The 2019 Accountants Week celebration and conference was held at the Modern City Hotel, Tamale from the 25th to 31st May 2019. The conference Topic was“Efficient Service Delivery in the Public Sector: The Role of the Chartered Accountant
The topic for Ing. Kenneth Ashigbey's session was the "Role of the Board in harnessing the opportunities and averting the risks of digital transformation – The Chartered Accountants responsibility".
Most business leaders, including some of you Accountants within our markets, still think of “digital” as about mobile phones, Internet and other electronic tools. Very quickly, we’ve learned that it’s an enormous, global shift on a par if not beyond the Industrial Revolution. Today’s CFOs, Accountants and boards understand how technology is driving massive changes for their organizations. They are aware that leading digital companies are threatening their business, and as a result, their business model will likely be disrupted in the near future. But do you as Accountants have what it takes to drive your organizations to thrive within this era? Digital is fundamentally changing the habits of individuals, society, businesses and nations the likes of which few have seen.
Digital transformation and related business innovation are permeating every facet of life and coming with it are new cultures, transforming society, redefining the competitive landscape, raising customer expectation, making them extra fickle, disrupting established business models, blurring the lines between industries and creating unprecedented challenges and opportunities for organizations everywhere.
In light of this, digital transformation is one of the most important strategic issues that should be on the board’s agenda. Accountants and CFOs have had time on our boards, how prepared are they to champion that agenda. Do the Accountants themselves have what it takes to appreciate this? However how many of the Accountants serving on boards represented here today have digital transformation mainstreamed as the new normal on the boards they serve on? (Main, Lamm, & McCormack, 2017)
What is the Board members role in today’s world and what is the Accountant’s responsibility on today’s Board? Is it to help create that sustainable competitive advantage for the long term? How is this possible within today’s environment without understanding the merits and risk associated with digital transformation and also the risk of inaction? Is the Accountant’s training making him ready for this challenge?
What is Digital Transformation & what is it not: - It is just not the technologies, AI, IOE, Big Data, AR, Blockchain etc. It is about how our companies can win using technology. Digital transformation is about dramatically improving business performance through re-aligning existing technologies and integrating new ones. A core part of this involves making changes to business processes to improve end-to-end performance.
Though Digital Transformation is mostly mentioned with disruptions, they mean different things. Digital Transformation can be applied to each and every organization, private, public and even the 3rd sector. It can be as simple as using digital innovations to dramatically improve or expand upon what the entity has been doing forever. Digital is paving ways for innovation beyond our wildest imaginations. It is not just about thinking outside the box, because with digital, outside the box is also full. It is about recreating our own box for our competitive advantage.
Accountants are our uniquely position to help organizations to develop smart approaches to drive long-term strategic competitive advantage. Accounting has been a skill that had been required on boards for a very long time, is that going to continue into the future, into the 4th Revolution?
The question is what makes digital transformation special, is it just because it is new? Is it another fad? No
- It has completely changed the magnitude, scope and pace of change beyond linear to extreme exponential change
- Strategies and impacts tend to be transformative and not just incremental – some times creating completely new customers and revenues streams.
- Data and insights are now primary sources of value creation and competitive advantage. It is the new gold or oil.
What will be the impact of digital on the Accounting profession?
As technological breakthroughs rapidly shift the frontier between the work tasks performed by humans and those performed by machines and algorithms, global labour markets are undergoing major transformations. These transformations, if managed wisely, could lead to a new age of good work, good jobs and improved quality of life for all, but if managed poorly, pose the risk of widening skills gaps, greater inequality and broader polarization.
As the Fourth Industrial Revolution unfolds, companies are seeking to harness new and emerging technologies to reach higher levels of efficiency of production and consumption, expand into new markets, and compete on new products for a global consumer base composed increasingly of digital natives. Yet in order to harness the transformative potential of the Fourth Industrial Revolution, business leaders including Accountants, across all industries and regions will increasingly be called upon to formulate a comprehensive workforce strategy ready to meet the challenges of this new era of accelerating change and innovation (Leopold, Vesselina, & Zahidi, 2018).
