Digital transformation is a moving target for business leaders. Executives need to ensure they are keeping pace with critical technology developments so they don’t fall behind the competition, while also ensuring they aren’t spending precious time and resources integrating pricey solutions that fail to benefit the business.
The finance chief plays a key role in navigating that balance. The finance, operations and technology teams need to be on the same page to ensure the planned implementation both solves a real problem and is cost-effective, said Jo Seed, chief operating officer for procurement solutions provider LogicSource.
Identifying the use case early
When examining new technologies, the challenge for business leaders is to cut through the hype — identifying particular use cases in their own organizations that could benefit from the introduction of a new tool. Finance leaders are already looking askance at generative AI, for example — cracking open that technology’s hood and discovering the true return on investment it provides is a key concern for CFOs, CFO Dive previously reported.
New technology integrations should really connect to a business’s P&L, Seed advised, driving benefits “either in terms of cost reduction, potentially, of human capital or working time, but also in terms of metrics such as revenue retention and differentiation in the market,” Seed said. “Those are the kinds of metrics that finance teams are acutely aware of.”
However, “often business leaders don’t involve finance, the CFO, from the beginning,” of such decisions, Seed said. This can stymie a potential integration, as finance chiefs have clear visibility into where money is flowing throughout the business that other decision-makers might lack.
Siloed departments aren’t able to see the software or technologies other areas of the business are using, for example, which can bump up costs for businesses that shell out for unused software licenses — a problem that cost companies an average of $18 million in 2023, CFO Dive previously reported.
Achieving a transparent understanding of a business’s existing technology stack is critical to bring operations, finance and other key decision-makers to an agreement about how to move forward — whether that means expanding an already-used tool or integrating a new technology.
“That tends to be the underlying symptom of the problem, that there isn’t a kind of centralized way of looking at technology,” Seed said. “And, again, I’ll come back to the involvement of finance. That organization kind of sees everything within and as part of the budget adherence over the course of the fiscal year.”
Achieving operational harmony
When it comes to a successful technology implementation, one of the first things decision-makers need to consider is, “who in the organization is going to be using the tool?” Seed said. “And how do we get them engaged early?”
Failing to do so means “the business value that everyone thought was there at the beginning is not realized…because the implementation of the change management piece of this was not well considered,” Seed said, causing financial harm to businesses.
Finding alignment on both the use case and change management strategy “is a cross-department collaboration piece of work that needs to be spearheaded by someone, and in our experience it’s usually procurement mining for those kinds of cost reduction opportunities, and then bringing different business departments together to align on,” he said.
Hopefully procurement and finance are “linked arm in arm” surrounding the ultimate cost-benefit analysis for any new technology, Seed said.
“From a decision-making perspective, finance may well have a say in that in terms of how to think about the money that is saved by removing excess software costs from budgets and deciding how to reassign the funding,” he said.
