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Episode 3: Digital Transformation Mistakes That Set You Up for Failure

Alex Jimenez Alex Jimenez

Managing Principal Consultant

Financial Services Consulting at EPAM

Madhurima Gupta Madhurima Gupta

Senior Product Marketing Manager

HighRadius

Available on

Synopsis:

In this episode, join Alex Jimenez, Managing Principal Consultant, Financial Services Consulting at EPAM, as he discusses the mistakes Mid-Market companies make when embarking on digital transformation and how CFOs can avoid these pitfalls.

Transcript:

Madhurima Gupta:
Hi, welcome to the Mid-Market CFO Circle podcast powered by RadiusOne by HighRadius. I’m your host, Madhurima Gupta. We hear you mid-market CFOs, and we understand your struggles. On this podcast, we provide conversations with your peers to help solve the challenges that you face at your office. It’s about 85% percent of AI-based digital transformation projects end up in failure according to Gartner, which is why today we are gonna talk about the digital transformations mistakes that can set you up for failure. And on that note, I’d like to introduce you to our guest on the show tonight, Alex Jimenez. Alex is a strategist, FinTech influencer, writer, and speaker. He’s, uh, the Chief Strategy Officer at Finalytics.ai and Extractable. He has over 28 years of experience in banking, much of it is in strategy. He’s been responsible for helping financial services companies define their digital transformation strategy and implement roadmaps, which is why, I think for this particular topic, there’s nobody better than Alex to guide you. Welcome to the Mid-Market CFO Circle, Alex.

Alex Jimenez:
Thank you for having me, um… Happy to be here.

Madhurima Gupta:
So, um, Alex, almost 70% of mid-market companies had a digital transformation roadmap for themselves, or either they were already working on one, but still, most companies were not far enough along to be able to not be impacted by COVID-19. So when CFOs are exploring options and making decisions to transform their finance function, how important is it for them to pick the right solution?

Alex Jimenez:
The problem is not picking the right solution, it’s uh, understanding what problem you’re trying to address. Uh, and, and that’s the issue that we see in, in all the functions, uh, throughout an organization. Uh, but we see organizations saying, we want to pivot, we wanna change our business model, we wanna be a digital-enabled organization, but they don’t know why they’re doing it. Uh, or if they, if they know why they’re very, uh, vague about what it is they want to accomplish. They want to be modern. They want to uh.., they want to have cost savings. They want to be where their clients are. And, and that’s, as far as it goes. And generally what we see is organizations then go on trying to look for solutions, uh, and there are solutions to some problems, but they’re not well defined.So uh, I think the organizations need to take a step back and figure out what are the issues, what are the problems that they want to address before they start jumping onto a solution. It, it, we’re looking at it backwards. We’re looking at, we’re all excited about the technology. Uh, we have vendors coming to us and showing us technology that does all, all sorts of great things, but are they addressing the issues we have or not? And that, that to me is the biggest, uh, disconnect, uh, and why a lot of digital transformations programs don’t achieve what they set out to do.

Madhurima Gupta:
You mentioned going backwards, Alex. So, um, you know, if, while people are choosing a solution, right? it becomes really important to map the current processes to actually required process needs,right? Um, but a lot of companies don’t end up doing that. How can this complicate the expected results from processes being transformed?

Alex Jimenez:
Well, if you don’t know what your process is, and you don’t know what bottlenecks you have and what issues you have in your process and what issues your team is having, then just buying another set uh,uh another solution that you’re going to implement, uh, without a thoughtful plan, uh, then it’s, it’s a recipe for disaster. So really you need to understand the process, you know, and really, you need to understand the outcome that you’re going after your outcome is well defined. Then you could just ignore the process and put a new solution because the solution will bring, you, give you a new process, but the outcome has to be well defined. And not just to say, this is, you know, we, we want cost savings X, Y, Z, but why do you want the cost savings? uh, what it is, what is it that you want to beyond that? What are the actual true goals? Uh, and, what the targets are, the timing, what metrics you have, what, uh, KPIs you have all of that you need to define well before you start looking for solutions.

Madhurima Gupta:
And how important it is to course correct and look at how your digital transformation choices are faring you. Right? So, uh, when people implement a particular solution, there are times that we hear from our customers at HighRadius that are proven or chosen, uh, strategy that might have worked for another peer of them did not work for them. Right? So, um, while companies are digitally transforming their finance functions, uh, would you say it is important to evaluate strategy at every step, uh, while you probably choose a vendor or build solutions in house?

