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Emerging technologies such as artificial intelligence, blockchain and robotics are transforming today’s companies but many board members and directors have little understanding on what the technologies are – much less how to navigate and lead effectively with them in mind.
A recent article from PwC’s Governance Insights Center outlines the “Essential Eight” technologies directors should be aware of and offers the imperatives board members must embrace in the face of these emerging trends.
FEI Daily spoke with Paula Loop, a leader for PwC’s Governance Insights Center about the steps directors and finance executives can take to tackle emerging technologies and become more involved in company strategy.
FEI Daily: How can financial executives support their boards in making strategic decisions around digital tech investment?
Paula Loop: The technology investment aspect should be incorporated into the whole strategy discussion. The role finance is going to play is the investment. The discussion about technology investments is going to continue and there's not going to be an end game. It's not going to be the kind of thing where you're going to make an investment of X amount of dollars and then it's going to be ‘one and done.’ Technology is changing so quickly. There's so much evolving that you need someone to monitor the investment and understand if you are getting the return on the investment that you wanted. Are you getting the return that you wanted? If you need additional investment, which direction are you going to go? What are the continuing monitoring controls that you're going to put in place around that investment?
That's why I think that the financial guides are going to really have to play a role, and in some cases, it's going to be a tradeoff. You can't invest in everything. What do you really want do and how are you going to get your best returns? And when you decide to make that investment, you really need to be paying attention to it and you need to have some real oversight of it.
FEI Daily: Are you hearing from financial executives that they struggle to prioritize when they look at all of these emerging technologies?
Loop: Yes, and that's why I say it's not going to be a one and done. In many of these instances, it's a bet. It's a part of a strategic plan and you think you need to have a big investment in this direction and you put out a dollar amount that you think is going to help you achieve it, and the return you're going to expect is either additional sales through better customer experience, or a better internal experience for your employees, or whatever you think you're going to try to get out of it.
Finance will not be driving the investment process. That's going to be run by the CIO. It's going to be run by an innovation officer or someone else within the organization. But finance is going to be the one that has to have the control around it, the monitoring around it. Finance is who they're going to come to when they need additional money to go to the second phase or the third phase.
FEI Daily: How has finance’s role in conversations around technology priorities changed over the last 5-10 years?
Loop: The pace of technological change is impacting the finance function – just as it is impacting every area of the business. Finance functions are implementing and adapting to new technologies that enable them to increase their effectiveness and efficiency.
We have seen how technology is helping finance functions automate and streamline their processes, and in some cases eliminate processes altogether. Companies are automating their reconciliation processes and the gap of time between closing the books to reporting the results is lessening. We see finance departments investing in ways to harmonize ERP systems and standardize data. This is a shift from the one-off system implementations that took up their time in the past. With common platforms, finance departments are continuing to have conversations on how to leverage new technologies, like the cloud, artificial intelligence, and blockchain, to improve data quality and controls.
Technology advancements will continue to shift how finance departments spend their time. They will continue to move away from data gathering to provide more analysis and insight of the data. Finance departments will look for ways that they can provide new services to the business and help manage the company’s broader technology priorities. And with that, we are witnessing more interaction between the finance department and others in the organization. Finance departments are working more closely with other company leaders, like the CIO, Chief Technology Officers, and business unit leaders. The function is transforming to be successful for the future. And, this is just the beginning as we continue to see greater technological advancements.
FEI Daily: What are the challenges board members typically face and what can they do to overcome them?
Loop: The average age of a director is 63 or 64-years-old, and some of them are no longer sitting in a full-time executive position, but are now retired from their full-time role and doing board work. So, the challenge is how do you relate and understand all these technologies and how do you stay on top of them? Because even if you start to get your head around them, they're changing and evolving as quickly as you're learning them.
The biggest thing is to understand which ones are critical to the company, to the sector, to the industry that you're talking about, staying close to those and then figuring out ways to stay smart. If it's continuing to be informed, podcasts, just paying attention to what's going on. I think even using some of the home devices, your own personal devices, and really trying to push yourself from a technology perspective to learn more can be helpful. Even in your car, the average person only uses a certain percentage of the capability of all the mechanics in your car. Try to push yourself a little bit to use more of those because even that could help give you an idea of how technology is changing.