Nowadays, it’s no longer a question of whether or not digital transformation and the automation that comes with it could play a role in the world of accounting. The question has become how exactly digital transformation will influence accounting.
Accounting as a field will not totally disappear in the future especially due to digitization and automation. But let me share some data based on the World Economic Forum: The Future of Jobs Report 2018 and let see what the research is saying about accounting as a job. It can be seen that Accounting will be transformed as parts of an accountant's job are automated when it is cost-effective to do so. Automation cannot effectively replace the entire cognitive and decision-making capabilities of accountants, yet. But with the new skills that digital is requires from the new leaders of organizations, are you as an accountant ready to be tomorrow engaged accountants?
Although it may sound intimidating, a future built around digital and automation isn’t necessarily a bad thing for the finance industry and accounting as a whole. Thanks to the power of finance automation, accounting professionals will be able to make more time to focus on strategic efforts, increase productivity levels throughout their team, produce more accurate reports, and spend their time turning raw data into real, actionable insights.
To put it simply, digital transformed and automated accounting is the future – you have to be ready yesterday to be relevant tomorrow. (Teampay, 2018).
The reality is this:
Accountants are just as important as ever before.
While complete disruption of the accounting profession as we know it today is a few years away, it’s more important now than ever before for finance professionals to establish skills like strategic thinking, analysis and people management if they want to cement themselves in the future.
The Stibo Systems, a Master Data Management Company, White Paper on The benefits and the challenges of digital transformation lists 10 expected benefits of digital transformation implementation:
- Better ability to meet customer expectations
- Increased cross-collaboration between departments
- Greater agility within IT to meet the business needs
- Improved competitive position within your market
- Higher level of innovation across the business
- Faster strategic decision making
- Increased business growth
- Faster time to productivity in core areas
- Reduced costs of doing business
- Reduced IT costs (Ithia, 2015)
Get your strategy straight: - There are rarely any benefits from random acts of digital. It has to be deliberate. The Accountant and CFOs on Board should question whether or not there is a digital strategy or whether your strategy is underpinned by digital. You need to understand how digital fits into the overall company strategy for sustainable success. Bear in mind as accountants you need to own the strategic space going forward.
You have to question if the digital initiatives underway are integral and aligned to the corporate strategy or whether they are random acts of digital. Is it just feel good initiatives or impactful and well thought through strategic initiatives?
There are 3 broad categories of Digital Strategy
- Improve Core: Use digital to enhance existing business models and current revenue streams. Example introducing bar codes on newspapers to digitally track the copies produced, sold and returned. It improves efficiency and reduces losses. This normally Accounts will love as the losses are reduced. Sometimes it is the investments required that the Accounts might push back on. But that has to change once we appreciate the imperative and evaluate it well enough.
- Move into an adjacent market: Use digital innovations to take advantage of new revenue streams. With the bar codes on newspapers, digital versions of the newspaper and other technologies including big data etc., newspapers can be used to run promotions targeted at particular persons for new revenue streams apart from single-copy sales or advertising. It could be the basis for completely new promotional revenue streams.
- Create an entirely new business. Use digital innovations to look to markets and opportunities beyond the boundaries of its current business. For example, Newspaper companies utilizing digital tools to digitize their content and archives and start providing digital-based research and insight beyond the circulation of their newspapers.
My questions for us as Accounts and CFO serving on Boards are:
- Is your current business a candidate for disruption? Are you willing to self-disrupt or want to risk being eaten up by another? In our current world, self-cannibalism is a virtue.
- What are the risks of clinging to the status quo vs. cannibalizing your existing business?
- What is your organization’s overall digital transformation strategy:
- Adjacent Markets or New Business?
- What is the anticipated financial impact of the organization’s digital transformation strategies, and the timeline for demonstrating a return on these strategies?
- What is the timeline for demonstrating income statement and/or balance sheet improvements arising from digital transformation?