Alex Jimenez:
Yes, absolutely. And, and not just, uh, at every step at every function. So while, while a CFO may be focused on the, on the, uh, finance area, you also gotta make sure that whatever it is that you are trying to implement and improve, it’s not going to result in issues elsewhere. Uh, so, digital transformation is not a project that you take on for a specific function. It should be something that you take on for the full organization. And it should start with looking at the strategy, you of the organization in general, start looking at what the business model is going to be for the organization, and then define what are the different changes that need to be made in all the functions. It should, it should not just be in the vacuum of saying the CFO is saying, okay, I need to, to transform my function while everybody else hasn’t transformed theirs, just as, you know, a CMO should be saying the same thing in the marketing team or, or a COO, or, you know, it should be the whole organization working tandem to move towards a digitally-enabled, uh, future. And a lot, lot of what we talk, we’re talking about has to do with data and has to do with how we use data.And if we don’t tackle data at the macro level, and to understand where we’re going, we’re not gonna be able to, to define solutions that are gonna help us at the micro level for a specific function. So if you’re, if you’re, you don’t transform your GL period, you gotta transform all the feeds that go into your GL. You gotta transform all the data that goes in it, and that,that’s a tool to help you transform your organization throughout. So it can’t just be, I’m going to, to transform my function. And I don’t care about the rest. It has to be in tandem with everybody else. And it has to be something that’s driven by, by the, the CEO on the board of the organization. It can’t just be one person doing it, one executive doing it at a time because, uh, that, that, that’s when you’re, when you fail, because you might have all these great functionality built in your, in your, your solutions, but you still are relying with, uh, in, in other functions. And the other functions are still doing processes in, in a, in a more analog way then you’re gonna have a problem.

Madhurima Gupta:
Interesting that you mentioned, uh, data there, right? So in our experience, uh, one of the main blockers from mid market CFO offices to adopt digital transformation, or, uh, you know, RPAs, artificial intelligence, all the technology, right,is data insufficiency, right? So what they generally come back saying is, Hey, we’d like to get started, but we are uh limited,little limited on data. So we’d not want to probably use machine learning AI-based solution as of now, because I don’t think that the, you know, the algorithm can be trained on the data that you already have available. So for such CFOs, would you say that is the right strategy, or would you rather have them implement the solutions and let the solutions learn over time?

Alex Jimenez:
It, it really depends again, on what it is that they’re trying to solve. In some, some organizations, it might be better to, uh, clean up your data and make sure your data is available and so on before you start implementing. In other, organizations, different, uh, set of, of requirements that you might, you might go the other way. So it’s hard to say that one approach is better than the other. But I would say that if a CFO is asking you, I don’t have data than we have a big, much bigger problem, because that’s all, that’s all the job is about. It’s all about what it is that you’re doing with the data.It just happens that the data has, uh, currency attached to it. Right? So,if, if you are not able to get to your data, the, the problem is not, do we need to transform digitally,the problem is you gotta clean that up. Uh, you, you, you gotta get a hold of that data. I see a lot of organizations, particularly the smaller organizations rely on their vendors to, uh, give them data. And a lot of times they are beholden to those vendors. That’s not a situation that you wanna be caught in. You wanna be able to have the data, uh, that is your data that you have access to it. Uh, even if it resides within a vendor, uh, you should be able, uh, to address it, you should be able to get, get a hold of it. And a lot of what I see, particularly in organizations like, uh, you know, the finance, uh, department, is that we are not understanding how we can use data better, how we can use data to, to manage an organization, uh, and look forward.So when we start talking about AI and machine learning, and so on is not just the, the, the application of, of the technology, but it’s also thinking about a different way of using data, uh, to make decisions. So, you know, generally you look at what happened in the last quarter, what happened in the last year, uh, and, and you make decisions based on what you think is going to happen. And, and generally, you know, in the past and the legacy, uh, structures that is done more of by, uh, the experience of the team saying, okay, we think that we’re go, there’s gonna be an increase, uh, of this profits here, and we’re gonna have more, more expenses here. Uh, we’re gonna have losses here. And then, you know, we are going to forecast this, uh, results, uh, But with machine learning and AI, you actually have data that can bring much more sophisticated models of the things that we build today into Excel spreadsheets, uh, that we, that we call models.So, we can do a lot of what if scenarios that we can look at, uh, more, uh, scenarios that can show us the, the different possibilities out there. And therefore, we, we need to have, have good data to be able to, to have some predictive models that will, will give us, uh, better solutions and better, uh, decisions. Uh, and that’s not the way we have tackled it. We’ve tackled it, uh, more of, you know, what happened in the last quarter. We think it’s gonna continue, and therefore we’re gonna make this decision. Well, gee, you know, there might be some reasons why there’s gonna be a change, uh, that the machine learning can show you and, and then you can make a different decision. Of course, it all depends on your, on your, on, on the environment, though. It all depends on the marketplace, etc. Uh, but the more data you have, uh, the better the data it is, and the better that we can use it, the better you can make decisions.

Madhurima Gupta:
The other question that I have with you is in terms of the, um, the elongatedness or the spread in which a digital transformation roadmap should be implemented, right? So, uh, there is a possibility that when you select, or you choose a path to digital transformation, you choose to build solutions in house, right? Or you choose to go with solutions that are available off the shelf, right? So there are so many SaaS softwares that one can use and benefit from, right? So generally when companies build solutions in house, at a particular point, it just gets too difficult to manage, right? Because you build teams, you have to make sure that all the systems talk to each other properly, and this particular thing eventually becomes, uh, really entangled and it doesn’t help, CFO offices to function efficient. Right. So what would you recommend to be the right digital transformation roadmap that CFO offices should take? Should they opt for, uh, you know, building solutions in house, or would you recommend that they should go with commercial of the shelf software available in the market?

