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Mar 18, 2019

CFO Involvement Is Key in an Organization’s Digital Transformation

Cybersecurity, artificial intelligence, robotic process automation: everywhere you look, business processes are becoming more digitized. According to a recent report from RSM US LLP, CFOs need to take a larger role in driving the strategies of their organizations when it comes to technological progress. To discuss the report, we spoke with Bill Kracunas, a principal with RSM, about his takeaways from the responses.

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By: Bill Hayes, Pennsylvania CPA Journal Managing Editor

Podcast Transcript

Workplaces are becoming more digital. Cybersecurity, cloud computing, artificial intelligence: everywhere you look, processes are becoming more high-tech. It's a major opportunity for CFOs to take control of these processes and help their organizations adapt a more efficient technological strategy. To talk about this important new role for CFOs, today we are with Bill Kracunas, principal at RSM US LLP.

Before we even get started with the questions, I want to make sure to mention that these questions have been derived from an RSM report about how CFOs are embracing innovation to stay competitive. Make sure you Google that and check that out because it's a really detailed report, and it gave us a great ground for some questions here. What does the survey that you did reveal about the CFOs role in transforming companies' digital strategies? Are they more involved than in recent years, and is there still room for growth?

[Kracunas] A lot of the information, a lot of the data, I'll cite will be from that digital transformation survey that we did do, so thanks for mentioning that. It is interesting, a lot of the results that we saw there. And I would say the answer is yes. The long and short to your questions is CFOs consider themselves to be heavily involved with digital transformation strategy. In fact, just about 70% of CFOs said they're involved with the digital strategy.

But what's interesting, while 70% said they're involved and they feel like that's their role, if you really zoom in a little bit, only about half of them really even have a digital strategy. It's really interesting when you sort of go from 70% saying they should be involved, about half of them really seem like they are involved. I think the bottom line is, when I think about that data I go, "There's tremendous room in the future for growth, but there's also a tremendous risk of failure for some CFOs, or the ones that aren't, I think, getting involved." I think through the questions we'll hear a little bit more why that is later.

What would you say CPAs' general impressions are about digital transformation and the impact it could have? Are they fearful about this? Are they hopeful? What's their outlook?

[Kracunas] That's a great question. One of the lines of questioning we asked in the survey was around people's emotional state. And I'll say, one of the things that digital transformation amount, 85% of the respondents see it as really a positive thing. I think why ... it's funny, I've been in the business a long time. Back in the early 2000s, process reengineering people weren't too excited about. But I think digital transformation, just because we all have cell phones and we see what it's done for our personal lives, I think people really get what it could do for our professional lives. People associate it with, I think, a better life at the end of the day.

How's the digital transformation set to expand and grow the roles of CFOs in particular? What specific duties did the survey say they're playing a larger role in?

[Kracunas] I'd say there's a few different components that they are involved with. The thing about CFOs that I think also comes across is the duties and responsibilities of CFOs varies very widely. Some CFOs have a lot of functions that report to them. Some have a few. Depending on the CFO, they may play a deeper role in other functions. But I would say at its core is definitely the strategy. Why is that? Well, digital transformation costs a lot of money. It's a big impact to an organization. I would say being involved with the digital transformation strategy of the organization, especially because they're going to have to fund a lot of that and understand how to fund it. I think that's really important.

Another piece, I would say, is just general automation. There are so many tools coming out. There's so much opportunity for process automation. And a lot of process, I think, the genesis is in the financing and accounting function, right? People look to that as sort of a process center of excellence.

And then, data. The CFO, and the office of the CFO, has always been the source of truth for an organization and its data. And right now, there's a lot of these data scientists and new data groups starting to launch. Some are under the marketing groups, some under IT. But, in my mind, the CFO really should take the reins. We see that really clearly around data.

Lastly, depending on who they have and their strengths and weaknesses, digital leadership. They need to hire people who are really passionate about this stuff. So, if I'm a CFO who's ... I'm a little less operational, I'm more sort of finance/accounting, then I need to make sure I plug my gaps with good digital leadership. Even in the departments I manage. What are they doing for their digital leadership? I think strategy, automation, data, and then that digital leadership would be, probably, the other piece I'd think about.

You just mentioned the IT department as part of your previous answer, and that's the first department you think about when you think of cybersecurity. With cybersecurity playing a bigger role in firms' growth strategies, how important is it for CFOs to play an active role in strengthening that department?

[Kracunas] That is critical. They are all over that. CFOs need to be all over it, especially ... a lot of times you'll see in mid-market firms for us. That's really where we focused in this survey. CFOs, it's interesting, they move from really more of expense management in smaller organizations. So, you’ve got to move to risk management.