Within this current era, Accountants need to be conversant with the 6 enablers of digital innovation and know-how to combine them to deliver strategic competitive advantage for the organizations they lead. Alone each of these enablers could create opportunity, but the sustainable strategic competitive advantage comes from a combination of multiples of these enablers.
- Connectivity: Transforming interactions and engagement models among internal and external stakeholders – including customers, employees, business partners, and investors – by connecting people, spaces, products, data and technology.
- Experience innovation: Wiring the organization to orchestrate and deliver a winning customer experience, such as using speech, facial recognition and gesture-based interfaces, linked to AI engines and bots.
- Data Intelligence: Using data and analytics to uncover breakthroughs business insights and develop products, services and experience tailored to customer needs. Even fort those needs the customer might not know that they have or might not be able to articulate them.
- Leading-edge innovation: Leveraging emerging technologies such as Augmented Reality, Virtual Reality, Artificial Intelligence, Machine Learning, Deep Learning, Big Data, IoE (Internet of Everything and not just Things), BlockChain, - to create innovative products and services that help build that competitive edge
- Automation: Using robotics and digital services to automate tasks that are currently done by humans – this will improve operations and ultimately deliver a more engaging experience.
- Cybersecurity: Implementing cutting edge security to protect customer data – particularly sensitive information such as health and financial data that is transmitted over connected devices as we get into IoE.
As Accountants and Business Leaders we need a good appreciation of how to apply these enablers to the 3 strategic categories and consider challenging management to develop solutions and experiences that are unique, innovative and valuable to all stakeholders of the organization – with the ultimate goal of increasing impact, maximizing market share and improving profitability return on investments.
Next sets of questions
- Are your organizations using digital tools to drive transformation or are you satisfied with incremental improvements, because that is what your local competitors or your intra-industry competition are doing? Note that you could be eaten by the dragons outside your geographical location or from entirely different industries.
- Have you been using these 6 digital enablers to gain an advantage in the market? What actions are you taking?
- Which of these 6 enablers is not getting enough attention and action from you as a board? Why is that so, should that change?
Make Sure your ambition is bold enough: - Is your organization too conservative about digital transformation? Organizations with great successful histories tend to be skittish when it comes to embracing bold transformation. They are victims of their previous successes and become venerable to extinction, it anchors them to a way of thinking that makes them prone to overlook or dismiss new and innovative opportunities.
Even for those who embrace the need for digital transformation, may find that their slow and steady linear improvements will not be enough to thrive. To be effectively competitive it is critical for Accountants to help their organizations to understand, appreciate and embrace the full scope of change occurring around them – and then establish ambitions for the organization to be aggressive enough to win.
Sustainable competitive edge through digital transformation requires more than throwing money and time at an assortment of digital initiatives and copying what others are doing including developing a mobile app, redesigning the website etc. These efforts apart from being aligned with the corporate strategies, they should create sustainable competitive advantage, else they will likely not be enough for real transformation and in the worst case could provide a false sense of security and accelerate the organizations slide into oblivion.
A risk-intelligent Accountant understands that being extremely risk-averse can just be as damaging to the organization as undertaking excessive risk. It is the collective responsibility of the Accountant and other Executive Management to help Boards to determine the appropriate risk appetite – both how much and what types of risk the organization should take in order to grow and achieve sold sustainable performance.
Question for you Accountants based on the need to ensure bold ambitions - step 4:
- Are your specific ambitions for winning in future bold enough?
- What strategies and initiatives are you pursuing to achieve our ambitions? How will they contribute to building a competitive advantage?
- How is digital changing habits and behaviours and how does that affect your customers, your competitors’ customers and business strategy.
- What are the biggest threats and opportunities around you? Are non-traditional competitors chipping away at the edges?
- Are the people in the organization ready, prepared and have what it takes to take on the challenge – is the leadership team poised to act? Even in digital it is still people that offer and drive competitive advantage
Envision your end goal: - At the end of the day no matter what the specifics are of your unique and bold ambition and vision, in today’s world, winning requires an exceptional customer experience. To execute non-digitally native companies often need to make fundamental changes at the DNA level – creating digital cultures that embrace innovation, accept appropriate degrees of risk, and are not afraid to learn from mistakes. It is critical for Accountants to note that your new and future customers and clients are digital natives and they are not used to analogue.
