Understanding the common pitfalls and strategic approaches of digital transformation can help tax firms and corporate tax departments successfully navigate their journey
In recent a survey of tax & accounting professionals, leveraging technology and automation were cited as top priorities by most respondents, indicating that tax professionals understand that there is a need to be more efficient in work operations — and that adopting new technologies is a way to do that. Indeed, for many tax & accounting firms and corporate tax departments, a digital transformation is the solution.
A digital transformation is simply the rewiring of how a company or department operates, but it is more than just about which digital tools are adopted over a period of time. In fact, digital transformation is an ongoing process, and there should not be an end date in place to mark when the last piece of equipment or software is purchased or installed.
The strategies around a digital transformation must be all-encompassing for proper execution and eventual success. Yet, digital transformation can be fraught with challenges and risks. In fact, just 16% of respondents said that their teams’ digital transformations have improved performance and also equipped them to sustain changes in the long term, according to a report from McKinsey & Co.
Unsurprising then, given these insights, that many digital transformation initiatives fail to deliver the expected outcomes, or even cause more harm than good.
Why does digital transformation fail?
The saying goes that clarity of vision creates clarity of priorities, and thus, a lack of clear vision and misalignment of a digital strategy can lead to its failure. By not knowing with some precision what goals the tax department or firm wants to achieve nor how it will measure its own success is essentially setting the stage for failure. Indeed, without a shared understanding of the goals, value proposition, and performance metrics to be tracked, different teams and departments may pursue conflicting or incompatible initiatives, or simply resist change altogether.
To avoid this, leadership, especially top management, need to communicate why digital transformation is important for the firm or department, as well as articulating the ways in which this transformation will improve how the organization will work, and how these goals are aligned with the overall organization’s purpose and direction.
Most people want change, yet very few are willing do it. Another reason for the failure of a digital transformation process is simply this resistance to change and learning. Often, even when something isn’t working, people will tend to keep doing it, in a sort of strange attachment to the way things have always been done. In addition, many employees may also fear losing their skills, roles, or power in the new environment; or, there may be a lack of willingness or ability to learn new skills, adopt new mindsets, or experiment with new approaches.
Many digital transformation initiatives fail to deliver the expected outcomes, or even cause more harm than good.
To overcome this, according to David Rogers, author of The Digital Transformation Roadmap, the onus is on the organization’s leadership to foster a culture of learning and agility, in which people are encouraged to embrace change, try new things, fail fast, and learn from feedback.
Often many corporate tax departments and tax & accounting firms are built on strong processes and structures, and within that steel-like rigidity can come a fear of trying anything new. Traditional hierarchies, silos, and bureaucracies can hamper internal collaboration, innovation, and speed. This fear may also create barriers to accessing and sharing data and information, as well as offering collaborative insights across group and department functions.
To combat this department heads must consider whether their team needs to be redesigned and what that would look like? What are the ways to make teams more flexible and adaptive so that they can work across boundaries, share resources, and make decisions quickly and effectively?
Last, poor execution and governance can contribute to the demise of a digital transformation strategy. Departments and firms may lack the capabilities, resources, or methodologies to implement and scale their digital transformation projects. And they may also face technical, operational, or regulatory challenges that hinder their progress or compromise their quality.
The solution? As a digital transformation strategy is being development, leaders should establish a clear roadmap, timeline, and budget for their digital transformation efforts, as well as assign roles and responsibilities to the relevant stakeholders. Finally, stakeholders need to rigorously monitor and evaluate the team’s performance along the timeline — and in doing so, they could help catch when things may be going off-plan in time to allow for course corrections.
Embarking on a continuous journey
Digital transformation is not a one-time project, but a continuous journey that requires vision, alignment, change, learning, flexibility, collaboration, innovation, and execution. By avoiding the common pitfalls and following best practices, tax & accounting firms and corporate tax departments can succeed in their digital transformation endeavors and begin thriving in the digital age.
Indeed, the journey of digital transformation is a multifaceted endeavor that demands not only technological upgrades but also a profound shift in organizational culture and mindset. Success hinges on the ability to blend strategic vision with meticulous execution, fostering an environment in which innovation can flourish unimpeded by outdated structures and mindsets.
It is imperative that leaders of tax & accounting firms and corporate tax departments cultivate a culture of continuous learning and adaptability, empowering their teams to leverage new technologies and methodologies effectively.
Moreover, robust governance frameworks must be established to ensure that all transformation efforts are aligned with the organization’s overarching strategic objectives. This involves not just setting clear goals and timelines but also maintaining rigorous oversight to navigate the inevitable challenges and obstacles that arise. Through sustained commitment to these principles, tax firms and departments can navigate the complexities of digital transformation and emerge as agile, resilient entities poised to thrive in the ever-evolving digital landscape. Ultimately, the success of digital transformation lies in the harmonious integration of people, processes, and technology that can ultimately drive sustainable growth and long-term value creation.
You can find more information about how tax organizations are using technology here.
