The digital revolution is having an impact on companies in all industries. In this new world, large and successful companies that have long been in existence are coming under attack from start-ups. These new competitors enjoy the competitive advantage of being digital natives and are taking away market share.
However, it is not too late for the incumbents to adapt and to transform, especially those that have considerable resources, including capital, strong brands and relationships with customers, in addition to a broad range of capabilities and decades of institutional know-how.
Many traditional and well-established companies are embarking on this digital transformation journey – including my own company, Schneider Electric.
One lesson Schneider Electric is learning is that, to be successful in digital transformation, companies need to have a unified and enterprise-wide strategy
Digitizing an incumbent
Established in France in 1838, Schneider Electric started out as an armaments specialist before transforming itself into a leader in electrical distribution equipment, movement control, building automation and security. WE are now reinforcing our position in software, critical power and smart grid applications.
Schneider is also not immune to the wave of digital transformation. Today, customers expect best-in-class digital experience. They want everything online, connected, and working fast. So digitization is now at the core of Schneider’s DNA.
Schneider Electric has launched a Digital Customer Experience initiative to strengthen customer relationships and a Digital Connected Offers initiative to boost growth and to create new revenue opportunities.
Internally, Schneider Electric has also launched initiatives to transform the organization and reinvent its IT infrastructure, processes, and business model to streamline costs and to boost efficiency.
Speed is one of the key success factors in digital transformation. We cannot afford to go alone. This is the reason that Schneider Electric partners with best-in-class players such as Microsoft to leverage the Microsoft Azure cloud to deliver digital services, apps, and analytics.
Schneider Electric is also working with Accenture to build a digital services factory that accelerates the development of IoT (Internet of Things) solutions and services. Some of the software parties we work with include ARIBA, Salesforce.com, Kofax-Readsoft, Concur, MyDSO, Birst, Anaplan, Tableau and box.
One lesson Schneider Electric is learning is that, to be successful in digital transformation, companies need to have a unified and enterprise-wide strategy. You need a carefully crafted blueprint to integrate digital technologies, such as social, mobile, big data, analytics and cloud, to transform the business.
Without such a strategy, you are just solving individual business problems with individual technologies by implementing piecemeal and unconnected digitization. History will repeat itself. We will end up building Islands of Digitization, which is the reincarnation of Islands of Computerization of the past, when various units had different IT equipment, ERP systems and other software that did not necessarily talk to each other.
Another insight is that, in today’s new digital world, every C-level executive in the organization should be a digital transformer. As CFOs, we too need to become fluent in the digital tools available to deliver a strategy that integrates technology with financial and non-financial information. This will enable us to effectively elevate our role to become true strategic business partners.
There are many digital tools available. Some focus on updating core systems and existing capabilities. Others are designed to deliver new and different capabilities. Some of these digital toolkits are Robotic Process Automation (RPA), Artificial Intelligence (AI), Cognitive and Predictive Analytics, Business Intelligence (BI), Graphics and Interactive Visualization, and Blockchain.
The finance function in Schneider is currently at the pilot stage on many of these digital toolkits. We are looking at adding BI and RPA tools around the core ERP systems, at the same time that we are trying to fix and automate those core systems.
We have already implemented an automatic e-quotation tool for vendors, AP invoice scanning systems with the capability to do three-way matching, and automated GL posting. We have also deployed opportunity pipeline management tools, A/R collection management tools and an e-travel system that features digital approval flow and auto posting to the ERP system.
It is therefore to first rethink our existing processes before we jump on the RPA bandwagon. We need to take bold steps to simplify, to optimize, to standardize, and to automate and digitize, before letting the robots take over
Speaking of robotics (non-human workforce), this is not something new. In our daily life, we have experienced answering machines, vending machines, ATMs, automatic parking systems. These are basically non-human workforces that are replacing the human workforce. The self-driving car is next in the queue.
As we look back to history to predict the future, I believe we inevitably will need to accept the fact that RPA, for one, is unstoppable and is here to stay.
What exactly is RPA? It is a technology application that enables computer software to automate human activities that are manual, high volume, template driven, repetitive, structured, and rule-based. As such, we can map out a business process that is definable, repeatable and rules-based and assign it to robot (software) to execute.
RPA normally sits on the top of existing IT systems and infrastructure; hence, there is no need to overhaul or to change the existing IT infrastructure and systems.
Decades ago, ERP and shared services fueled the growth of centralized finance organizations, competency centers of excellence, offshoring and outsourcing. It has become no-brainer cost savings initiative to implement in most finance organization with such dramatic impact on cost reduction.
As most of the benefits of shared services had been extracted, organizations are looking toward the next wave of RPA that will change the way we work and deliver further cost savings. The benefits of digital labor (RPA) over human labor is that it offers reduced delivery risk, reduced cycle time, improved business efficiency, improved compliance, improved accuracy, improved data security, 24/7, cost savings, etc.
RPA is being embedded with cognitive and predictive AI (Artificial Intelligence) technology, where we can teach RPA to recognize data patterns and make decisions without human intervention.
RPA can automate a process as it is, which is a clear advantage for quick-win results. However, there is a good chance that all existing inefficiencies, complexities, inconsistencies, and duplication in the process will also be repeated by RPA.
It is therefore critical to first rethink our existing processes before we jump on the RPA bandwagon. We need to take bold steps to simplify, to optimize, to standardize, and to automate and digitize, before letting the robots take over.
The CFO of the future
With the adoption of these digital toolkits, the future ecosystems in the workplace will be off-the-shelf cloud SaaS (Software as a Service), based on ERP solution platforms that bring standardization, reduce complexity, increase productivity, and deliver significant cost savings.
For the finance function, the system will be a self-service and remote-enabled solution with advanced analytics capabilities (cognitive and predictive) and high visualization (not boring data in table form). And it will shift from capex (capital expenditure) solutions to opex (operating expense) and pay-as-you-use.
The finance function itself is similarly evolving. Yesterday’s CFO was basically an expense controller and chief accountant making sure that the books are properly done in compliance with GAAP and local statutory and tax requirements.
Today, the CFO is not just a story teller and reporter of what happened in the past. We are also business advisors and strategic advisors. The future CFO needs to become fluent in the digital tools available to them to deliver a strategy that integrates technology with financial and non-financial information to effectively elevate their role to become true strategic business partners.
I see the CFO as becoming a business value architect, an information and technology integrator, and a strategic business advisor working in a less predictable and more experimental but innovative business environment.
About the Author
Tjendra Halima is Country CFO of Schneider Electric in Thailand. He was a panelist in the recent 3rd CFO Innovation Thailand Forum.