Changes of this magnitude will likely require new capabilities – not only an innovation culture but also the right ecosystem strategy to access and stimulate new ideas. However, the survey shows that finance teams could perhaps do more to open themselves up to new ideas and fresh perspectives. Finance leaders were asked to choose one statement that most accurately described how they intend to approach innovation in the coming years, and just 37% of respondents said they plan to primarily use an open approach. Of the other finance leaders:
- 17% of respondents said they will primarily drive innovation from within the finance function itself.
- 44% of respondents said they will primarily drive innovation in partnership with other in-house company teams, such as IT.
- 37% of respondents said they will take an open approach to innovation, generating and developing creative ideas with external providers.1
To build an innovation capability, leaders should define their vision, help to align it with the wider enterprise strategy, and put KPIs in place to measure progress and achievements. As examined in the 2019 EY Global FAAS corporate reporting survey, finance culture change will also be an important factor. In terms of open innovation, leaders should also look to map out how important players – finance itself as well as in-house functions such as IT – collaborate with the broader innovation ecosystem, including external providers.
Defining a provider and managed services strategy to achieve transformational goals
Finance and reporting are facing significant pressures. These can range from highly demanding stakeholders requesting different types of financial and nonfinancial insight to an increased expectation for finance to play a central role in the organization’s long-term value strategy. However, finance teams could struggle to meet new challenges because of the distraction and weight of legacy responsibilities and complexity, the likely requirement to rewire finance technology, and the challenges of finding the proper talent to provide the new mandates.
“CFOs face significant challenges when it comes to their finance function,” says Dave Helmer, EY Global Tax and Finance Operate Leader. “The first is talent – getting the people they require, with the right skills, and giving them a career path so that you retain them. Second, staying on top of the constantly changing legislative and regulatory environment. The third is the requirement to have a sustainable plan around data and technology. The fourth and final issue is a perennial one for CFOs – not only reducing costs, but doing so dramatically.”
Meeting these challenges is why many CFOs are examining their target operating model. And, in today’s interconnected world, managed services can be a smart weapon in the finance leader’s provider strategy. “This is more than just taking low-value, commoditized finance processes off CFOs’ hands,” explains Paul Clark, EY Global Leader – Managed Services. “It’s about looking at finance leaders using today’s digitized, connected world to ‘consume’ higher-value finance services. It allows finance leaders to unlock value and drive innovation because they are not consumed simply by ‘running finance.’ It offers deep domain experience in finance, regulatory understanding and credibility, global reach and the potential for a state-of-the-art technology stack that leverages both new technologies and common data sets. The CFO can then be more focused on the smaller group of leading finance capabilities that they want to build in-house.”
The importance of an innovative provider strategy is reinforced by the 2020 EY DNA of the CFO survey, which explores the perspectives of more than 800 CFOs and senior finance leaders around the world. In this survey, more than three-quarters of respondents (76%) said that finance will increasingly partner with external parties to provide finance processes or activities requiring specialized knowledge or technology.
Cloud computing and data analytics are likely to be an important factor in providing this strategy. In essence, cloud computing is a set of distributed on-demand technology services that can be scaled up or down to support an organization’s requirements. The technology can provide the environment for finance digital transformation and the collaborative architecture to connect a range of ecosystems, including providers, employees and customers. There is also significant investment by cloud providers to maintain the security of cloud-based data and apps, which is increasingly important in a world where cybercriminals are ever more sophisticated. Embracing these data ecosystems could prove important as organizations look to share business information across internal boundaries, requiring the establishment of governance and sharing protocols with providers in order to manage possible risks.
As finance leaders look to rethink the finance operating model, a more open approach – including the use of innovative provider strategies and technology – could be important to success.
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