Disruption abounds in today’s business environment. Market pressures, regulatory changes, technological innovations and new entrants are just some of the disruptive forces, according to a McKinsey & Company report.
Jan. 23 marked the passing of Clayton M. Christensen. While his name might be unfamiliar to most, the tech start-up industry and related sectors were founded on the theory of disruptive innovation that the Harvard Business School professor developed.
Christensen coined the term “disruptive innovation” during the late-1990s technology boom. His theory describes the disruptive impact that innovative technologies have on leading companies, products and market networks, and the way new entrants can shake up established companies in a particular market.
Indonesia is at a nascent stage of digitization. We can apparently realize an estimated US$150 billion in annual economic impact by going digital, according to a study by McKinsey. Indonesian companies must evolve to incorporate digital technologies in their corporate DNA and business strategies to join the digital age.
Transformation and disruption are the most overused business terms these days, although the bitter reality is that transformation and digitalization programs often fail. Despite this fact, more than $100 billion was invested in digital reinvention between 2016 and 2018.
An estimated Rp 456 trillion ($32.5 billion) was spent on information and communications technology (ICT) in Indonesia in 2019, according to a report by the International Data Corporation (IDC). It also highlighted that the critical trend among Indonesian enterprises was to seek and consider a technology-based decision-making process and digital ecosystem.
Chief financial officers (CFOs) are becoming the second most important executive role after CEOs, akin to catalytic strategists for an organization.
They also have insights into every business unit in the organization, so are thus able to identify the opportunities that digital transformation can unlock, while possessing the know-how to lead the transformation. Implementing digital transformation while simultaneously transforming the finance function is the new strategic role of finance executives.
Digital transformation in Indonesia is escalating, although it is relatively new compared to other regions. McKinsey claims that its research into 20 markets shows Indonesia is still in the preliminary stage of digitalization.
The biggest challenge finance executives face in their day-to-day duties is being change agents. Among their top priorities are managing unexpected changes to the financial budget and forecast, and ultimately adapting the ever-changing business processes to their organization's rapidly evolving growth and business models.
To produce real value, CFOs need to adopt the latest technologies and changes harmoniously rather than segmenting talent, technology, data and the workplace. The CFO and their team are arguably the custodians of cross-company collaborations. This means that they need to be ready to navigate uncharted territory, not only in their own roles but for the rest of their organization, too.
One of the most challenging aspects of digital transformation is building the right institutional capabilities and culture. First and foremost is an organization's people. Employees are often neglected during transformation, so the workforce should be part of the journey to ensure effective transformation. As regards mindset and capabilities, the leadership needs to adopt and enforce new ways of thinking, particularly post-transformation to meet the organization's rapidly evolving needs.
Digital technologies are redefining existing finance positions; the functional silos are breaking down. Leaders must therefore upskill their workforce to become digitally savvy and develop “world-class” finance talents, by creating an environment that encourages new ideas and a center of excellence for sharing the latest technological advancements.
The second aspect is the technology. Finance departments are often the first to see pioneering changes to their technology, with constant updates to their enterprise resource planning (ERP) system that bring more value and deeper insights to business parameters, flatten hierarchies and allow for real-time decision-making.
Furthermore, automation brings advances to the finance function. Automation has long and greatly impacted industrial factories. Today, the impacts of automation is not limited to finance and business workflows, but also impacts the workplace itself.
The result of automation is that employees spend more time on qualitative than quantitative analysis, have fewer repetitive tasks, and can help the business make informed decisions based on factual data and faster analyses. Executives should also develop key performance indicators and incentives to support decision-making agility.
The latest digital tools that enable finance professionals to crunch and digest data quickly, such as Tableau and Power BI, support fast data access instead of generating large amounts of management reports.
The organizational demands for finance professionals have evolved since the onset of digital disruption and transformation. They are required to do more than just generate reports, and must also be an "insight creator", use technology to solve business problems and offer assisted insights and performance to serve the business's growth.
Many companies are adopting these advanced technologies more rapidly and undergoing digital transformation, not just for reasons of productivity and effectiveness, but for the incredible analytical power of these tools that support growth and transform companies.
Digital reinvention is not a fight for survival. It is instead about a business reaching its full potential and responding to external pressures and new opportunities as they arise. In the end, business is transforming to avoid disruption in the current technological wave.
Indonesian businesses are poised to benefit significantly from digital transformation. Leaders that implement a comprehensive strategy and adopt a holistic approach to digital transformation will enable their businesses to rise above the tide and boost Indonesia’s economic growth.
The writer is a recruitment consultant at a multinational consultancy. The views presented here are personal.
Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.