Future finance: the home of truth

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Future finance: the home of truth

For the past year or so, I’ve been working with the software firm Prophix on the future of finance. Not financial services, but the function: the department or team in every organisation above a certain size that deals with money and numbers. As with every market, sector or field that I touch, it has been enlightening. Partly for what is unique about this space, but mostly for what is common. Because working in the future of finance has reinforced so many of my beliefs about the way the world is changing and how all of us — individuals and organisations — need to respond.

High frequency change

The argument I make, if you’re not familiar with it, is that change happens faster now. Not the great sweeps of historical change perhaps, but high frequency changes of sufficient scale to be an existential threat to many organisations and roles. And to cause significant discomfort to those slow to adapt.

The correct response to this accelerated pace of change for individuals in the workplace is to learn to learn faster, and to enhance the core skills of discovery, creativity and communication. For organisations the challenge is to become more athletic: hyper-aware of the changing environment and equipped to act rapidly to address those changes.

Low friction, high competition

One of the first steps in building this athleticism is to understand what is driving the accelerated pace of change. This, I argue as others do, is technology. Technology has no agency, in and of itself. But its dual abilities to lower friction in commerce and innovation, and as a result to create a competitive imperative, combine to power change forward.

Technology touches every organisation in five distinct ways. It accelerates change, as above. But it also creates greater diversity at every tier of the value chain — a second effect of the reduced friction of commerce and innovation. It accelerates the flow of information, and raises the expectation that this information is analysed and acted upon quickly. It permeates every aspect of life, becoming cheaper and more applicable until even the smallest level of utility justifies investment. And it lowers the barriers between organisations, whether they are companies or countries.

Vectors of change

These five effects are visible in every market I’ve examined, from supermarkets to superyachts. And they are clearly visible in finance.

Finance is where technology — at least of the digital vintage — first landed in the workplace. Here were the comprehensible, programmable problems, like vast payroll calculations. But technology now presents a rather Oedipal threat to its workplace parent. Automation is set to eliminate much of the mechanical aspects of the finance function. The lower barriers that technology creates mean systems can now interact directly with no low-skilled roles for moving data from one to another. And the machines can do it more consistently and faster, creating the possibility for much more frequent, accurate and even near real-time analysis of performance.

This changes the nature of the finance function — and threatens to eliminate it almost altogether unless those working in it choose to reinvent themselves. If the machines can present data in forms that generalist managers can comprehend, are finance professionals really necessary?

Truth in a big-data era

One answer lies in stripping the currency symbols from the work of finance.

For a long time the only big data in most organisations was about the movement of money and hence the domain of finance. Now marketing, sales, manufacturing and customer services teams all have vast swathes of data of their own: CRM, analytics, marketing automation. These are the sexy data sources, providing an insight not just into past performance but the future. These disciplines remain largely embryonic though, while finance has centuries of heritage. Finance has always been the bastion of truth in business. In this newly data-rich age, perhaps it should make this its role.

This isn’t about a land-grab: the rule of lower barriers applies inside organisations, as well as between them. Finance professionals need to be business partners, working closely with the other functions across the business to enhance their decision-making based on hard data. This perhaps hasn’t always been the strongest skillset in finance teams.

Likewise there has been an underinvestment in the skills of planning and analysis — increasingly critical if the function is to extend its remit beyond statutory reporting and purely financial data.

Embracing change

None of this will be possible in the current operating environment however. One where manual effort is the solution to almost every problem. Rather than rejecting the threat of technology, finance needs to embrace it. Automation can increasingly handle huge swathes of the necessary work, freeing resource to focus on strategy and growth. Compliance should never be a process: with automation it can be a state. Planning shouldn’t be a rancorous battle between departments but a collaboration based on practical models of tomorrow — all possible with current technology.

So, finance can be the home of truth, data and analysis in organisations. The place for best practice in all these things. And a partner that works across the organisation. But this can only happen with investment. Investment in systems for the organisation and skills for the individuals. And investment in relationships.

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Tom Cheesewright