Felicity Hawksley, journalist

Business transformation isn’t a new concept, but since the onset of the pandemic it’s taken a different shape. Pressures arising from the impacts of Covid have led many companies to adopt alternative approaches to how they make changes to their business model and operations – even to their service and product delivery.

ACCA research, published in Transformational journeys: finance and the agile organisation, has found that businesses now typically have to make smaller decisions faster, and that the context of these decisions is far less stable than before. For the finance function, which is always at the core of transformation efforts, this has important implications.

The pandemic has forced businesses to abandon any lip-service in favour of real strategies to address shifts in the business ecosystem

Major shifts

The pandemic has rapidly changed both customer needs and behaviour. Perhaps most interestingly, it has intensified focus on a movement already under way. Pre-coronavirus, businesses were already feeling the heat from society to re-evaluate their purpose and to consider a broader group of stakeholders rather than just the shareholders. But the pandemic has forced businesses to speed up this process and to abandon any lip-service in favour of real strategies to address what are now unmistakable shifts in the business ecosystem, such as climate awareness and action and social inequalities.

Because the speed and scope of transformation has changed, the process of transforming a business has changed too. According to ACCA’s research (which includes a two-page ‘action plan’ for finance professionals), instead of the large, long-running change projects of yesteryear, businesses are now having to react more quickly, while paying attention to a wider context than ever before.

But transformation is both tricky and risky, so how can companies ensure their programme of change won’t fall flat? And how can the finance function best support the business in the effort?

The part the finance function has to play in transformation and driving wider business value requires a reframing of its role

Redefine change

First, businesses have to drop their assumptions about what transformation should look like. It’s time to abandon the notion that heavy, lengthy business-wide programmes are the go-to way to change. ‘Fail fast’ is the new mantra – a recognition that it’s better to have a minimum viable product than no product at all.

Organisations need to use techniques such as agile, sprint and devops to tackle transformational tasks that, while still governed by an overarching vision and detailed strategy, have been broken down into smaller components. Transformation should be a part of the business culture, a more constant mindset that is adaptable, flexible and opportunistic.

Companies need the flexibility to respond effectively to the findings of their data analysis

Better use of data

Data is now at the heart of all transformation efforts. ACCA’s research has shown that its effective use by people and processes is the key to organisational transformation. But what does this mean in practice?

Organisations have a huge amount of data available to them (their customers’ and third-party data as well as their own) to help understand the needs and behaviour of their customers and suppliers and the wider market context. But having this data is only the first step. Companies need the right technology to segment and understand it, and they also need the flexibility to respond effectively to the findings of their data analysis.

Rethink the finance function

Finance teams have historically been focused on performance monitoring and compliance – both important jobs. But they now have a huge role to play in transformation and in driving wider business value. These transformation and value tasks can be carried out only by reframing of the role of the finance function.

ACCA’s research suggests the most successful finance teams are advocates for change. To do this change-championing properly, finance teams need to be not only the guardians of the organisation’s data and data model (making sure they are a ‘single source of truth’) but also able to work with that data – both financial and non-financial – to deliver the insights that can shape the business trajectory.

Ability with non-financial data is of increasing importance. The finance function needs to understand how to fit information such as environmental, social and governance (ESG) data into models and processes. Without this skillset, organisations risk ignoring a key driver of change in today’s markets.

Instead of thinking about return on investment, the finance function needs to measure the wider initiatives

Value cases, not business cases

One area where the finance function has always played a leading role is building the business case. But with the availability of more (and more granular) data, and the evolving drivers of change (such as the shift towards carbon neutrality), successful organisations are asking their finance function to produce value cases instead.

So what’s the difference? A value case has some similarities to a business case, in that the finance function analyses the costs and benefits of an initiative. But a value case has a broader range of inputs and outcomes. Instead of thinking about ‘return on investment’ in the classical sense, the finance function needs to measure and report on the wider initiatives already driving the market, such as social equality, employee satisfaction and net-zero goals. (See also AB's special edition Leading the change, for more on 'purpose above profit'.)

There are some things about transformation that haven’t changed. They include the requirement to have a strong organisational purpose and vision, and to translate that into a targeted operating model with plenty of detail about achieving the business strategy. But that’s where the similarities between transformation pre-Covid and transformation today end.

Enhanced data, powerful analytical technologies and new drivers of change all demand – and support – a different model of transformation. It is one that is centred around a more creative, flexible and connected finance function that is in tune with business and market imperatives.

The speed of change has accelerated, and long-term organisational success now requires a different approach – one that is faster, bolder, broader-minded and constant.

Further information

Watch the video conversation on business transformation with Clive Webb, ACCA head of business management, and Krishna Nacha, head of global business services at Wiproa