Professional services firms are increasingly using digital transformation to support their clients more effectively, reduce costs and prepare for volatility and uncertainty.
The CFOs at law firms, accountancy practices and others in this sector are very much the driving force of this revolution.
In order to move from a role of historian, looking back at financial information in order to produce annual reports and accounts and other statements, CFOs who want to become visionaries, capable of developing the business strategy and shaping the future of the firm, need to ensure they own the digital transformation process.
According to recent research by Sage as part of its CFO 3.0: Digital transformation beyond financial management report, almost all of those asked (94%) of financial decision makers report that their role has expanded over the past five years and is no longer just about fiscal responsibility.
Meanwhile, to just over half of those surveyed (51%), thinking of new ways to help the business with financial matters is the most challenging aspect of their job.
Read this article for four key reasons why your professional services firm should start a program of digital transformation.
1. Say goodbye to manual processes
The explosion of new technologies – including cloud computing, big data, machine learning and artificial intelligence (AI) – means your staff no longer have to spend time on routine, repetitive and predictable tasks.
Instead, they can focus on those elements of their role that technology can’t handle – interpersonal relationships with colleagues as well as developing the firm’s strategy and vision.
“The time to be complacent about this mission critical area is long over,” says David Brennan, co-chair of Global Tech at international law firm Gowling WLG. “Endorsement at board level and financial commitment is essential to enable a genuine commitment to digital transformation.
“‘Buy in’ to the adoption of business critical technologies and preventative processes is now an essential survival tactic from both a competitive and protective point of view.
“In addition, the correct allocation of digital resources needs to sit within a stringent and robust financial framework to avoid parts of an operation being left unserviced and unaligned with the whole.”
The CFO 3.0 challenge
Take the CFO 3.0 challenge to reveal the key findings from our research and discover if you can truly call yourself a visionary.
2. Data can be used to generate insights that benefit the firm and clients
Led by their CFOs, embracing big data and AI means law firms, accountancy practices and other professional services firms can know more about their clients and the markets in which they operate.
This enables them to provide better business advice, adding extra value to the professional services that they offer their clients and repositioning them as business consultants in addition to their role as accountants or lawyers.
According to Becky Mackarel, professional services and buy-side consultant at Odgers Interim, the UK’s largest interim executive headhunter, the CFO of a professional services firm can pre-empt disruptive competition.
They can also create an ecosystem where human expertise – and the services they deliver – is enhanced with digital capabilities that produces for the firm a significant competitive advantage.
“As with all digital transformations, the impetus for change needs to be an organization-wide endeavor that is driven from the top,” she says.
“It’s not just about choosing the technology and implementing it. CFOs need to consider the cultural impact across the business and how it will change the way employees work, the future skills that may be needed and how roles and responsibilities will change.”
Mackarel adds: “CFOs need a communications strategy that conveys why the transformation is being carried out, how it will impact individual roles and the major milestones anticipated in the transformation journey.
“CFOs also need to ensure their peers in the senior leadership team are prepared to go on the transformation journey – these are not individuals who regularly go through change so the CFO needs to enlist their fellow C-suite members to champion the change programme throughout their various functions and across the business.”
Bots can now analyze data, build and test models and make recommendations to you and other decision-makers within the business. Professional services firms are constantly trying to balance talent and available capacity with clients’ demands and workloads.
The data produced by digital transformation can help with more accurate predictions here.
3. Improve company agility
Meanwhile, the ability to tap into on-demand support from cloud-based technology as and when it’s needed means that as a CFO, you and other business leaders can become agile.
Just as you’re more likely to be using a hybrid model of on-premise and cloud-based IT solutions, you can also move towards a hybrid model of using employees and contingent workers.
In other words, professional services firms can staff up or down as dictated by client demands more quickly and easily than ever before.
Increasingly, your clients and those of other professional services firms expect to access information anytime and anywhere, either through technology or contact with their lawyers and accountants.
Online forms and bots can provide information for clients and all them to complete simple tasks in a way that once required the presence of human being.
4. Become more specialist and add more value
As the CFO, you need to think about how you’re going to work with colleagues to provide an ‘always-on’, automated access to expertise, advice and solutions for clients.
How will this be charged for? By subscription or on a pay-as-you-go basis? Finance teams also need to consider how they’ll ensure that the people within the firm who are providing the services are paid.
You can replace the traditional fee and billing structure based primarily on the time spent working for a client to a more accurate and nuanced version that is based on outcomes and the tangible benefits to those clients.
According to a recent survey by the Economist Intelligence Unit, 82% of respondents said that in five years, specialized service providers will be more valuable to their business than those with broad offerings.
CFOs can use digitization to help their firms to become more specialist in particular areas, providing a range of different niche expert advice.
Digital transformation is often driven in professional services firms by these changes in client behavior and expectations, as well as by internal factors such as the need to reduce costs, increase speed and engage with clients, explains Gianvito Lanzolla, professor of strategy and head of the faculty of management at the City Business School.
There are two distinct outcomes, according to Professor Lanzolla’s research. “Firms either use digital transformation to become more specialist and focused in their legacy fields or to become a provider of a broader range of services which address broader client needs,” he says.
The focused approach allows them to lead through innovation, the latter enables them to expand their businesses. Either way, digital transformation is not a strategy that can be deferred, it is a must.
Beware of organizational tensions
“However, besides the strategic challenges, digital transformation creates several organizational tensions and so it has to be managed well,” says Professor Lanzolla.
“For instance, new organizational fault lines emerge between new hires, which bring digital skills to the organization, and the traditional lawyers and accountants.
“The risk is sometimes one of fragmentation, where there’s a lack of unity of vision around the changes that are taking place and, most importantly, their goals. It’s a question of leadership, of changing the DNA of the firm.”
Communication is essential to change the organizational DNA, according to Professor Lanzolla’s experience with firms, and technology might sometimes help in the form of social media. Incentives are also important.
He says: “Everyone needs to be incentivized for success in the same way so that digital transformation benefits all employees. Lawyers need to share the same incentives as those driving digitization.
“As such, the identification of such joint incentive schemes becomes of strategic importance.”
Unlike other change management programmes with digital transformation, the successful business model is unlikely to be known at the outset. “You know that the future will be different but you don’t necessarily know how it will be different,” explains Professor Lanzolla.
“You need to take people on this journey and that involves making it easier to experiment with new ways to deliver results. That also means more being tolerant of failure and understanding that it’s often essential ingredient for success.”
Conclusion on professional services firms adopting digital transformation
Traditional law firms have been challenged by disruptors such as Elevate, Conduit Law and Lawyers on Demand who are adopting new business models to service clients in a more agile, cost effective way.
Architects, accountants and engineers are beginning to face similar challenges, thanks to new technology and smaller, more agile, specialist startups.
As the CFO of a professional services firm, you have the opportunity to use digital transformation to do more than simply fend off these challengers and to reduce costs.
You can enable your colleagues to provide a more responsive, holistic and bespoke service to your clients, engaging with them and meeting their needs more effectively.
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