Get ready to move up a gear

The coronavirus pandemic is undoubtedly a humanitarian crisis leading to millions of human tragedies. On the other hand, it works as a catalyst for change in the business area, with an unprecedent pace and scale since the war. Today it would be difficult to argue with the statement that we live in a time of permanent change and uncertainty but, in the face of many questions about the future, one thing is certain – it will be digital.

Faced with enormous challenges and the need to make difficult decisions, some CEOs decided to make sharp cuts and choose the escape strategy. Others focused on more risky activities which gave them the chance not only to survive, but also to win in the post-COVID reality. The current slowdown seems to be a kind of a pit stop – according to the racing terminology used by Professor Andrew Scott from London Business School. They use it to properly “lubricate” the company so that, after leaving the pit stop, it will achieve even better results.

McKinsey's research shows that, during the 2007–2008 recession, the top quintile of companies outpaced its competitors by approx. 20 percent in terms of TRS (Total Reward Statement) as they eventually entered the recovery phase. Eight years later, their advantage grew to over 150 percent. This is another proof that companies which act decisively and early enough are doing much better than others.

The fourth industrial revolution continues and modern technologies, such as RPA (robotic process automation) or AI (artificial intelligence), are gaining popularity. Before the pandemic, relatively few companies could boast of implementing them, whereas now the question is not so much “whether to invest?” but “what to invest in?”. The selection of the right technological investments is the key issue – it should reflect new assumptions about your industry, the pace of its digitization and the digitization of customers, suppliers, employees, regulators, etc. Development should be conducted in two ways: across the company's business core and towards searching for new market opportunities. In the area of F&A outsourcing, the pursuit of automation is one of the ways of looking for cost effectiveness – the basic element of building value for customers. The same concerns the use of cloud computing which enables, among others, financial reporting or providing advanced analytical data in real time. Advanced business analytics allows capturing information that indicates trends or risk areas, e.g. operational ineffectiveness. Thus it allows clients to, among others, streamline internal processes, improve services, etc. Additional indicators may also enable, e.g. identifying a rival who struggles with financial difficulties and may be open for sale (based on information, e.g. from commercial authorities or market analysts).

When talking about modern technologies, we should constantly take into account security (including data), risk management (especially immediately after the loud fire of the European cloud giant OVH Cloud in March this year) and cybersecurity (put to a great test in the home office era). IT systems must be properly designed not only in terms of security, but also bandwidth and capacity.

In the area of F&A outsourcing, the pursuit of automation is one of the ways of looking for cost effectiveness – the basic element of building value for customers. The same concerns the use of cloud computing which enables, among others, financial reporting or providing advanced analytical data in real time.

the growing importance of the modern tools and technologies in business, this aspect was relegated to the background, becoming an added value.

A separate issue is the level of digital employee competences – the gaps in this area (especially among senior leaders) probably resulted in the fact that companies hardly use e.g. artificial intelligence. Meanwhile, the upgrade of talents in companies with digital aspirations is indispensable not only from the perspective of building a competitive advantage on the market, but also in terms of motivation.

Agility has long been a characteristic feature of the best preforming mid-size companies. Such companies – which will be ready to quickly react to changes (e.g. the boom in the use of videoconferencing services, telemedicine or e-shopping), constantly conduct analyses of their environment, learn and introduce innovations – will stay ahead of the competition. To achieve this, it is necessary to provide close cooperation on almost every business and functional line of the company, focusing on continuous offer improvement based on delivering value to customers. For this purpose, it is necessary for the company to accept the “test and learn” approach. As a result, it will be able to draw conclusions about actions components that should be kept and method to promote them.

Flexibility should cover not only the inside of the organization and its offer, but also the way it is delivered to customers – e.g. in terms of the structure and scope of contracts. More and more often, especially in IT outsourcing, we hear about the so-called autonomous teams or the bestshoring phenomenon (different business needs are implemented on the basis of various task teams from different countries in order to optimize the expenditure and obtain the maximum value for money). This approach gives both parties a win-win deal and is likely to grow in popularity.

The third area worth considering in the above context is the ability to reach customers where they are – more and more frequently online, especially on social media. Many organizations, including finance and accounting, are publishing, tweeting, chatting and sharing increasing amounts of messages, photos or videos on their social media channels. In consequence, they manage to establish relationships with customers, attract new ones and increase brand recognition. There will be fewer and fewer companies that will choose not to use or to ignore the potential of the tools that allow them to like, share or comment on almost every word, photo or video.

In the pandemic reality, entrepreneurs think twice before choosing to spend money. The most recent data on the reasons for outsourcing by CEOs and CFOs are all the more understandable – they indicate that there has been a sharp increase in the number of organizations that prioritize cost reduction. For many years, the possibility of saving and improving financial results was the main argument for managers to choose outsourcing. Subsequently, with New market realities have brought professional business service pro viders and many of their clients to the common denominator – remote work. This allowed many skeptics to break the last barrier: the lack of trust in people “from the outside”. As a result, service providers gained the opportunity to reach the most conservative prospects and free themselves from the mindset in which they are completely dependent their own chief accountants or human resources. For this to happen, however, service providers must deliver a message that they may find obvious as entities operating in the outsourcing market: information about the benefits of outsourcing partnerships.

Klaus Schwab, founder and executive president of the World Economic Forum, stated some time ago that, in the new world, it is the fast fish that eats the slow fish – not the big fish that eats the small fish. This holds true both on the racetrack and in the pandemic or post-pandemic reality. COVID-19 has undoubtedly become a “black swan” which made: (1) the safety and protection of employees become the highest value, (2) physical location cease to be important for building trust between business partners, (3) the cost aspect of cooperation return to its key position. All these factors are characteristic of outsourcing services – we just need to turn them into success.

Author:

Partner, Managing Director, Grant Thornton