How To Drive Strategic Value With ERP-Enabled Finance Transformation
ERP-enabled finance transformation can help CFOs elevate finance function performance and deliver greater business impact. It takes stakeholder collaboration, a strong vision, and a detailed road map to get there.
With many organizations undergoing rapid change to adapt to challenges and opportunities arising from the COVID-19 pandemic, business leaders are looking to CFOs, and finance in general, to help deliver insights, automate decision support, and drive advanced capabilities with emerging technology. To address rising expectations, many CFOs are considering new ERP systems that can jumpstart or accelerate digital finance transformations to drive better business insights.
Elements of ERP-Enabled Finance Transformation Strategy
With finance teams often interacting with a range of stakeholders, planning an ERP-enabled finance transformation requires a clearly defined and communicated strategy. That journey should begin with defining a vision and a road map that serve as strategic guides for modernizing and transforming capabilities.
Define the finance vision. The vision for the ERP-enabled finance transformation consists of a set of choices and goals that articulate and align the CFO’s aspirations for how the function serves and partners with the broader organization. Creating that finance vision for the transformation starts with understanding the enterprise strategy and finance’s role in enabling it. For example, a consumer product company focused on managing operating expenses may want to invest more heavily in standardizing and automating processes via robotic process automation (RPA). Alternatively, a technology company expanding into new markets may seek to prioritize investment in financial planning and analysis and predictive analytics capabilities.
Start by gathering input from stakeholders to build buy-in and to ensure alignment with the rest of the enterprise and business strategy. Answering the following questions provides a good starting point for articulating a transformation vision aligned with business strategy:
Where does the company expect to win in the market, and how will finance support the business?
What value should finance deliver to the business? How can the finance team enable new capabilities that can evolve with new business models, analytics needs, and acquisitions?
Do all business-critical stakeholders have a seat at the table? Is there cross-functional leadership alignment (e.g., finance, IT, supply chain, business units) regarding the capabilities and functionality required to enable the business strategy?
How will finance support value creation and growth while managing expenses?
Since a transformation and related ERP implementations take place over several years, how will finance sustain momentum throughout the project? How will the organization ensure the future workforce delivers on promised capabilities?
At the same time, the CFO and other finance leaders should get guidance from the CIO and IT to understand the future-state enterprise data strategy and application architecture, including costs and benefits, to ensure alignment and help guide road map development.
Considerations to guide finance as it defines the transformation include:
Be inclusive within finance. Transformation affects all of finance. Operating as one finance team can reveal opportunities and challenges that might be missed by a less representative team.
Define reporting strategy early. Understanding what information and supporting data the business needs can be critical to realizing the new capabilities enabled by ERP and digital tools.
Build and manage to key metrics. Define metrics that capture the transformation’s value. Having a measurable way of showing the transformation’s impact makes the value demonstrable early on.
Integrate ERP with operating model transformation. Defining what will be delivered where and with what tools will shape decisions about the number of instances, what data to pull in, and how many variations and customizations are allowable in the future.
Road-mapping the transformation. The finance transformation road map is a practical articulation of the vision—a prioritized, aligned, and sequenced list of initiatives that addresses people, process, and technology enablers. The following four steps can help CFOs build the road map:
1. Partner with IT, procurement, supply chain, commercial, and other key stakeholders to assess current-state capabilities, tools, and the desired future state.
2. Identify required initiatives across people, process, and technology pillars to achieve the finance vision for future-state capabilities.
3. Evaluate the role of ERP and other systems and tools in enabling the transformation.
4. Finalize a list of key initiatives and ongoing or competing priorities; for each initiative, identify resources, milestones, timing, dependencies, and risks.
An integrated road map typically has a three-to-five-year time horizon, includes major projects and initiatives, and forces key priorities and interdependencies to surface so that major decisions can be sequenced effectively.
Initiatives should be tailored to the organization’s finance vision, resource capacity, and priorities and to the maturity of its current capabilities. The finance vision acts as a guide to prioritize initiatives. For example, some organizations may put innovative capabilities first, automated controls, and employee experience ahead of cost and efficiency, while others may prioritize cost and efficiency above all else. The initiatives typically align to people and operating model (e.g., future of work), process (e.g., simplification and standardization), technology and data (e.g., RPA), governance (e.g., steering committee meetings), or other ongoing initiatives.
Execution: Key Activities and Considerations
The road map helps finance plan how to juggle competing demands and priorities by asking some critical questions:
Value. How does finance maintain momentum and achieve wins during a multiyear, ERP-enabled transformation (e.g., quick wins, pilots)?
Process. What level of process redesign and standardization is required before implementing the new ERP?
Technology. What is the data strategy, including the corresponding data requirements, to enable the desired reporting capabilities?
People. How will current employees need to be reskilled so they can effectively partner with the business in a digitally enabled finance organization? Where is the work delivered now, and where will it, or could it, be delivered?
Transformation requires significant dedication and knowledge—often from high-potential or highly knowledgeable talent. Consider making the program a career accelerator for top talent. Assign high performers to the program, taking steps to backfill their current roles and plan off-ramps so they can return to the business in highly visible roles.
Finally, achieving an effective ERP-enabled finance transformation means that CFOs should assess the art of the possible―understand what innovations an ERP and other technologies can enable, what problems they could solve across finance, and what value they can help finance deliver to the entire organization.
Gathering input from stakeholders and maintaining alignment with the rest of the enterprise are essential. So is understanding that the transformation is not just a technology implementation. It can’t be successful if run independently of other initiatives. Organize a transformation office with the resources and sponsorship necessary to form a cross-functional team that can build a portfolio of initiatives that can be run simultaneously to improve the value of each. It’s easier to achieve the vision when the team is working together.