New York City is a nexus of the financial universe. From the New York Stock Exchange on Wall Street, to multinational banks that make their homes in skyscrapers, the hallmarks of big business are everywhere.
Yet it was small- to medium-size businesses (SMBs) that swayed the conversation last month during Modern Finance Experience, presented by Oracle. From presenters to attendees, from hallway conversations to podium pronouncements, the message was clear: modern finance matters more than ever for any company pursuing growth, disruption and competitive advantage.
It starts with this simple, often-noted fact: when looking at the list of Fortune 500 companies in 2000, over 50 percent are now gone—out of business or acquired. Ponder this for a moment. In less than two decades, many big household names are as extinct as the dinosaurs—roadkill on the road to disruption. Victims of fast moving and innovative enterprises with better ideas and more business agility.
Such companies died for two other key reasons: inertia and a desire to maintain the status quo. And the finance function is an important part of this story.
Consider the role finance plays in the business and how it is evolving.
For hundreds of years, the finance function has been viewed as a back-office activity, primarily involved with reconciling credits and debits through tactical activities like accounts receivable and accounts payable. The role often involved constructing historical point-in-time analysis of the ledgers; for instance, accurately determining the balance sheet for each month-end close every 30 days. Budgets and forecasts were important, but the basis for everything was discrete data painstakingly collected through invoices, checks and receipts.
Today, finance is being asked to be a strategic player. The CFO needs to be a strategic partner to the CEO and board to help the company look forward. This message was echoed at nearly every session: the role of finance leaders is to provide meaningful insight about new markets, expansion and opportunities.
Yet, it is hard to be strategic and modern when a finance team is tied to endless tactical tasks and last-century technologies. APQC recently found that finance teams still spend nearly half their time on transaction processing. Old systems—such as on-premises ERP and EPM applications—don’t provide the level of automation needed to free up finance professionals to focus on more strategic analysis.
The sessions throughout Modern Finance Experience touched upon the challenges finance organizations face today. The list of challenges is long and growing daily, but the challenge everyone could agree on was the pace of change, which is happening faster than SMBs can keep up. This mantra could be best summed up as: “Companies and all industries are moving rapidly. Don’t get left behind.”
Consider the rapid disappearance of corporate data centers; the cloud-only delivery of new technologies (such as blockchain, artificial intelligence, IoT, augmented and virtual reality); the daily news announcements of malicious cyber-attacks and malware; consumer expectations for intuitive experiences, more choice and diversity; and demands from millennial employees who want their work environment to mimic their social and recreation experiences. If SMBs have any hope of keeping pace with the technologies supporting these innovations, they must turn to cloud providers that are continually updating their finance (and other) applications with the latest in new technologies.
If your goal is to build your SMB into a Fortune 500, you need to build a finance team ready for the challenges while supporting your vision. You are already focused on out-innovating your competition with new products and creative services. Is your finance organization a partner in meeting this primary objective?
Dr. Michael Mandel, senior fellow at the Mack Institute for Innovation Management at Wharton, unveiled his new research at Modern Finance Experience 2018. In Intelligent Finance: How CFOs Can Lead the Coming Productivity Boom, Dr. Mandel calculates that U.S. gross domestic product could increase by a cumulative $2 trillion in the next 10 years. Exciting new technologies like the Internet of Things, blockchain, predictive analytics, and artificial intelligence are driving this productivity boom—along with the cloud services that make these technologies available to organizations large and small.