Becoming a Corporate Finance Futurist

Companies demanding deeper insights and better business strategies are focusing their finance teams on the future. By KRISTINE BLENKHORN RODRIGUEZ | Summer 2019



“No amount of sophistication is going to allay the fact that all of your knowledge is about the past and all your decisions are about the future.” The words of GE’s former strategic planner and founder of its “future studies” group, Ian Wilson, still hold true. But finance professionals today have more tools at their disposal than ever to help them think like futurists and plot their companies’ futures as well as their own.

The question remains, are artificial intelligence (AI), robotic process automation (RPA), machine learning, predictive analytics, and other digital technologies the crystal balls and magic bullets so many have wished for?

Bots & Bytes

Finance roles and responsibilities are expected to be among the most impacted by digital technologies like AI and RPA. For now, though, many finance departments are planning for the 21st century while working with methods still belonging to the prior.

The average corporate finance team spends roughly 80 percent of its time on non-value-added manual processes like gathering, verifying, consolidating, and formatting data, leaving just 20 percent of their time for higher-level financial planning and analysis, according to findings in Adaptive Insights’ CFO Indicator Report. So much for being futurists.

The risk is that many of today’s finance professionals are focusing most of their time on tasks that could soon be automated, leaving them vulnerable as more sophisticated forms of AI and RPA creep into daily finance functions and organizations increasingly ask for deeper business insight and strategy from the finance team. “Very quickly we’re going to be in a world where, if you don’t have skills in robotics and the related technologies, you will be obsolete as a finance person,” KPMG CFO David Turner recently told CFO.com. At the beginning of 2019, Turner, an RPA bull, said the firm was about 55 percent of the way toward achieving an initial goal of creating 200,000 hours of workforce capacity savings.

Bots can process transactions, monitor compliance, and audit processes automatically. And many of the bots being developed today learn as they go. Through machine learning, bots improve all on their own, based on new data and new experiences, which cuts down on the manual work finance professionals have previously done and, arguably, has held them back from largely becoming more strategic business advisors.

Accenture’s David Axson, global lead of CFO strategies, says some executives are surprised when they see just how much of corporate finance’s day-to-day can be done by technology: “Many are dismayed because they’ve traditionally seen their job as the preparer of financial reports and now technology is usurping that role. What they don’t realize is that in today’s digital era, finance’s job begins when they deliver the report or analysis. Their role is now primarily an advisor on major business decisions, not a report compiler.”

The scenario is increasingly playing out. In “Bots, Algorithms, and the Future of the Finance Function,” McKinsey & Company highlights how AI can outdo veteran talent: “At a heavy-equipment producer, managers had long used spreadsheets to forecast monthly sales and production. Frustrated with the time consumed and the imprecision of manual forecasts, they tasked a team of four data scientists with developing an algorithm that would automate the entire process. Their initial algorithm used all the original sales and operations data, as well as additional external information (about weather and commodities, for example). In this case, within six months the company eliminated most of the manual work required for planning and forecasting — with the added benefit that the algorithm was better at predicting market changes and business-cycle shifts.”

Another case in point: Willis Towers Watson’s use of RPA. “Intelligent automation boosts both day-to-day finance functions and the quality of finance’s strategic insight,” says Willis Towers Watson CFO Michael Burwell in an interview with CFO.com. “We use robotics to retrieve invoices in response to various queries by state and local tax authorities. It’s an important step, because both the number of reviews per day and the amount of data requested is growing exponentially. My tax team can assign the robot a task and time to retrieve invoices in advance of a tax examination. A key advantage of using robots is their ability to work off-peak hours when staffers are home. When they arrive in the morning, they have invoices and a status report to review.”

More CFOs seem to be catching on to what the future can hold for their finance teams. According to Grant Thornton LLP’s 2019 CFO Survey, 38 percent of senior financial executives currently implement advanced analytics, while 30 percent have adopted machine learning. And over the next two years, an increasing number of CFOs will invest in AI (41 percent), RPA (41 percent), blockchain (40 percent), and drones and robots (30 percent).

When Axson maps out the task list for corporate finance teams in the pre-digital and post-digital worlds, it becomes clear that the traditional role of finance must change. “Intelligent machines can sift and sort through vast data sets — sets far too large for humans to accomplish. And those same machines can identify patterns we humans simply can’t because of the volume of data. Machines also do things like this with far less error than humans do. If you want to know the impact of changing pricing or building a new factory, AI can help faster and in ways humans can’t,” Axson explains.

 
That said, Axson makes it a point to note that humans empathize, ideate, create, and converse with each other for better solutions far more effectively than any bot. “AI is not a cure-all. For example, AI is not great at predicting black swan events,” he explains.

