The UK elected a new government in July, and expectations are high that we will see significant economic reforms. The need to increase productivity across the economy is one of the top items in the new administration’s in-tray. There is undoubtedly a lot of work to be done in this space, but the evidence shows that finance teams are already leading the way. AICPA & CIMA UK and Ireland vice-president Paul Turner writes

Our profession has been remarkably successful in driving internal efficiency. Research by McKinsey found that during the last decade, finance departments reduced costs by almost 30% and that this trend is continuing today.

Of course, this is to be expected. A core competency of our profession is making sure the organisations we serve are using their resources in the most efficient manner possible, so you would expect us to lead by example.

The reason we hunt for efficiency is very simple: to gain competitive advantage. But as we all know, while keeping costs under control is vitally important, it is only one half of the productivity equation. You can also make gains by investing in better ways of doing things. What is exciting about the period we are living through is that entirely new possibilities are opening up for the first time, in the form of the new digital technologies that are transforming the economies we operate in.

I am sure some of you are sceptical at this point. We all know that digital adoption is not an easy task. There are many pitfalls associated with adopting leading edge technologies, and nobody will get it 100% right. This means there is a temptation to hold back and wait to see how other people do it before diving in. It is my contention that doing so would be a serious mistake.

Agile Finance Unleashed

A few years back, AICPA & CIMA published a significant piece of research we conducted with Oracle called Agile Finance Unleashed. It surveyed senior finance leaders about how far along their digital adoption journey they were. It found that there were a small number of what it termed “digital finance leaders” whose organisations were at the leading edge of technological innovation. These were the ones who had worked hard to do things like re-engineer legacy finance processes to drive efficiency.

The key research finding was that “there is a strong correlation between organisational strength and finance agility. The more successful the organisation, the more likely it is to have invested in the finance skills that support new, digital business models.” In other words, investing in digitisation resulted in the organisation gaining competitive advantage. For me, this is the absolutely crucial lesson for today.

Just look at what is happening with artificial intelligence. It is the most obvious source of productivity gains in today’s market. This is not just speculation; PwC’s 2024 Jobs Barometer Report found that sectors which are exposed to the technology are experiencing 4.8 times higher labour productivity growth than non-exposed sectors. That level of potential competitive advantage is just too significant to ignore. The reality is that if you do not try to tap into it, your competitors will.

Not everybody learns this. The AICPA & CIMA and Oracle research found that most finance leaders did not fall into the digital finance leader category. While there are genuine reasons for being wary of new technology, the research found that the laggards were concerned about being left behind by the leaders. That is not a good place to be.

This fear will become acute for many organisations over the course of the next few years. Think about all the business models which have been rendered obsolete by streaming and social media in recent years. These technologies didn’t directly impact our profession. Things like generative AI will, and we all need to be ready for it. That means more than just investing in the technology. It means a commitment to upskilling and understanding the data security implications that come with it and managing a whole new set of risks.

On the whole, based on the conversations I have with CIMA members, I am confident that our profession will successfully adapt to the new digital age. Doing so will require all of us to learn new skills and ways of thinking. We need to do this now because historically, when economic change comes it happens surprisingly quickly, and it can be brutal for those who are left behind.