The role of Business Control in executing on the promises of Digital Transformation

While the role of the CIO to execute the technical enablers and supporting process of a digital transformation is fundamental and clear, the role of finance and, especially business control is decisive to A) certify that those technical enablers do deliver on the promises of the business disruption that digital transformation promises and B) turn those enablers, and the benefits generated by those, into business levers.

During a number of years, I spend day-in day-out listening, evaluating and coaching engagement teams that wanted to drive sales opportunities that deviated from company sales, commercials and technical guidelines. Most of those opportunities were related to digital transformation customer projects: IT-systems that would enable omnichannels to deliver new digital services, digitalization of services such as customer care, bigdata analysis platforms, infrastructure virtualization to enable ubiquity, etc… In many cases, the reason of deviation from the corporate guidelines was lack of customer budget to reach profitability requirements. Does the customer have enough money to pay for the party?

Yet, the relevant question that we end up discussing was how the customer was going to make money out of the transformation. How could we propose, alongside the technical implementation, the path to cash though that technical implementation into operational efficiency, new markets, products, services, new revenue streams enabled by new business models, etc…? who would be the one receiving, directing and streamlining these activities that touch upon all the angles of the customer organization? My view is that business control should play this role in the mist of any transformation, but specially, in the digital transformation given the importance of business models disruption.

If the digital transformation does not include a business transformation, it is just a technical migration.

Business control needs to look beyond and behind the numbers and investments: capital assets allocation that reflects which assets supports the digital journey and which not, which new assets can be generated in the process of the transformation, i.e. residual IPRs that can increase the goodwill of the company, and how those new assets can be financially used to create room for further investments and solidity, new business models enabled by new technologies and processes, i.e. X as a Service, that leads to new Operating Cash Flow curves and working capital, etc…

You could argue that all this has already been done… True. Yet, the quick nature of the digital transformation creates new requirements for business control to rapidly act upon. Let me give you a few examples:

  1. Agile development: Costs and business benefits need to be rapidly quantified and aligned in order to continue through the industrialization process of alfa/beta models.
  2. Digital assets evaluation: The outcome of those implemented technologies can create (residual) assets. Those can have a significantly higher value than the costs incurred in its development or the value of the assignment for which they were designed. An algorithm generated to identify behavioural analysis in a group to identify members and their interests in marketing driven site, has far more value than for member mining. It could be licensed, sold, etc
  3. Enabling of new business models: If the digital transformation does not include a business transformation, it is just a technical migration. Business control needs to secure the business case of the digital transformation and its governance, fulfillment and adaptation to market and company conditions.
  4. Assets capital allocation: which assets will remain and which will need to be released after the digital transformation of the company, how and why. I.e. should we just kill our current bespoken billing system or sell it after the migration to the new high capacity and latency virtusalied one?

The role of finance and business control in the digital transformation is, in my view, under estimated. But a powerful one if developed.

I hope you enjoyed!

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