To move up the digital maturity curve, consider the following;
- Innovate on the edge, scale to the core: for companies that need to make progress fast, setting up a digital organization on the edge, and scaling it to the core has proven successful.
- Faster and more agile: able to rapidly respond to changes in the marketplace.
- Transformative innovation: pursuing transformative, not just incremental, change. This means setting a bold ambition and paying attention to the technology and market dynamics that are shifting every day.
- More efficient and effective: use digital breakthroughs to do things better, faster, and cheaper.
- Willingness to embrace risk: taking calculated chances, consistent with the organization’s risk appetite, and constantly learning from new market offerings.
- Increased data-driven and analytic: using data and insight as a strategic weapon.
Adopting these traits looks different at every organization. It could include improving agility through from non-traditional workforce approaches like remote workers, virtual employees, offshore resources, and digital ecosystem partnerships. It likely includes embracing rapid ambition delivery, where, instead of spending months or years in product development, you take smaller steps to deliver into the marketplace in just days or weeks instead of months.
Questions for Accountants to consider:
- Does your organization need to make changes at the DNA level (people, processes, and technology) to prepare itself for competition in a digital world? If so, what changes are necessary?
- Do you have the right people on board to achieve your digital ambitions—people who know how to think differently and can foster that mindset throughout the organization?
- Are you making adequate investments in technology and training?
- Are you doing business with ecosystem partners (suppliers, service providers, etc.) that have digital in their own DNA?
Don’t settle for random acts of digital
Board members should be responsible for overseeing a company’s digital vision. Nevertheless, Accountants have critical roles to play in sharping their sense of direction. That is your responsibility. You need to be satisfied that the vision makes sense for the long term—and that the required transformation unfolds strategically.
Some organization make the mistake of focusing on technology first, investing in a jumble of digital projects that are not directly related to the ambitions of the business, only to find their executives wondering why those projects fail to deliver the sustainable competitive advantages necessary to take the company into the future.
Transformative change happens by starting with an ambitious vision and then aligning the company’s efforts to make that ambition a reality. As an Accountant, you can help the business plot the right course by assessing whether it is ambitious enough—overseeing the appropriate steps to achieve and sustain long-term success.
When it comes to digital transformation, one secret is to stop thinking that the end-goal of digital is focused on a digital device or technology initiative. Rather, the end-goal is about creating a winning business for the future—which is the true measure of digital transformation success.
For the composition of today’s Board, there are new skill sets beyond Finance, Marketing, Law etc. that are required for organizations to thrive within this digital era. So, for you Accountants, your guaranteed spot on the Boards are numbered if you do not acquire new still skills set. Accounts will continue to be there but it will be those Accounts who have more than just accounting skills.
There is a current study that has come out with the following 11 Leadership Guidelines for the Digital Age – These are categorized under 3 broad groups; the business environment, the organizations and strategy
- The business environment
- Digitalisation requires an unbiased understanding of the external environment: - Analogue-era frameworks such as Michael Porter’s “five forces” will need to be revisited, now that the impact of digitalisation is rapidly replacing traditional physical barriers to entry with intangible barriers (e.g. relevant purpose, resonant mission, authenticity and trust) that no amount of industry prominence or cash can overcome.
- The organisation
- Digitalisation may require a reformulation of the firm’s mission: The environmental shift caused by digital may challenge the very existence of individual companies, even entire industries. Accountants, their other colleagues' Executives and Boards will need to question all pre-existing assumptions about the firm’s mission and industrial positioning, as well as the sustainability of its business models and methods.
- The meaning and impact of digital to the firm must be clearly stated: Digital advantage resides largely in the opportunity to customise not only products and services but also organisational strategy and structure. Rather than searching for a blueprint to guide them through digitalisation, firms should define their own digital road map. Accountants, as Business Leaders can start by developing an in-house dictionary, including entries for “digital” and all related keywords, terms and concepts. Like any other dictionary, it will need frequent updates.