Alex Jimenez:
It depends. Uh, it really depends. You really need to look at your organizations and see where your capabilities are, where are your core competencies, right. If, if you have a, uh, a good IT team that is, uh, has a good DevOps team, uh, and, and can deliver something, uh, quickly and at scale, uh, then yes, you know, bringing the development in, uh, if you don’t then, you know, really think more than twice on, on trying to develop on your own. Uh, the, I, I, I continually see organizations in all kinds of different business in, in different, in different industries saying, you know, we are not a health insurance company. We are a tech company, or we are, uh, we are not a bank. We are a tech company. Uh, we are a, uh, retailer. We are not a retailer. We are a tech company.
Well, everybody wants to be a tech company, but the reality is that only tech companies or tech companies, right. Your organization, needs to focus on what you do well. Uh, and, you know, I’m in the banking space where I said, uh, a few years ago, uh, the CEO of the BBVA in Spain, uh, said we are no longer a bank where, uh, we are a technology company. Uh, and that to me is an, it was an important thing for him to say, to drive the importance of technology throughout the organization. The problem that I have with that approach is that then you forget what it is that you’re doing there, what it is that somebody hires you to do, right? Uh, a customer doesn’t hire a bank for their technology. A customer hires a bank for, banking, products, and services.
Uh, so to, to start thinking, well, my organization is a technology organization, uh, when that is not the end goal of the organization is a mistake. So, you know, I, I, I, I talk to small organizations that have a small IT team that, uh, majority of what they do is break fix. You know, they make sure that everybody’s computers on their desktops work and that the, the, the systems that they use are integrated, uh, appropriately, and they have a good vendor management program, and they have a good security program. Um, but they don’t have a development team. To say,we are a technology organization, we’re a technology, uh, organization does not make any sense when your own technology team is fairly small and would not be able to build something. Uh, so that’s when you need to look at vendors and you need to look at vendors that have the same goals that you have that share the same, thinking about where the industry’s going, that understand your industry well, and that can deliver you appropriate solutions for the problems you have.And certainly if you’re looking at the, at the CFO, uh, organization, um, uh, there are plenty of vendors that are very focused in finance organizations and can give all, all sorts of great tools. Uh, but you need to understand that it’s not really just buying stuff from someone you really are partnering with them because not only are, are you getting the service and the technology that you, that you want from them, but you should also have a way to drive their roadmap and drive where they’re going. You should be, they should be the kind of organization that listens to you when you say, okay, we have this problem. We’re using your tool. The tool’s not working for us. How can we solve it? And let’s work together to solve it. Uh, those are the organizations you need to partner with. You can’t be partnering with an organization that will won’t return your calls, uh, uh, that won’t have good customer service that will not, uh, help you, uh, uh, solve the problems that you have. So, uh, for small organizations, unless you’re in that technology business, you’re more likely gonna be buying technology, but you have to jump in with both feet with your eyes wide open understanding what it is that you’re buying. And it can’t just be, you know, uh, everybody in our industry uses this technology. So we also gotta do it.

Madhurima Gupta:
Absolutely. That’s really fair advice. Um, Alex, just one last question, before we wrap up this session, um, you know, I wanted to understand that if there were three things that, or three steps you’d want CFOs to follow to ensure that digital transformation roadmap that is set up for the, for the CFO function, doesn’t break, and what would these three steps be?

Alex Jimenez:
One, making sure that this alignment within the organization for a transformation that is not just for your function, but for the full organization. Uh, so, uh, you know, I can, I can think of many, many examples where a, uh, an executive said we are going to make a big change, and then, uh, it, it never happened because they didn’t have this support of the rest of the organization. So you have to have that. Uh, secondly, you need to understand what your objective is, how you’re doing digital transformation. Cause all the kids, all the cool kids are doing it, right? Uh, that, that’s not what you, why you should be doing it. You should be doing it, uh, because, uh, you have some big problems. Uh, the speed of change in the industry is accelerating. And you need to keep up and you are not able to keep, keep up, uh, you know, those sort of problems are the problems that should be driving your, uh, digital, uh, transformation. And, thirdly, as I said before, then once you’ve understood what the outcomes are and, and you have alignment, then you need to find the best way to do it. And like I said, for small organizations, mid-market organizations, generally, we’re talking about finding vendors that share your philosophy, share your goals, and are gonna be there to help you get there.

Madhurima Gupta:
I think that’s the best advice that I can get for our community today,coming from you,Alex. So thank you much for your time, we really appreciate it. And for our listeners out there, stay tuned,we’ll be back with more.

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