CIMA/Thomson Reuters

Business disruptors are emerging and evolving faster than ever before. So what will your business — especially the finance function — look like 25 years from now? In the first of three roundtable discussions, in London, New York and Singapore, CIMA and Thomson Reuters brought together a selection of business leaders to explore this in detail. The key to a successful future is a strong working relationship between man and machine…

The term "disruption" often gets a bad rap in a business context. Business leaders view it as a negative term — a threat to their business model or the course their organisation is taking. However, far from having a solely negative impact on organisations, disruptors can provide an opportunity to steal a march on competitors, create a more efficient and effective organisation, and improve processes.

A recent CIMA/Thomson Reuters dinner – an exclusive roundtable event that brought together more than a dozen business leaders from major global brands to discuss the business disruptors facing organisations today – saw this topic discussed at length.

The event was held against the backdrop of groundbreaking research carried out by CIMA and Thomson Reuters that revealed, among other insights, that regulation and policy is seen by a majority of businesses as being the key disruptor they face, followed by "people issues" and technology, specifically automation and the threat and opportunities it presents.

Defining disruption

Amid all the frenzied talk of organisations being disrupted out of business and falling by the wayside as new, rapacious digital natives swarm across the landscape, the roundtable discussion centred largely on understanding disruption and what it means for the individual brands that were represented around the table.

As Jaspal Saund, COO for technology services infrastructure operations and networks at UBS AG, explained, changing how we view the concept of disruption is the first critical step on the path to embracing it – and turning it to an advantage.

"If you actually look at what it means for technology, how we apply new tools and capabilities, it’s not disruptive at all. In fact, the word ‘disruption’ means it’s going to change the way we do things."

That rallying call resonated with the assembled guests, all of who are embracing and seeking to capitalise on the disruptive effects of technology, changing consumer behaviour, globalisation and other trends.

Given that more than 80 per cent of European respondents to the CIMA/Thomson Reuters survey pinpointed automation as a great way of reducing the time spent on monotonous tasks and reducing human error, the opportunities are clear.

And, as Brian Peccarelli, dinner co-host and president of Tax & Accounting at Thomson Reuters, pointed out, disruption is nothing new. "I can remember when it was adding machines, and then spreadsheet software arrived, which was a big disruptor. Then we saw workflow software emerging, and since then we’ve had cloud technology across all devices — it’s a constant change."

However, there is little doubt that the pace of disruption and change is accelerating. While spreadsheets ruled the roost for 30 years, the new product cycles rarely exceed five at the most. In that context the challenge for leaders in finance and other functions is to identify what trends they should pursue, which ones should be ignored and which developments may pose a threat.

Take Julie Downman, finance director for Interserve Justice, for example, who has led the way in her company’s efforts to adapt to new practices and expectations in a sector — criminal justice — that few regard as ripe for disruption.

"We didn’t look at introducing Skype business to interface with offenders as a disruptor," she told the discussion. "We looked at it as a possible solution to the problem of how to reduce office costs and stopping offenders having to travel to locations to meet with case workers, because we have to pay their travel costs in those cases. So how can we provide a customer service to cut our costs at the same time? Nobody ever considered that as a disruptor." It is simply, Downman believes, a case of "seizing an opportunity that new technology offers".

Emma Connell is the senior finance director for the Hair Category at multinational consumer goods giant Unilever – a €6bn turnover business made up of more than 70 brands in more than 120 countries. She takes a more optimistic view to the disruption promised by new technology and, in particular, artificial intelligence. "I think it will take out a lot of the dross and the errors that we currently see," she said during the discussion.

“It might also help with fraud detection and controls that are manually handled at the moment. And then you look at some of the capabilities and tools you can use around digital media procurement, for example: firms could use some artificial intelligence algorithm to help them understand that something is going to go viral, and say, ‘let’s ride the wave of that’. It’s about identifying that opportunity more quickly and capitalising on it. I also think it could — in some cases — help us identify anomalies and trends in processes much quicker than it might take a human, which will enhance the traditional financial ROI techniques that we use in our spreadsheets. So, I’m quite optimistic about it."

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People plus tech

Also speaking at the event was CIMA’s head of performance management research, Peter Spence. He pointed out that most new technology, be it cloud computing or data analysis tools, is usually very quickly available to everyone once it arrives on the market. That means, he added, that any competitive advantage is very short-lived in organisations and that the key differentiator is, crucially, people.

"Artificial intelligence is coming fast but, even so, for the next 50 years people are going to provide that competitive edge for businesses," he told the assembled guests. "Technology is becoming cheaper, more widely available, better, easier to implement and more applicable to what most businesses are doing. So if everybody is doing the same thing with technology, it is people that are going to provide the edge in the foreseeable future."

While people may provide a critical point of difference in surviving the disruptive currents, there’s little doubt that businesses are struggling to deploy their talent in an optimal way. The recent research carried out by CIMA and Thomson Reuters in advance of the event revealed that "people issues" rank second in the most concerning for global businesses, with 59 per cent citing it as a key concern. Respondents in Asia viewed it as a particular concern.

Clearly, some organisations are grasping the nettle of change, and adapting their systems and processes for two key reasons: to make the most of new talent, melding with emerging technologies, and to reflect the ways in which the new generation of professionals want to manage their own careers. As one guest, a senior finance leader at a major FMCG business reflected, it’s a change that is long overdue.