- Digital understanding and capabilities are required across the firm: Digitalisation may involve a great many experts, but the ultimate responsibility for digital transformation belongs to all functions within a firm, including the Accountants. The successful change also requires cooperation from junior contributors all the way up to the board by linking digital-savvy millennials with the business experience and wisdom of senior executives and directors.
- Digitalisation must be supported by the organization’s corporate culture: The digital revolution is indeed cultural, not merely technological. As with any large-scale cultural change, digitalisation will never take hold unless it is driven by top executives, under the board’s leadership.
- Digitalisation demands a greater level of collaboration: Business success can be achieved only through continuous collaboration and ongoing conversations between shareholders, boards, executives and “frontline” employees. In addition, digitalisation is blurring the lines between different industries, heightening the importance of cross-functional and external collaboration.
- Digitalisation requires greater engagement with the public. In the past, customers were subdominant. We spoke at them; we marketed to them. With digital, anyone can create and monetise value with size, scope and speed. Just as easily, consumers can destroy value by, for example, dismantling a massive company one tweet at a time. It has never been easier or more essential to co-create with customers and crowd-source ideas, and firms that position themselves as facilitators of customers’ dreams will win in the future.
- Business strategy in the digital age becomes a continuous process: Gone are the days when companies had the luxury to think in terms of five-year strategic plans. With major business trends shifting constantly as they are today, strategy formulation and execution need to happen simultaneously and ideally in a seamless feedback loop.
- Decision-making in the digital age is increasingly data-driven: Compared with the plethora of advanced predictive and analytics tools available to businesses today, the old-fashioned executive summary laying out binary choices is a primitive instrument. In the absence of Big Data, what used to be allowable, as an “educated guess” will become at best a stab in the dark. Here Accountants will have to take leadership and let the data speak.
- Digitisation requires firms to enter uncharted territories: Planning for disruption entails exploring new business models and revenue streams. Organisations will have to launch ambitious experiments and quickly take learnings on board. For their part, Accountants must raise their comfort level as regards uncertainty, ambiguity and risk.
- Digitalisation is about continuous management of change. In the pre-digital world, a one-off change management programme could pay dividends for years if not decades. Not anymore. Accountants must ensure that the will and ability to continuously change are built into the very fabric of the organisation.
Responding to revolution: - The digital revolution, like every revolution, can be viewed either as a catastrophe or as a world of opportunity – depending on whether your allegiances lie with the old order or the new. Optimism is a prerequisite for survival. Digital will undoubtedly force Accountants to attain unprecedented levels of innovation, competence, effectiveness, leadership and responsibility – with fundamentally positive results for both firms and society. (Andersson & Ludo, 2017)
Andersson, L., & Ludo, V. der H. (2017). 11 Leadership Guidelines for the Digital Age. Retrieved May 5, 2019, from https://knowledge.insead.edu/leadership-organisations/11-leadership-guidelines-for-the-digital-age-5516
Ithia, A. (2015). Harnessing the Opportunities of Digital Transformation. Retrieved May 5, 2019, from http://www.businessoptix.com/blog/harnessing-the-opportunities-of-digital-transformation-v4%0AYou
Leopold, A. T., Vesselina, R., & Zahidi, S. (2018). The Future of Jobs Report 2018. Geneva. Retrieved from http://www3.weforum.org/docs/WEF_Future_of_Jobs_2018.pdf
Main, A., Lamm, B., & McCormack, D. (2017, October). On the board ’ s agenda | US Winning with digital : What boards need to know about digital transformation. Deloitte On the Board’s Agenda. About, (October), 1–5.
Teampay. (2018, February). Will Bots Eventually Take The Jobs Of Accountants & Bookkeepers ? Chatbots Magazine. Retrieved from https://chatbotsmagazine.com/will-bots-eventually-take-the-jobs-of-accountants-bookkeepers-207c465bc6af