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Digitalization in finance

Change management and digital transformation

by Yooz on 11.6.2020

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Digitization in Finance has become an inescapable reality. According to a survey by IDC France, 70% of large companies and 53% of SMEs had already begun their digital transformation by mid-2020. The health crisis has had dual impact: on one hand, existing projects such as remote working and new forms of teamwork were forced to accelerate; on the other hand, it highlighted some of the downsides of not moving forward with transformation, including losing clients and experiencing heightened competitive pressure. As American investor Warren Buffet once said, “Only when the tide goes out do you discover who’s been swimming naked".

 

Without a doubt, 2020 has sped up digital transformation involving all business functions, including finance departments that have lagged somewhat on digital initiatives more generally focused on marketing and the client experience. According to Gartner, the health crisis (1) has motivated 70% of the finance departments surveyed to accelerate their transformation.

In July 2020, Keyrus Management published a survey of 120 French CFOs showing that, in the context of the current health situation, process automation has become the top third priority right after managing payroll costs and cash resources. Accelerating transformation is clearly on the priority list for finance departments. The process will involve revisiting information system architecture (for eight out of ten companies) as well as process automation (for three quarters of the surveyed companies), especially for larger organizations. According to a Blackline survey, communication and teamwork (44%) and technology and infrastructure (31%) are among the main challenges for finance and accounting functions, where more than eight out of ten professionals expect to see faster digital adoption as a side-effect of the crisis.

 

Why is Digital Transformation so complicated?

 

The reality of digital transformation is far more complicated, a consideration that is typically not portrayed by a few summary figures that do not reveal the widely diverse contexts, strategies, constraints, and complexities found in organizations. There are as many different digital transformations as there are companies!

Nonetheless, three key worlds interact in all cases: technology, organizational, and human. Each one has its own levels of complexity and unique challenges. It is therefore necessary to combine several facets, ranging from the easiest (technology can be brought into a company) to the less easy (existing organizations need to evolve) and the most difficult (integrating human factors). By definition, people’s behavior varies widely and evolves continually. Uses, corporate culture, and corporate values must adapt constantly. Change management concerning people is very clearly a key piece of the puzzle. Still, it is a difficult mission because the transversal aspects required for digital transformation directly confront people’s individualism. Change can cause anxiety and worry regarding employment, skills, and collaboration methods.

The American economist Gary Hamel (3) provides a good summary of the pitfalls facing companies when it comes time for transformation: “Today’s organizations were simply never designed to change proactively and deeply—they were built for discipline and efficiency, enforced through hierarchy and routinization”. Those aspects are hardly adapted to external shocks that force rapid change, such as a serious and sudden global health crisis. Not only that, but change is considered in most companies as a simple interruption of the status quo, often imposed by upper management. From their perspective, analysts at Gartner (4) identified several barriers blocking change, notably the following, in order of importance: risk aversion, poor management quality, directors’ approach, lack of commitment by employees, and employees’ lack of trust in the overall vision.

 

What can be done to get “quick wins”?

 

Several principles can be emphasized. The first is to avoid underestimating the challenge. This means you have to be aware of the problem, particularly regarding an approach overly focused on technology to the detriment of usage, cultural issues, and human factors. Here, it is important to understand why digital transformation is not generating the expected results. Failure to succeed may be related to the specifics of both corporate culture and individuals, with their values and beliefs. These aspects must be identified to distinguish those that pose a problem from those that are likely to boost the process in the right direction. Edgar Shein, professor of management at MIT, says: “Culture is the primary source of resistance to change”. (5) It is therefore necessary to focus simultaneously on the environment, beliefs, and behaviors”.

The second principle is to set a clear direction to avoid improvisation and leverage existing features and available resources. Of course, this involves knowing how to find benefit in the unexpected, which can be used as a strength instead of a constraint.


The third principle is that it is wise to take on work projects that allow rapid deployment, while generating strong visibility, immediate benefits, and driving behaviors and practices forward. That is what happens with digitalization, which combines low levels of investment in terms of time and budget, especially when using SaaS. Digitalization brings maximum exposure concerning many processes with solutions that are simple to deploy. User satisfaction rises thanks to the elimination of time-consuming tasks, coupled with better understanding of daily gains.

 

Change is better and accepted more quickly with this approach, as it reduces worry and presents the transformation in a positive light – notably by saying goodbye to time-consuming and demotivating tasks with little added value. It also encourages people to step safely outside their comfort zone. The respected management consultant Tom Peters (6) summarizes the stakes of change management clearly: “Change is about recruiting allies and working each other up to have the nerve to try the next experiment”.

 

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(1) www.gartner.com/en/newsroom/press-releases/2020-09-30-gartner-says-sixty-nine-percent-of-boards-of-directors-accelerated-their-digital-business-initiatives-folloing-covid-19-disruptions(2) www.mckinsey.com/industries/retail/our-insights/the-how-of-transformation. https://www.latribune.fr/opinions/tribunes/pourquoi-tant-de-transformations-digitales-echouent-781349.html

(3) www.mckinsey.com/business-functions/organization/our-insights/leaders-everywhere-a-conversation-with-gary-hamel

(4) Tactics for change agents : keep people positive on the change journey, Gartner Symposium 2019.

(5) https://www.business.com/articles/management-theory-of-edgar-schein/

(6) www.mckinsey.com.br/business-functions/organization/our-insights/tom-peters-on-leading-the-21st-century-organization


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