Moving from digitisation to digital transformation
Like it or not, we’re all living and working in a digital world, with the digitisation of even the most mundane of tasks happening on a daily basis. This increasing need to digitise is definitely not lost on the charity sector, with the UK Charity Digital Code of Practice aiming to not only increase the uptake of digital activity but improve digital skills as well.
The gradual adoption and implementation of digital technologies over the past 40 years has meant that almost all charities have at least some digital functionality within their organisation - usually within the finance department - increasing efficiencies and keeping pace with the digital environment in which we all find ourselves.
The digital journey shouldn’t stop there though, with the much discussed concept of “digital transformation” the vital next step for charities of all shapes, sizes and scopes.
What is digital transformation?
Digitisation is the application of technology to existing processes, using tools to automate and improve ways of working. Digital transformation, however, involves adapting the entire organisation, transforming processes, procedures, skill sets, organisational culture and business models to optimise the opportunities that digital technologies can bring.
In short, digital transformation means moving from one way of working to another, adapting the inherent culture of a charity and the way the charity operates to best work alongside new technology, as opposed to trying to shoehorn new technology into an inflexible organisational set-up. As such, to be successful, digital transformation requires the buy-in of the entire charity, with the finance function very well placed to lead from the front.
Finance leading the way
For a long time finance was regarded as merely a back office function. However, the last couple of years in particular have seen forward thinking charities recognise finance’s importance as more of a strategic business partner.
In order to lay the foundations for wider organisational digital transformation, a charity’s finance function needs the ability to report on a broader set of activities, carrying out more dynamic reporting and analysis, and using the resulting data to spot trends and outcomes. With the pressure on charities to demonstrate greater transparency of activities and financial performance, with increased reporting and scrutiny the order of the day, the finance function is well placed to provide charities with the necessary levels of both oversight and insight.
For many finance professionals operating within the charity sector, the frustrating thing is trying to convince the rest of the organisation to follow where finance can lead, with recent research revealing that 86% of those finance professionals questioned acknowledging the need to increase the speed of digital change. It’s here that the finance team can take on an educational role, extolling the benefits of digital transformation and leading where the rest of the charity can follow.
Benefits of digital transformation
For a sector where the need to strengthen relationships with stakeholders and donors has never been more pressing, the ability to provide a holistic view of the charity in combination with in-depth and in-context business analysis is key. When you also consider that research from only last year found that that more digitally mature charities are twice as likely to see an increase in donations, then the case for digitally transforming a charity just builds and builds.
Impact reporting, which, let’s not forget, started out with the finance function, can be taken to the next level via digital means. Spreadsheets and traditional financial skills aren’t enough to produce in-depth actionable insight, but with the right systems in combination with the right approach, a digitally transformed finance department can release a charity’s full potential, providing the insight needed to underpin robust, reliable and transparent decision-making across the board for the ultimate impact.
When it comes to sustainability, those charities which embrace digital transformation will steal a march on the competition, for whom a reliance on analogue processes and procedures will mean that the scaling up of operations is a difficult and costly task.
Digital working not only allows for affordable and straightforward scalability but also new levels of agility, levels which simply can’t be replicated in the analogue world or in an organisation full of disparate and ageing systems and spreadsheets. It’s this agility that enables charities to be more responsive, better meeting the needs of stakeholders, donors and beneficiaries.
Digital transformation can serve to bring a charity together, with digital best practice and the results that can be achieved showing the entire charity just how beneficial digital transformation can be.
For example, a charity might deploy a BI system to support a certain department or business function. But, once the rest of the organisation can see just how useful a tool it is, you often find that the capability soon spreads, eventually becoming the centralised reporting tool for the entire charity, bring together and analysing data from multiple sources, spanning fundraising, marketing, HR and many more areas.
This is digital transformation in action: shifting the mind-set of the organisation, embracing technology to facilitate a new, joined-up way of working digitally for the benefit of the entire charity.
Next steps for transformation
So, what does the finance team in the charity need to do to embark upon its digital transformation journey? Well, first and foremost, it needs to change the way it thinks about itself. If the finance department is to be seen as operational and business advisers who support and deliver operational and business objectives, it needs to present itself in this way, interpreting data from across the charity and communicating valuable and timely insight.
In order to provide the optimum levels of insight quickly and effectively, finance teams need to have their own houses in digital order, adopting modern and flexible systems to not only deliver better analytics, but to enable them to focus on real value-add activities to underpin the successful digital transformation of the wider charity. These up-to-date solutions enable the finance team to be more proactive in communicating data and insight, with old, inflexible systems one of the biggest obstacles to digital transformation.
Although digital transformation is ultimately different from digitisation, without a digitised finance function, efforts to digitally transform the entire charity will more than likely fall at the first hurdle.
Finance teams must embrace increased automation, AI and machine learning, making full use of the available technologies to take on the mundane, time consuming processes, leaving them free to focus on more strategic, value-add tasks. With the addition of advanced analytics and reporting capabilities, rather than just crunching numbers, finance and accounting professionals will be in a position to deliver in-depth financial insight in a timely manner, readily identifying cost-saving opportunities and underpinning wider business strategy.
In terms of ways of working, finance teams in charities need to accept that rigid budgeting cycles and monthly reports just won’t cut it in the fast paced digital world in which we all operate. There’s a real need for ongoing performance feedback, particularly when it comes to the introduction of new digital initiatives.
If charities are to successfully digitally transform their operations, the finance team needs to be involved from day one, helping to define and develop the wider digital strategy, supporting digital investments with data-driven insight to scope out maximum ROI levels wherever possible, and feeding back performance data about new digital initiatives as and when they happen.
What charities need are finance leaders with the right skills. Where once the traditional skills of attention to detail and a logical approach to problem solving were more than enough for a finance professional within the charity sector, the digital age requires so much more than this.
In a unique position, finance has the ability to touch all areas of the charity, meaning that softer leadership and influencing skills are now of vital importance if finance is to steer the rest of the organisation through its digital transformation. It’s actually less about the technology and more about the understanding and the leadership skills of digital transformation champions - roles which modern, digitally aware finance professionals are well placed to take on.
This is not to say that technology doesn’t have a major role to play; of course it does. This is another area where the finance team can take the lead, building a stronger, two-way relationship with the IT department. Clear lines of communication between the two are vital, as it’s only finance that can help charities to strike the right balance between cost and risk, particularly when looking into new technology or new digital tools.
Where once finance might have been seen as the main obstacle to digital innovation within a charity, in reality, a digitally transformed finance function, in its unique position with a direct line of sight across the entire organisation, can often be the catalyst for further digital investment, facilitating a successful programme of digital transformation across the charity.
Driving the sector forward
Finance professionals in the charity sector have the potential to drive the sector forward when it comes to digital transformation. Although improvements have been made, many charities still very much underuse their finance team, limiting them to cost management and the overseeing of budgets.
In reality, by empowering the finance team to take a lead role in digital transformation programmes, making full use of their skills and knowledge to not only develop digital strategy but to also inform decision-making, charities can benefit from the successful implementation of digital initiatives. With a clear ROI from the outset, this will pave the way to build a sustainable and effective organisation for the foreseeable future.