Especially digital transformation today, you need to consider risk upfront. Why is that? Because guess what? There's a lot of cloud vendors out there. So there's a lot of third-party risk. Data. Where's my data? What's the data governance? Being asked these questions after there's an incident is embarrassing. You want to ask these questions upfront. There's nothing worse than after the fact these questions are asked. It's like, "Oh. Well, we haven't done a vulnerability scan, a penetration test, ever." And it's like, "Oh. Well, you had a breach."

So again, I think you want to think about risk upfront. I think it's critically important, internal controls. And then, also, evaluating the talent you have. A lot of the risk issues we see, or cyber issues we see, are from humans. I think evaluating your talent is equally as important today. CFOs need to be all-in on risk management, and everyone looks to them as the source for that.

Interesting little nuance sort of question here when we're talking about digital roadmap versus digital strategy. Can you tell us a bit about the difference between those two concepts here? The survey revealed that 94% of respondents had a digital roadmap, but just 48% had the fully developed digital strategy. What does that suggest for these companies?

[Kracunas] It was interesting. When I saw the results, I had that same sort of reaction when I saw that. I wanted to zoom in a little bit myself. When we really looked into the data a little bit further, what we realized was people felt like having a digital roadmap was really, "I have a list of digital projects." "I have a formalized list on projects." A strategy is those projects in context of an overall goal. Like, "We want to improve employee experience at our firm. Here's a series of programs and projects that we're going to do to do that." That's a strategy. A roadmap is "Oh, we're implementing SharePoint. We're going to do NetSuite." Those are two nice things to do, but they're not related to a strategy.

People felt like, "We've got a lot of digital stuff going on. We've got a lot of lists of projects. But it's not really as strategic as it could be, and we're not really thinking about it from ..." A lot of people believe, and I believe as well, our expectations, and buyers' expectations, have changed. Just like when the iPhone came out. The BlackBerry was a fine phone, but our expectations shifted. That was the problem. I think today our customers of our businesses have changed, our expectations around data, around knowing them. We've got to keep pace with that today. I do think having a strategy for that is more important than ever to say, "How are we fundamentally going to change how we do things to really adapt to the new buying conditions that are out there?"

We talk about going from a roadmap to a full-blown strategy. What are some of the steps that the survey revealed companies have to take if they want to take their digital strategies to that next level?

[Kracunas] The survey itself didn't, in my opinion, give us a ton of great meat on here. They said, "Jeez, we're spending money and training employees." In my opinion, those were like no fooling, right? That's what you need to do. Improve your talent and spend some money. But, if you ask me, something that I see some of the most successful digital CFOs out there is they're trying a lot of things. They're trying many things. People say, "Fail fast," or whatever buzz term you want to put at it. But, you're trying a lot of stuff out there. Because you don't know what's exactly going to work. There's a lot of new tools coming down the pipe. You need somebody who's looking at all this stuff coming down and distilling what's meaningful and what isn't. The velocity is really important today.

In my mind, really, if you want to take that digital strategy to the next level, you need to execute on it, which means you need to try a lot of stuff. Because it's not all clear. Especially, we'll talk about artificial intelligence in a minute, but it's hard to understand what's real and what isn't. You need to try many things. Again, I do think you need to spend the money, absolutely. To try to hire all the skills you need today in your four walls to deliver on all this stuff today is extremely difficult. Even firms like ours, that are dedicated to retention, recruiting, and training, it's ... even at scale, that's the challenge. Imagine when you have small departments, right?

So I do think you need to train your people. You need to make sure you're outsourcing the commodities and you have the brains inside the four walls.

What did CFOs see to be the most important digital components to a comprehensive strategy? It looked like cloud computing was seen to be important, while some of the more high-level technology, we'll call it, could be put on the back burner. What were their impressions about that?

[Kracunas] I think maybe because I'm such a technical guy, I live in the universe, I live in this space, I thought we were much further down the road than we are. And the survey told us, "Listen, if you want to know what we're focusing on, it's core applications. ERP, CRM, and analytics." And then, I would say a close second was process automation and collaboration tools, like SharePoint. Really though, it was sort of the traditional, good old stuff that they're focused on. If you're asking me, if you don't have a CRM in place by now ... I was really shocked to see how many people responded that they really didn't have a CRM. I mean, think how annoyed you are when you go to a hotel that you've been at 20 times and they don't know your ... you'd be irritated if they didn't know ... you didn't have a customer number, right?

Again, I think some of these fundamentals, it's really interesting. I think there's great risk, just like there's great opportunity. If you don't start moving on some of these things, you're going to get outmoded really fast here.

But I do think cloud is a standard today. I think six years ago, people were apprehensive about cloud computing. "I'll never put my financials in the cloud," etc. But now, it's just a no-brainer. People see it for what it is. I think, really quickly, they started to gain trust.

