The advance of digitalization in virtually all economic and social areas is forcing companies to rethink their controlling practices. The objective: To ensure the economic success of companies over the long term.
Big data, real-time availability of data, predictive analytics, and automated decision models based on artificial intelligence are much more than just the latest buzzwords or short-lived hypes. New technical capabilities in the wake of digitalization are fundamentally and permanently changing the face of business control.
Digital controlling vs. controlling in digitalization
Many things have been written about “digital or digitalized controlling” even though this is actually a misnomer that creates misunderstandings. When talking about digitalization in a controlling context, the core message is a fundamental realignment of controlling activities rather than the use of new technologies alone. And even though these are the enablers and drivers of the transformation, digitalization means that much more to controlling practices. In order to continue to successfully exercise business control, companies have to systematically transform their controlling and take it to the next level.
A shift of paradigm in controlling
The success factors in business controlling have changed.
Processes, contents, methods, organizational structures, and roles have to be reconsidered and critically reviewed.
- Creating value from data vs. collecting data
Being able to create value from data means being able to sift through an abundance of information, extracting only the information relevant to controlling purposes, and to then analyze it, translate it into recommendations, and simulate the potential impacts. This is now the key to success.
- Focusing on the future rather than analyzing the past
All finance & controlling activities should be systematically aligned with the future. The past is only relevant with regard to its implications for future developments.
- A firm focus on actions and measures rather than documentation
An analysis should always produce actionable recommendations and action plans. This also entails defining the corresponding responsibilities, setting milestones, and tracking the implementation to always be able to take any necessary corrective measures.
- Integrated planning & forecasting rather than isolated Excel exercises
A forecast includes a current snapshot that should predict a company’s future development based on the information that is available at that time. It is not just a mere extrapolation of past business development that is devoid of substance. The task is not to replace planning with forecasting, but rather to close the gap between plans and forecasts. New opportunities to simulate scenarios while incorporating external data sources are providing invaluable support in coming to informed decisions. What’s more, current requirements will also increase the frequency of control cycles.
- Speed vs. accuracy
The speed at which decisions have to be made is ever increasing and frequently the speed at which decisions are made is a crucial success factor. Often, incomplete information has to suffice to make the right decision and you shouldn’t waste any time on unnecessary analyses and mock accuracy. This, however, is in no way intended to mean that there is any way around 100% accuracy in accounting.
- Agility rather than reaction
Controllers require a deep understanding of the business and very often need to act on their own initiative to adapt to current and future requirements ahead of time. Controllers should always be one step ahead of business executives.
- Flexibility vs. stability
The share of defined standard reports will continue to be reduced in favor of more flexible ad-hoc reports. Business conditions are constantly changing and controllers need the flexibility to quickly make any necessary adjustments.
- Be bold, not safe
In the future, controllers will need the courage to make their own decisions without hiding behind figures and numbers. Data should be made available in a mostly automated fashion. It is not about making “calculations”, but about interpreting and analyzing data with a firm eye on the future.
Conclusion: The role and self-image of controllers need to evolve
Digitalization presents many opportunities to improve controlling practices. To tap into these opportunities while reflecting on the risks involved, however, the contents, processes, organizational structures, and system environments used in controlling will need to evolve and sometimes even undergo fundamental changes.
This process starts out with people and their willingness to embrace these necessary changes. Companies need to create the necessary conditions to enable and promote this process of change. There is no clearly defined “right” or “wrong”. It is important, however, not to lose any more time and to get started “now”, allowing for mistakes and learning from them.
This post is also available in: German