Next Generation companies such as Spotify operate in a fundamentally different manner to companies with traditional organisational structures. A differentiating factor is the speed at which these organisations learn and adapt – developing actions or solutions to optimise their positioning quickly. It’s important for companies to consciously consider where they have chosen to play and to act deliberately in their agility decisions – to enable maximum and beneficial impact. When it comes to agility, there are three key questions for every CFO to keep top of mind: #1 What does the agility spectrum mean for you? The confluence of technological advancement and changing consumer preferences has underpinned a significant increase in the rate of change for business models – customer, product and channel. Organisations can struggle with the pace of change and adaptability needed. Organisational agility is the essential element to enable Next Generation companies – it allows the rhythm of business model evolution to match the rhythm of change in the organisation’s operating environment. CFOs must consider how the processes, technology and systems, information and people are positioned to support the wider organisation in the context of its chosen Way of Working. That is, how should the Finance Operating Model be positioned to enable the wider organisation to achieve not only its objectives, but the agile way in which it reaches those objectives? If the organisation seeks a greater degree of agility to be leaner, faster and more iterative in its continuous development, the Finance Function must understand the roles and responsibilities associated. Comparing the typical traditional model to a highly agile structure gives insight into the spectrum of agility: Traditional organisations: Structures are hierarchical and top down. While offering high levels of efficiency in a static environment, particularly in relation to repeatable processes, investment decisions are often costlier and long term oriented. Consequently, traditional structures sacrifice the pivot in a changing environment, a characteristic compounded by the fact that it is difficult for feedback on change required to cascade to the top Agile organisations: Structures are flatter with a rich channel of feedback throughout the organisation at all levels. The many independent smaller teams, known as squads, are focused on highly autonomous product delivery, whether internal or external. The wider organisation is structured as a complex web of smaller networks, operating through many interactions at various levels to achieve the company’s stated objectives. #2 What is the role of the Finance Function in the new state and what does this mean in terms of change? The magnitude of change required from the Finance Operating model will depend on the current state of operations, relative to how far along the Agile continuum the wider organisation has chosen to sit. The Agile Maturity Metre (Figure 1) highlights that with each additional level, the number of business functions which adopt an agile way of working increases. The minimum level of adaption is characterised by the restriction of agile project delivery to IT; this is the birth place of the Agile framework. At the opposite end of the metre all business functions are completely agile reflecting a complete transformation of the business and operating model. Figure 1: The Agile Maturity Metre: Where is your organisation’s optimal future state? To better understand the level of finance transformation required at each agility stage, the areas of change can be broken down into the three W’s: Work: what work does Finance deliver at different operational levels? This describes the type and nature of work required from Finance Worker: how does Finance deliver products and services and what kind of workers are best suited to deliver this work? This describes the composition, capabilities, culture and operating models of a human/robot workforce Workplace: how does the workplace need to change to enable the flow of work and workers? This describes the structures and practices to enable the worker to create value in the future. #3 How does your chosen future state impact the 3W’s of the Finance Function? When a company becomes more agile, the Finance is empowered to deliver Work that evolves frequently, according to the development needs of the business. Budgets, forecasts, planning and reporting blend traditional long term requirements, such as consolidation and financial reporting, with new short-term outputs, such as beyond budgeting, adaptive cost allocation, performance measurement and product profitability. These new short-term outputs respond to the needs of internal project teams and the wider commercial environment. The change in work drives a corresponding change in the composition, capabilities and culture of the future Worker. In agile enterprises, the boundaries of Finance and the wider business must become seamless. Core capabilities of collaboration, teamwork and complex problem solving enables the worker to shift their focus primarily towards delivering tangible commercial value through business partnering. The Workplace is about the overarching structures, practices and technologies that support the change in work and worker – with reliable leaps now seen in the self-service, ad-hoc analysis and visualisation capabilities available to the business. In an agile organisation, these tools are all the more important, as they enable quick and flexible decision making required to drive performance. What’s next? It’s time to turn outwardly and review the shifting landscape of your business environment. Customer preferences are no longer static; the expectations for a frictionless commercial engagement is increasingly the norm; and technological advancement in natural language generation, automation, in-memory computing, cloud enabled analytics, real time reporting and forecasting is increasingly attainable to organisations of all sizes. As a CFO, are you ready to define the work, workers and workplace that will move your business forward? To read more from Deloitte about Digital Finance and how to start the journey – visit our website.