A strategy for creating the finance function of 2035
Anders Liu-Lindberg
Leading advisor to senior Finance and FP&A leaders on creating impact through business partnering | Interim | VP Finance | Business Finance
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Think “AI first” to realize the people potential of your finance function. This is the vision that we defined for the finance function in 2035. This week, we try to get more concrete by outlining a strategy to create the finance function ten years from now. We will use Roger Martin’s “Playing to Win” strategy framework. The strategy we outline will be somewhat generic, yet we will try to make it as practically applicable as possible. In the coming weeks, we will deep-dive into the different aspects of the finance function to describe how we see them in 2035.
We undertake this work knowing that most strategies fail to deliver the intended impact. Zooming in on the finance function is even more challenging as the tenure of CFOs today is among the shortest in the C-suite. That means most CFOs don’t get to see their strategy through. Hence, when making a strategy for a finance function looking ten years ahead, it’s guaranteed that nine out of ten CFOs at least won’t get to see it through.
That’s not necessarily our intention, either. Instead, we want to inspire present CFOs to take the first steps toward 2035 and seed the ground for their successors. We also want to help senior finance leaders prepare for future CFO roles by informing them of the building blocks they need today to be well-equipped for such roles. This should help everyone build a more concrete roadmap for themselves and their finance functions in the future.
Your 2035 finance strategy
Let’s briefly remind you about the components of Roger Martin’s strategy framework. It has five core elements:
Let’s outline each element to form a strategy for the finance function 2035.
Winning aspiration
An example of a winning aspiration could be:
“We will run our finance function on artificial intelligence but drive and execute decision-making through human intelligence.”
The winning aspiration is the next step of the vision; hence, it should make it more concrete and lend itself to measurable elements. Here are some suggestions as to how we can measure these bold intended outcomes.
These can easily be measured, and you can set bold targets to drive the change and transformation. You can even create a baseline as of today and chart your path to the future.
Where to play
As we described in our article last week, the definition of the finance function hasn’t changed. Hence, we’re not choosing what a finance function should be and where it should be involved. Instead, we should decide where AI will play and where humans will play.
We propose splitting the finance function into three parts to structure these choices.
Operational Finance
The goal is to ensure operational finance is nearly 100% run by artificial intelligence by 2035. It’s as simple as that. However, exception handling and oversight of process performance likely require human intervention.
Therefore, humans are still needed in operational finance, but these will be highly specialized process experts with deep technology insights. They’re not there to continuously execute exceptions but rather to identify root causes of errors and issues and fix them so that artificial intelligence can meet its 100% target.
Specialized Finance
These teams will be augmented with artificial intelligence, removing mundane data and related tasks from their scope. They will primarily be responsible for policy deployment within their domain areas and work with the process experts to implement these into the AI workforce.
They will also advise top management and the board on all strategic decisions and leverage artificial intelligence to deliver timely and relevant insights.
Business Finance
These teams are close to all relevant decision-makers, who will take co-ownership in delivering their targets and ambitions. They’ll be enabled by a central AI-driven center of excellence with data, analysis, and reporting capabilities to provide them and their stakeholders with relevant insights.
This means the roles move away from analysis and reporting to interpreting the latest intel about internal and external changes in the company. This is being done to discuss how to address them and improve performance.
The main KPIs to measure the where-to-play choices will be AI enablement, the percentage age of AI, and time-to-insight.
How to win
We could start by asking, “How can the finance function remain relevant in the future?” Almost everything related to compliance and control will be done by artificial intelligence. There’s only one viable answer: improving decisions and performance.
The starting point is high-quality data, which means setting high standards for Operational Finance.
Second, it means building a central intelligence engine that can deliver clearer, faster, and richer insights, as described by McKinsey in their 2030 vision. It must be central, as humans can’t make this processing power available locally. Using Generative AI, local business finance teams or individuals can query company data for insights into current business challenges and discuss them with their stakeholders.
Finally, it means taking charge of the company’s strategic agenda to drive the right strategic choices. This may be the most challenging part; however, AI should be able to analyze the external context and internal capabilities to derive the best options.
The main KPIs to measure how-to-win choices will be stakeholder satisfaction and overall company performance.
