Closing the innovation divide between business and finance with AI
Looking at data in new ways and contexts with innovative analytical tools has opened our eyes to fresh and exciting perspectives for thinking about economics.
For example, the use of gross domestic product (GDP) is now being questioned as a measure of a population’s well-being as that metric is examined in light of new data and the dynamics of a global economy. And the dreaded “inverted yield curve” that had economists in a panic early in 2019 didn’t translate into a recession as expected.
At a smaller scale, and with the right tools, data has the same potential to reveal fresh insights for individual organizations. Until recently, the vast amounts of information that companies generate and collect each day—known as big data—has been divided on two fronts: front office and back office.
Front office functions that contribute to an organization’s bottom line, such as product engineering, sales and marketing, get most of the attention. Meanwhile, back office functions are treated as operating in support of the business and are starved of the resources needed to advance innovation. This keeps companies from benefiting from the novel understanding revealed when data is analyzed through the lens of new tools powered by artificial intelligence.
While those insights are helping companies operate more efficiently and competitively, transformative innovation is typically biased toward product, services and strategy. Innovation has left essential back office roles behind, forcing teams to rely on traditional—often manual—processes to perform their jobs. Artificial intelligence is changing that dynamic, however.
This happens because back office data is frequently regarded as separate from the front office. The resulting stove-piping of functions is based on the flawed notion that data collected for finance and administration has nothing to offer in support of engineering, for example. Such strategic analysis also takes time and resources that are already at maximum capacity, engaged with traditional management systems that rely on manual processes.
It is unrealistic to ask the back office to take on additional data analysis under the best of circumstances with traditional tools. With AI, however, the CIO can ascend to a role that complements that of the CTO, functioning as an equal, using data as a catalyst for driving top-line revenue growth by taking full advantage of all of the data available to the enterprise, with tools that collect and analyze data in real time while supporting the automation of routine tasks. This has the advantage of mitigating risk in audit and other required processes by ensuring complete and accurate compliance.
Large, international organizations, for example, have to deal with multiple compliance regimes where tax, currency and legal frameworks change as money and data cross borders. Expertise in one region doesn’t translate; and even where outside accounting and audit support is in place to centralize reporting, transparency is often an issue because of the difficulty of collecting and delivering information.
One large, multinational aerospace firm we encountered revealed to us that, despite the company’s reputation as a technically adroit innovator, it still relied on mostly manual processes for many accounting practices related to control and compliance. Its talented and skilled staff were often relegated to time-consuming, menial functions in order to meet demanding deadlines.
The company found that, by adopting a financial management platform driven by advanced artificial intelligence, it was able to automate those tasks, saving time and minimizing audit and compliance risk because their data collection was now completely transparent and operating in real time. The data were complete, accurate, and on-time. And, what’s more, staff who’d previously been tied up with the old processes were now able to apply their talents to higher value, growth-focused activities.
That last point is important to introducing new tools into organizations, and especially those with strong work cultures. Too often, the (unfounded) fear of being innovated out of a job by technology can hinder progress. But with artificial intelligence, the threat is in failing to adapt and adopt to the inevitable.
When tools driven by powerful innovations like artificial intelligence are applied throughout the organization rather than in a narrow band of customer and public-facing functions, the effects can be transformative, effecting change within organizations by extracting previously undiscovered trends and insights that lead to new or improved operations, services, and business models.
CIOs that harness AI’s ability to unify the back-office and front office, democratize data and apply the resulting insights throughout the organization will earn the right to become an equal partner in the C-suite, having a hand in setting and implementing a new strategic direction supported and quantified by data.
In one large tech company, the creation of a behavioral index of expense related activities helped identify geographical regions and individual departments where inefficiencies persisted. By knowing specifically what needed to change, they were able to quickly generate six-figure savings by improving a single process.
Transformations and results like these are easily replicable with other back-office enterprise resource planning (ERP) systems related to human resources, sales, inventory management, customer resource management, and other business critical functions where there is a lot of data generated, but very little of that data is correlated and analyzed bidirectionally across business disciplines.
This is where the CIO-CTO partnership pays off. Gartner tracks twenty different ERP vendors, each operating with its own data model and, with the amount of data relegated within siloed legacy systems, there had been little opportunity for putting that data to work.
Today, AI is that opportunity, and visionary organizations, led by visionary CIOs working in tandem with the CTO, are already taking advantage of the technology to eliminate error, waste, and fraud from their back office, administrative processes while discovering new ways to generate operational efficiencies and support business growth.
Competition in 2020 and beyond means looking for ways to improve processes and efficiencies in every aspect of business. AI and data systems give CIOs the ability to catalyze data in ways that were not previously possible, apply the resulting insights in new ways, and open the door for innovation not only in products and services, but across all layers of the business, invigorating processes that have long been starved of the attention they deserve.
In order to rethink and reshape tradition, as well as to empower talented employees to achieve their potential, artificial intelligence must be the linchpin of a data-first approach for any forward-thinking, modern enterprise to close the innovation gap that persists between the front and back office.