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Ever since the Second Industrial Revolution, Asia has been the epicenter of technological development.

This was highlighted once again when China announced that by 2025, it wants to be the worlds largest tech-based economy. In a little over six years, any piece of tech that you hold will come straight from China, components and all.

It comes as no surprise then that a lot of the worlds technological news originates from the Far East, if there is a change that tech brings, Asia will feel it first.

A whole new world

I recently read an article on enterpriseinnovation.net which pointed out that disruptive technologies are wreaking havoc in the world of the Chief Financial Officer (CFO). Enterprise Innovation spoke to Rick Payne, ICAEW Finance Direction Programme lead, for insights into the changing role of the CFO as disruptive technologies are inevitably embraced by organizations in the Asia Pacific region.

The following interview was conducted by Enterprise Innovation and not GTconsult. However, we felt that the insights from this interview would benefit our readers.

With technologies impacting the finance functions and skill requirements in the digital age, how has the role of the CFO changed?

CFOs have been driving and responding to change ever since the role came into existence. Technologies have always played a key role in this – from the first introduction of computers in the 1950s.

But the pace of change is increasing through rapid developments in data analytics, artificial intelligence (AI), chatbots, robotic process automation (RPA) and so on. These have contributed to increased expectations on CFOs to improve their contributions to decision making, make their finance departments even more efficient while maintaining their stewardship role.

The CFOs who are adapting best to these expectations are taking on leadership roles in strategy, risk management and the use of new technologies across the organization. In particular, CFOs now have to work with the executive team on complex decisions around which technologies to prioritize and invest in when something better could appear on the market within the following weeks.

How would the CFO go about building an effective finance team/function, in an age when organizations need to embrace disruptive technologies?

Boring but still true, building an effective finance function requires strong leadership of great people using effective processes and systems.

The CFOs and finance teams we have been meeting with in Singapore recently have all emphasized finance transformation starts and ends with people. Getting the buy-in of the team to the changes required is fundamental. Of course, you need a good understanding of what the business requires of finance from which you can build a realistic plan.

One thing to emphasize is the importance of active, top-level sponsorship, preferably from the CEO. Sponsorship is necessary to ensure sufficient organizational resources are allocated, any roadblocks are overcome and to keep motivation levels high even when challenges seem insurmountable.

Disruptive technologies open new possibilities for change and CFOs should be reviewing the options they have available to them. For example, greater automation may now be affordable through cloud technology, RPA, updated ledger and enterprise resource planning systems or specialized finance automation software.

What disruptive technologies (AI, advanced analytics, blockchain etc.) are right for the finance functions, and what challenges do organizations face in choosing the right technology to deploy?

Several factors must be taken into consideration to choose the right technology for finance functions. While all these disruptive technologies have the potential to vastly improve the efficiency and effectiveness of finance work, factors like an in-depth understanding of the business problem, digital strategy and the functionality of the wide array of competing solutions play a crucial role in determining the success of the implementation of such technologies within the organization.

For example, advanced data analytics and AI may be right for large organizations with access to big data while some organizations may still need to significantly improve the basic financial analysis they carry out; RPA may be a good option for automating routine, rules-based processes within an organization while blockchain may be worth investigating where there are opportunities to extend automation and data sharing outside of organizational barriers.

There remain risks and challenges to operationalizing these technologies. Most CFOs have experienced technology promises that failed to deliver, be that due to sales hype, flaws in the software, bad design, lack of processing power, poor implementation and, of course, dysfunctional human behaviors. However, today’s developments in the industry give us reasons to believe that it will be different in the near future.

How should organizations overcome resistance to change, and help develop the right mindset and culture of innovation, especially among staff in the finance functions?

The need for finance staff to ‘change their mindset’ has probably been the phrase I have heard the most while in Singapore. This is not easy.

Our mindset develops over many years and the older we get the more difficult it is to change. If we look at some of our own behaviors and habits we know how challenging it can be. To achieve change in others, we need to employ several approaches including performance management, incentives, coaching, mentoring, training and so on.

Sometimes a burning platform can lead to individual change, such as the fear of losing one’s job. We will also have to be honest, as sometimes people may not be willing or able to change and we will have to let them go. This should be done with compassion and with help in finding a new role.

While we are changing the mindsets of individuals, developing a culture of innovation requires CFOs to lead by example. By being seen to introduce new ideas into the organization, others will be encouraged to follow. Providing positive feedback to staff who have experimented with new approaches and new technologies, even if they have not been successful, will also be helpful.