Capabilities
A simple way to split these would be into AI and human capabilities. Regarding AI capabilities, companies would need to make a strategic choice between building them internally or outsourcing them. Realistically speaking, only the largest companies could build these in-house when speaking of the central intelligence engine. In contrast, most companies would have to rely on systems with most of the capabilities inbuilt.
On the human side, we have frequently reviewed some of the needed capabilities in this newsletter so that we won’t dive too deep into them. Instead, we will refer to the list of skills highlighted last week, i.e., the top 10 in demand in 2035. These are all critical for finance professionals to develop technology skills, which depend on your choice of AI capabilities.
Management system
We have outlined five simple KPIs, and behind each, you must establish different initiatives to achieve your ambitions. Each initiative requires support and tracking, but you should also establish overall tracking of the five KPIs. Most KPIs can be measured monthly or more frequently if needed, whereas stakeholder satisfaction could be a quarterly follow-up.
Depending on your company's size, you may need a central finance transformation office to drive the strategy rollout and tracking. You must also solicit feedback from teams and individuals working in the various parts of the finance function. Their insights are critical to understanding strategic progress and what needs to change to increase strategic effectiveness.
A winning strategy
Strategy is about winning. Although we highly recommend benchmarking regularly, it’s difficult to say if your finance function is winning against other finance functions. You can tell if you’re winning by setting ambitious targets for the five KPIs we have outlined and tracking positive progress.
As we said in the beginning, we know most strategies (also for the finance function) fail to deliver the intended impact. How can you avoid this when creating the finance function for 2035?
The simple answer is to ensure that the strategy doesn’t hinge on a few individuals, i.e., a CFO and some senior finance leaders. To avoid this, you need a vigorous strategy cascade supporting teams at all levels to choose where to play and how to win. This will create a much better anchoring of the strategy.
In addition, you should make the strategic progress tracking available to everyone and use every chance you get to talk about why the strategy is essential and how you’re progressing. Moreover, you must ensure sufficient resources, i.e., funding, people, etc., are available to execute the strategy. The point is to gather as much momentum for the strategy as possible to ensure it can withstand a few executives leaving here and there.
We’ve said it before and will repeat it. It’s an exciting time to be in the finance function. Today's AI capabilities are much more advanced than those a decade ago. If history is any prediction, it’ll be wild to imagine the capabilities available to use a decade from now. That’s why you might as well start operationalizing the vision of “Think AI-first to realize the people potential”.
Do you have a strategy for your finance function? What role does artificial intelligence play in that strategy? And what are you doing to ensure the strategy will be a success? Join the discussion below.
This was the third article in our new series, "Finance 2035 - what Finance will look like a decade from now". Find the previous one(s) below. Remember to subscribe to be notified when we publish future articles.
You can catch our previous series, "Hacking the Annual Wheel in Finance." below.
If you want more trends in finance and accounting, you can read our previous series, "The Top 10 Priorities for CFOs in 2024." This series explored what critical issues CFOs should focus on in 2024.
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Anders Liu-Lindberg is the co-founder and a partner at Business Partnering Institute and the owner of the largest group dedicated to Finance Business Partnering on LinkedIn, which has more than 12,000 members. I have ten years of experience as a business partner at the global transport and logistics company Maersk. I am the co-author of the book “Create Value as a Finance Business Partner”, a long-time Finance Blogger, a LinkedIn Learning instructor, and a Top Voice on LinkedIn with 350,000+ followers.
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2moExcited to see how finance teams can adapt! Let’s evolve.
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2moFantastic vision for the future. Inspiring strategy, Anders!
I help individuals and teams know how to use accounting & finance information to make and evaluate strategic decisions | LinkedIn Learning Instructor | FP&A, Financial Acumen & Leadership Coach & Consultant | Professor
2moI like the split of AI and human capabilities. Educating for the crossover between the two seems important.
Chartered Accountant AIR- 42, Sharing insights on Cost Optimization, Financial Planning & Analysis, Data Analysis, Process Reengineering and Digitization Trends in Banking, Ex-ICICI
2moThanks for sharing the insightful read
OK Boštjan Dolinšek