabilities.

1. Enable comprehensive access to business data

You need data to discover ways to drive your business, but that data is rarely democratized. “It’s locked up in IT. It’s their world. If you want data, you knock on IT’s door, and they give you an extract,” according to my colleague Victor Barnes, Senior Vice President of Connected Planning.

That’s a limiting approach, he says. Data should be continuously accessible so that the right users have the right insights at the right time to help them make informed decisions.

2. Interrogate your data with analytic tools that ask the right questions

Analytics and business intelligence tools can tirelessly comb through your data to report on nearly any aspect of your business. Just make sure you’re using them to track the metrics that boost long-term shareholder value.

For example, simply measuring efficiency to drive down operating expenses can backfire. This might motivate a company to simplify its processes by implementing an “automated” call center system to limit the number of calls that have to be taken by a live agent. Although this may drive down costs in the short term, in the long run, it results in greater revenue loss because the unmonitored system doesn’t help customers address their concerns as quickly and effectively, and they drift away.

In this case, the company would be better off focusing on metrics that track customer experience and efficiency. Doing so balances both cost containment and long-term revenue growth because happy customers (1) are more likely to buy more in each transaction, (2) are more likely to return, and (3) could become a marketing asset by sharing their positive experience.

3. Assemble your insights into the big picture

Once you have an ecosystem of analytic tools, the challenge is to assemble those tools’ findings into larger insights and accurate forecasts that can guide smart decisions. Today’s finance leaders face a much wider range of expectations, touching on most other business functions. The challenges they face include:

• Spending the right amounts in the right places at the right times to maximize profit.
• Uncovering efficiencies at a granular level and at a holistic level to limit costs and boost revenues.
• Removing barriers to collaboration, so sales and finance are aligned on revenue plans driven by sales forecasts.
• Aligning with HR for workforce planning to ensure they’re maximizing those resources and getting them in place at the right times for cost efficiency.
• Aligning with supply chain planning to optimize inventory and manage costs.

Meeting these challenges requires a digital platform that pulls together all your sources of information, from ERP, CRM, and HR applications to spreadsheets and memos, into a single, transparent, accountably sourced view that lets you unify planning and forecasting across business functions.