Ultimately, “CPAs need to think of themselves as more than accountants,” Axson says. “They are moving up the value chain to become more of a business partner and a strategic enabler — providing solutions versus simply transactions. To do that well, it helps if they have a strong grasp on what lies ahead for their companies.”

Becoming a Finance Futurist

Futurist, economist, and self-proclaimed human spark plug and brain shaker, Rebecca Ryan, smiles to herself when executives think what she does is shrouded in mystery. “’Futurist’ is a wonky term, I know, but we’re all futurists of a sort. If you’re trying to figure out retirement savings or the weather for your vacation, you’re doing what I do. I just do it with a lot more training and tools,” she says.

When it comes to corporate futures, Ryan says a surprising number of the business leaders she works with hesitate to shine a light on it. “Most of us tend to think the future is a dark room. And we don’t want to go in there because we don’t know what awaits us. We’re afraid of the bogeyman.” Her job is to prove the bogeyman is a myth and that what leaders plan for has more power to help than to hurt.

In practice, Ryan uses “The Foresight Wheel” to walk business leaders through a futurist’s thought process, a multi-step method of developing strategic foresight by asking “Where is the world likely to be?” and then working backward from there.

Step 1: Frame the domain. Here, specificity is required. What do you want to explore or accomplish and by when? Think of the future of your company by 2025 or 2030.

Step 2: Scan for forces and trends. This is where a good futurist helps. Ryan says she looks for forces and trends that move leaders beyond their own biases, like the common availability bias, where we over-rely on sources we remember instead of what’s true. In this step, Ryan takes executives through what she calls the STEEP areas: society, technology, economics, environment, and politics.

First, look at society. Are your customers changing? Are their attitudes different as a new generation comes to the fore? Second, technology. What’s on the horizon — AI? Robotics? Third, economics. How is the gig economy or unemployment impacting your workforce? Are your customers or clients being hit by tax regulation or trade conflicts? Fourth, environment. With climate change, are carbon taxes and environmental credits going to become a business concern? Fifth and finally, politics. How will changing leadership impact your regulatory and business environment?

Step 3a: Forecast scenarios. Many businesses plan on their best-case scenario or what Ryan calls “rainbows and fairy dust.” It’s aspirational, but no professional futurist will let you get away with that scenario alone. She usually walks people through a “watch-and-wait” future. What happens if we don’t do anything differently? Then, an aspirational, best-case-scenario future. What happens if we have all the right people doing the right things with the right resources? For the third future she asks business leaders to imagine a negative disruption. This future is filled with black-swan events. What if a client that accounts for 20 or 30 percent of your revenue makes a sudden change in leadership and your firm is no longer working for them? And the fourth future envisions a positive disruption. What if two of your biggest clients double in size?

Imagining all these futures gets people out of their boxes — optimist, pessimist, etc. — and considering a wide range of possibilities.

Step 3b: Identify crossover issues. This is where you look at the four scenarios you’ve just laid out and say, “What are the things we can control that would help us regardless of which scenario plays out?” You can’t control the economy or who comprises a major client’s C-suite, but you can control other things like your hiring practices, R&D, or investigating new areas of business.

Step 4: Envision the future. What is our highest vision of the future, and what will success look like in that future?

Step 5: Backcasting. Starting from your end domain (whether that’s 2030 or just three years out), work backward to fill in your strategic plan. What actions and outcomes need to take place to achieve your business’s goals?

Step 6: Implement. What are the steps to take now to set your strategic plan in motion and get you headed toward your future state?

Sparking the Conversation

Don’t mistake strategic foresight as being reserved for the C-suite. It’s not just about how executive groups think.

“Bring some weirdos into your planning sessions,” Ryan encourages. “And I say ‘weirdos’ in the most positive way. You should have a stable or ecosystem of talent to choose from.” Ryan says she has seen chief innovation officers, entrepreneurs, and young college teaching assistants and professors fill this role, but the options are endless — even interns could contribute.

“Have them sign an NDA and then bring their creativity and ingenuity to your table. They will take you out of groupthink, out of the mode in which your ‘new’ plan is just last year’s plan with slight updates,” Ryan stresses.

She recalls one organization she worked with that had turned to its next-generation employees to help identify ways to better attract and retain employees. This young talent set brought six projects to the company’s leadership team. Leaders had to green-light, yellow-light, or red-light the ideas, but they had to give clear reasons as to why. “I was in the restroom during a lunch break when I heard one of the female partners at this firm exclaim that she had no idea the firm had such talented young employees with such innovative ideas. Sometimes, your brilliant nonconformists are right under your nose.”

While strategic foresight is still a little “out there” for many organizations, Ryan says it can’t stay like this much longer. In a world that is constantly changing, strategic planning will only take you so far. Instead, be the “human spark plug” that ignites the impetus for overcoming organizational inertia. It certainly beats the crystal ball approach.