What touches the customer is what matters most, right? Maybe not, if what you’re looking at is your bottom line.
Retire the Cutting-Edge
A 2013 research study by McKinsey & Company projected that digital initiatives would impact average bottom-line sales by 20%. Bottom-line cost reductions, however, would produce a powerful 36% savings when digital solutions were implemented. The old axiom that says growing revenue is the key to success may not always be accurate.
Get out of the Back Seat
Updating back-end functions to support corporate decision making should be a serious consideration when weighing digital transformation investments. As the McKinsey article clearly put it, “[T]he greatest digital value may reside beyond … customer-facing functions.”
Accounting and other back-office departments have the reputation (and the reality) of holding the organization’s purse strings. When belt-tightening is done, they often suppress their own needs in favor of spending on the high-touch departments. However, the real ROI often lies in automating traditional, paper-heavy and labor-intensive functions, such as budgeting and planning, human resource management, and marketing program initiatives.
Digital transformation doesn’t need to be a buzz-phrase that’s read about and wished for among the finance, HR, sales and marketing teams. While fingers might tremble as they release their death-grip on the legacy (and familiar!) applications they’ve relied on for years, there are newer and better tools to support strategic decision making and effectively drive down costs.
The even better news is that these tools, designed to guide strategic decision making, are more affordable than ever. Cloud and SaaS have enabled software vendors to distribute, maintain, and update their software more easily while modifying their pricing models. Software to automate back-end functions, including budgeting, accounting and HR, are often scalable for the businesses they serve and priced to be accessible to millions more. Utilizing the right software advances decision-making ability, engages management teams, and can provide the foundation to identify and evaluate additional opportunities.
Assessing the value of new technologies and prioritizing them for implementation is significantly easier with the right tools in place. For example, by automating the budgeting and forecasting process, finance professionals can more easily and effectively gauge their decisions. Marketing software that targets your ideal customer and minimizes risk can be compared with the cost and value of implementing fulfillment software that glides your product out the door faster. Parallel initiatives plotted within a what-if analysis can be done in minutes versus taking days with spreadsheet models.
Choices and Challenges
When assessing software investments, you’ll often be immersed in volumes of statistics, scads of features, and (hopefully) a case study or two to help you narrow your choices. When choosing new software to update your back-end functions, consider these three essential factors:
- Ease of adoption – The more complicated and costly software is to implement, the longer the decision process will be. Remove the concept that ‘if it’s difficult it must be better’ and you’ll open your eyes to new possibilities.
- Is the software intuitive enough to gain a solid understanding of it in an afternoon?
- Is the interface friendly but useful enough to encourage less tech-savvy managers to engage directly in the planning process?
- Can reports be configured to mirror your existing ones, or to those that meet state requirements or regulations?
- Free trials where you inject your own data can take just minutes to set up.
- Look at the end game – If a software solution merely mimics a paper process, the potential reached by modernizing will be limited. Determine your required capabilities and be open to utilizing those you hadn’t considered.
- Capturing source document references (and often the documents themselves) within the software streamlines process, review, and audit time significantly, saving you time and money on each front.
- Tools that include workflow solutions and discussion features lead to more finely-honed decisions and easy references where successors can understand the assumptions used and reasoning behind decisions that were made.
- One investment solving multiple challenges – Efficiency just isn’t enough anymore. Human multi-tasking went out years ago, but systemic multithreading is essential.
- When you look at areas of opportunity, you’re likely to find several that fit together and can be solved with one solution. For example, budgeting and reporting both require usage of the same KPIs, metrics and formulas, and therefore naturally fit together.
- If not built in, ensure that compatible products meet your immediate and future needs, and don’t require a significant learning curve.
Legacy tools, just like floppy disks and Lotus 1-2-3, served us well for decades. But the time has come to modernize back-office functions as part of overall digital transformation efforts. Supporting strategic decisions and the digital transformation requires dynamic analysis and deliberate risk management. Robust tools to accelerate back-end functions are essential to keep pace among competitors, and can light the way toward technological prioritization and implementation.
For a more in-depth look at how Best-in-Class organizations achieve substantial benefits through digital transformation initiatives, be sure to read Aberdeen’s comprehensive report, Don’t Be Left Behind: The Time for Digital Transformation in Now.
John Orlando is Executive Vice President and CFO at Centage Corporation.