When we are part of a particular culture, which derives from shared, deep-seated beliefs and assumptions, it is not easy to see the organization’s culture for what it is. So, it is worth getting an outside view on how the culture compares to that of innovative organizations.

Diversity has been shown to make a positive contribution to innovation. Therefore, CFOs should consider the balance within their teams, not just in terms of gender, race, age and disability, but also think about bringing in people with backgrounds in other disciplines such as data science, marketing and psychology.

Similarly, the rest of the organization should think about employing accountants in other functions where their wide-ranging skills can often add value.

I am hopeful that CFOs and their teams will continue to adapt to change, as they have always done, and continue to make a positive contribution to their organizations, the accounting profession and to society.

Critical levers

It is clear that while technology can disrupt a business, it can also offer a number of benefits. Writing for enterpriseinnovation.net, Professor Kevyn Yong – Associate Dean of Executive Education ESSEC Business School Asia-Pacific – pointed out that technology can be used as a lever that will benefit a business.

The article points out that, in their seminal work on problem finding, Jacob Getzels and Mihaly Csikszentmihalyi posit that creative outcomes originate from those who engage in a continuous process of reformulating their own perspective of the problem at hand.

In other words, creativity is best achieved by continuously reframing a problem to find the right problem to solve. It turns out that finding the right problem to solve is actually quite difficult – in large part because it is not natural. For one, the natural tendency is to jump straight to brainstorming when confronted with a problem.

The article adds that the natural tendency to brainstorm immediately – rather than engaging in problem finding – reflects a subjective understanding of the problem biased by the limitations of the individual perspective, and therefore inhibits innovation.

To mitigate this inherent bias, enterprises have strategically approached innovation with data, expertise, and collaboration.

Data distortion

First, enterprises collect data to mitigate the bias inherent in problem finding.

The article points out that collecting data is based on the premise that the more data that you can collect about your target market or consumer, the deeper your customer insight is likely to be, and there you will be able to find the right [customer] problem to solve.

However, research has shown that we tend to collect information that is consistent with our initial or emerging preferences. That is, our natural tendency is to collect and emphasize data that strengthens or confirms our initial biased understanding of the problem, rather than data that provides an alternative understanding of the problem.

The article adds that, to this end, AI can make a significant contribution to innovation: AI can be developed to support non-biased data collection to foster effective problem finding. It might be designed with a Gaussian mixture model algorithm characteristic of unsupervised learning to augment the cognition underpinning data collection for innovation by aiding the innovator to develop deeper (and more accurate) insights about the kind of “jobs” that a customer needs to be done.

In doing so, the innovator is able to strategically identify and decide which opportunities for innovation to pursue and develop.

Mental models

Second, enterprises recruit innovators with the right expertise.

The article points out that research on the cognition underpinning strategy making has examined the role of the innovator’s internal mental representation – or mental model – of the firm’s competitive position.

The innovator’s internal mental representation is formed by the innovator drawing an analogy between his/her previous experiences and the situation at hand to identify viable competitive advantages for his/her firm, particularly when faced with the challenge of coming up with strategic solutions to novel situations.

The article adds that, to this end, AI can make another significant contribution to innovation: AI can be developed to support imbalanced mental models to foster effective problem finding.

Collaboration dynamics

Third, enterprises assemble innovation teams.

The article points out that innovation teams are typically set up to maximize diversity in expertise and knowledge. However, heterogeneous information sets, heterogeneous cognitive structures, and heterogeneous goals – in innovation teams – create representational gaps that impede successful strategic problem formulation.

The success of strategy formulation is measured by comprehensiveness and relevance. As such, research suggests that innovation teams – characterized by diversity in expertise and knowledge – achieve comprehensiveness and relevance when team members are able to constructively challenge each others’ opinions and ideas in such way that individual team members are able to engage in less biased information processing to achieve a multifaceted understanding of the problem at hand [4].

The article adds that, to this end, AI can make a third significant contribution to innovation: AI can be developed to support collaboration dynamics to foster effective problem formulation in innovation teams.

For instance, in a study of routines at a fast-growing retail enterprise operating a chain of approximately 400 stores geographically dispersed nationwide, Scott Sonenshein [5] discovered how this enterprise used routines to establish a clear organizational identity and foster creativity across all the stores. That is, customers can walk into any store in any geographical location and instantly recognize the brand, and yet the customer gets a unique shopping experience that can only be found in that particular store.

“GTconsult definitely has an open mind to the benefits that technology can offer a company. Companies are far beyond the point of technology being a disrupter. If it is, companies are not flexible enough to adapt to a changing environment. They might as well commit harakiri if this is the case,” says GTconsult Cofounder and CEO Bradley Geldenhuys.

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