The other thing that's going on that's real important in why getting these core apps is critical is we've moved to more platforms. Back in the day, Word, Excel, PowerPoint, yes, we used them, and it was part of Microsoft Office. But they didn't really talk. But today, if you use Office 365, it really is a suite of tools that's sort of this hybrid world of cloud and on-premise. You can copy and paste between them. You can imbed the ... it's amazing how it's a platform. The more you move to these platforms ... through new tools that are coming out, you're going to be able to integrate these platforms. Having good platforms in place is important, and that's what we saw in the survey.

You sort of previewed our discussion on this: a low ranking there for something like artificial intelligence. It would seem to suggest it isn't important in people's views. But does it also open a competitive advantage for firms that get out in front of it?

[Kracunas] That's a great question. First of all, I get why people say AI is something that's low on the list. I think technologists use these broad terms, you know, "cloud," "business intelligence," right?

Artificial intelligence, it's like, "What is that exactly?" I get the apprehension. Also, with some of these new things like blockchain, people are like, "What is it? I don't even know." This stuff's so foreign.

But then there's a few diamonds in the rough. I think one of them is, I'm gonna zoom in on AI, called robot process automation. It's a component of AI, okay? AI is a very broad term. In AI, if you think back, when cars were first invented, believe it or not, there was like 1,000 auto manufacturers. Over time, we consolidate to the 20 winners, right?

Same thing with ERP systems. Right now, there's a lot of AI tools. There are thousands, literally. Even when I go into robotic process automation, there are some generalists that will automate general processes, and then there are very specialist software applications that'll automate just contracts, reading contracts and learning contracts. What's going on right now is there's a big volume of these tools. You've got to wade through them.

I will tell you that robotic process automation, in my opinion, is something that's going to move extremely quickly. To your question, if you jump on that one quickly, you're going to be thankful. I've gotten to really see it firsthand, and to see what it's going to do. It's not like a physical robot, it's a piece of software. It watches you work. It records your work. If you think about, "Oh, I have a process where I log into System A, I look up some information. Then, I log into System B and I do XYZ. And then, I go to CRM and I do this," that's going to go away. Software now, this AI software, RPA, it will watch you do that. It will watch you do it a few times. It slows you down a little bit, but it's just watching you. And then, it learns. And then, believe it or not, it starts doing it. And then, you just set up a control to make sure, oh, it totals properly.

And believe it or not, some companies are even building these ... they call them bots. They're even giving them employee names, badges, because they are doing jobs. And they're working next to people. It's not replacing what we do. In fact, it's just helping it. They're like these macros that go across systems.

Here's the good news. Normal people can set them up. You don't need necessarily to call a big consulting firm or whatever. But, obviously, guidance on that stuff, and we love doing that. But I do think it's one of these tools that ... just like Excel. One of the reasons it's so popular is you can self-use it. I think RPA is a tool where you'll be able to do some stuff with it yourself. You'll need some firms for more advanced stuff, but I think that's one that's going to move quickly and that you'd want to jump on.

There's some software that will just read contracts, like read a lease, and extract the key data. It's amazing. Some of these new tools coming out are really ... they're amazing me, someone who's been around for a while. So I think there's going to be a constant wave of these things that you're going to need to evaluate.

It's a sort of endlessly intriguing topic. I was going to say about the robots with their employee badges, I hope they're not always losing theirs like I'm losing mine. It can be annoying. I have to figure they're able to keep theirs in a more secure place.

[Kracunas] Think about it for a second, though. Imagine, even in IT, because even IT groups, I'm like, "Why does a person set up a laptop for another person?" If anything could be automated by a computer, it would be setting up a computer, right?

If you really think about these things, you start to realize about 35 or 40% of labor today is just us doing things that really a piece of software that could learn a little bit could do.

One of the great things that we've been going through here, and that you've been so good to give us, is some of your surprises, insights that you got from the survey. Would you say there's a number one takeaway you got from the survey results? Anything that especially surprised you that you haven't talked about yet? What do you think?

[Kracunas] When I really look at it, and just sort of take a step back, as if I was a CEO, a little bit, looking at it, in my mind it's a critical point for CFOs out there. I feel like you've got half of them that are sort of all-in with it, and they really get it, and they're taking the reins on it. And you've got another half that's looking on the sidelines, kind of going, "Well, I'm going to wait and see. Technology's just a tool." But I think times are changing a little bit faster than that right now. My takeaway was you've got some CFOs that are going to be at risk out there that might not even know it right now.

Also, if data departments are being developed outside of your purview, if all of a sudden people are looking to another department for more predictive information, if people are looking to other places for process automation and again, CFOs, it's understanding your strengths and weaknesses and plugging those gaps. I think the number one takeaway is we're at this critical point right now. A lot of this stuff is real. And, it's time for CFOs to jump in. What a great position to be in moving forward, because it's just going to have such a large, positive impact on the organization.

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Podcast transcripts are provided as a summary of the conversation and have been lightly edited for the written medium. The transcript is not a verbatim representation of the interview.
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