"All of our industries are still stuck in, let’s be generous, the late 1990s in terms of the way we work," he said. "People don’t want to come and work in a different way to which they live their lives, they want to operate in the same way. This is the disruption that we can turn into an opportunity: how do you attract the best young talent? By making work similar to the way they live their lives. That’s the flip side of this people message with disruption: how do we use the tech to attract the talent that grows the business?"

The impact of automation

Given the speed of technology-led disruption — which for finance centres is having a major impact on the rise of automation in processes — the FD of one major global merchant bank expressed a concern over where the next generation of accountant — someone who can fit into the digital-era company — is going to come from.

"I think most of us will tend to recruit a lot of newly qualified people," he said. "But, anecdotally, I recently spoke to three different audit partners and they have been decreasing their graduate intake every year for the past three years. They’re asking: ‘why do you need ten juniors on a review of balance sheet reconciliations, or bank recs, or hedge accounting confirmations, when you can do it with a bunch of robots and two to look after the exceptions?’"

"What’s more, they can’t find newly qualified chartered accountants as easily as they did before, and they cost a lot more." That FD’s views echoed the findings of the recent research carried out in advance of the discussion, which showed that leaders in the US and Europe are particularly convinced of the rise of the machines. More than 60 per cent of finance managers agreed they expect a machine or robot to be doing the bulk of their monotonous tasks 25 years from now.

So, what is the answer to this particular disruptive factor? Try to attract different skillsets? Change the business model to accommodate demographic changes? For Unilever’s Connell, the focus has centred on re-examining the company’s recruitment criteria to more accurately match its needs. "The selection process that used to take nine months is getting close to taking just three weeks now, because it’s all automated. Three weeks is the target and we are certainly heading towards that," she explains.

"There are many benefits to that. The gamification uses AI technology to help remove bias and allows for blind sifting. It enhances the data we have, providing feedback at each stage. It also helps us to make a better assessment of candidates’ potential, as well as past performance, and works across platforms to ensure it is convenient for users. It’s also reduced recruiter-screening time."

"And we’ve actually got a VP of finance who is tasked with looking into the specific opportunities for finance. He’s looking at blockchain and other elements of automation that we can use to generate big wins. He’s asking, ‘How do these things work? What can we take in Unilever? And he’s going to apply it to finance, as well as other areas."

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A single view of disruptors

Another major topic discussed at the event revolved around who holds responsibility for monitoring and responding to various disruptors. Around the subject of automation specifically, for example, it was asked if it’s fair to put the onus for initiating, fostering and leading innovation on the IT function?

Indeed, why is it, one guest from the financial services sector wanted to know, that many corporate boards have an expectation that "the IT and technology guys will handle it, because they know a lot more about what’s coming down the line — so it’s their responsibility to either manage what’s happening in the market at the moment or initiate innovation and change in the organisation?"

It’s a key question that highlighted a perennial problem facing disrupted companies who remain unsure about where to place the focus of their response. As one FD from a major telecoms business put it, cultural norms often come into play: "I think the mindset comes from executives, FDs included, asking the question ‘how do we automate or streamline, or reduce the cost of delivering our back office function?’ If that’s the mindset then that’s often how it’s delivered."

However, some companies are able to avoid falling into this trap: "And then I think there’s the alternate view, which is the model of the world that you come from, which asks: ‘how do we use this technology to create a new business or a new way of delivering a service or a product?’ That’s the pure innovation."

If the "war for talent" is an ongoing struggle amid all this technological change, the impact of regulation on business models also cannot be ignored. As Thomson Reuters’ Brian Peccarelli explained, historically technological innovation was driven by governments and military, which involved huge investments by governments for decades.

"They invested heavily, and that was first usually applied on the military side. Then the tech would go into the consumer market, where there was plenty of time for regulators to observe and adapt accordingly. Now, everybody gets it instantaneously — and that presents a real challenge."

Peccarelli believes the pace of regulatory change has added to the challenge. And it’s not just regulators that are struggling to keep up. "The insurance industry has a horrible problem right now, because with all this change and disruption to established models, how do you write and insure for this new business?"

This question is clearly vexing finance leaders across the globe, but a growing number — currently around 30 per cent, with a strong lean towards Asia and Europe — believe that government departments/regulatory bodies respond to this by adopting automation across their own operations.

"For instance, how do you deal with AirBnB for liability? It’s never been done. Look at driverless cars and autonomous vehicles: who is really liable? The manufacturer, the programmer? We’re seeing all kinds of industries that are impacted but they can’t catch up."

Clearly, given that no company can hope to keep pace with the development of every new technology, there are some more traditional ways of staying current and bending towards disruption. As one guest, an FD working in the banking sector, highlighted, the importance of fostering the right kind of company culture to absorb and capitalise on disruption cannot be underestimated.

But what does that mean in practice? "Company culture is really critical in a disruptive environment," he said. "You talk about how ‘disruptive’ can be successful. That is when you've got a completely different culture; where people are very outward-looking; they’re absorbing everything; they’re looking at what’s going on around them, and how they can take advantage of the opportunities."

"Larger, more traditional companies are going to be, tend to be more introspective and don’t spend so much time looking at what opportunities are out there: what are we defending ourselves, what are we defending our investors’ interests against? So they need to change their culture."

Clearly disruption isn’t going away, but it seems fair to say for this and the next generation of finance leaders it is simply a fact of life. And the smart ones are bending change to their will to build a successful future.