The Wall Street Journal published a piece recently on CFOs working to remove their teams’ dependence on Excel to solutions that better integrate company systems and reporting needs. Oftentimes, these are particular systems focused on FP&A or budgeting, but many exist to serve accounting needs as well. The trend itself is interesting to know, but the insights behind this change of sentiment are what’s important for organizations to understand fully.
As the article mentions, when Excel came to market it revolutionized the finance and accounting industry (along with pretty much all others). The tool itself is incredibly flexible, and, when used effectively, allows for complex questions to be modeled and addressed with relative ease. I’ve spent my whole professional career in Excel, and I can’t even begin to imagine what kinds of questions went unanswered before it’s advent. Because of this, I still see no end in sight for the need for just about everyone in business to be functional in Excel. It’s value in ad-hoc or personal analyses is unparalleled. We all love our dynamic spreadsheets linking systems and analyses together, because they are fun to build.
But, Excel is the jack-of-all trades, master of none solution. While serving as it’s greatest strength, this is also the chief drawback of Excel. The principal uses of Excel include data organization, data manipulation and modelling, and data visualization and presentation. If you look at each one of these use cases individually, there are clearly better solutions to address those needs as they become more complex and important within organizations. Eventually, working in Excel becomes a burden.
So much time is spent on the mechanics of updating data, reworking and checking formulas and macros, that oftentimes the most critical piece of work, interpretation, judgement and decision-making, is put on the back burner. This is the critical insight behind why CFOs are shifting away from excel.
Businesses are ultimately the sum total of the outcomes of the decisions they make and the amount they pay to make them. Anything that reduces the amount of time spent to get to the same information for the same decision to be made is a positive. Anything that improves the information at hand to make a better decision is a positive. Anything that reduces the cost to get to the same decision is a positive. The reality is that the rapid pace of innovations in big data and enterprise software are allowing organizations to improve dramatically at lower costs.
Being comfortable with the status quo in this age of increasing change is the kiss of death for an organization. Continuing to find solutions that automate processes and streamline workflow is critical for businesses to compete.
Excel is good for many things, but when it comes to institutionalized processes and reporting, it ultimately falls short. It is one thing for individuals within a function (say FP&A) to pass a spreadsheet back and forth, but it is another for those same individuals to do so with another function (say marketing or software development). Oftentimes, each function has its own processes and measurement modeled in excel, so when they come together it causes confusion across functions from data source validity to analysis techniques to error identification. Eliminating this issue through implementing software solutions that integrate systems of record is critical. But, companies still need to decide how those solutions fit their processes.
Ultimately, businesses need to optimize for the quality and speed of the decisions they make. The more we automate the mechanics of how we can get to these decisions, the more we can focus on that one thing that humans compete best with machines — judgement and decision-making in the face of uncertainty. If Excel removed 80% of the uncertainty, and the latest tools removed the next 10%, there is still 10% remaining today for the role of humans. Said another way, technology is enabling humans to make better decisions than before. As AI and other innovations continue to reduce that remainder down, that does not mean that humans lose their role. We continue to play our role in that remainder of uncertainty, because no technology will ever eliminate the uncertainty in life altogether.
Consciously or unconsciously, CFOs are making the decision to be more strategic when they move off of Excel for key company processes and reporting. Sure, there is a financial cost calculation in there, but the underlying driver is to enable employees to be better strategic decision-makers by allowing them to focus on where uncertainty actually exists. A business that deploys its employees on the 10% remainder of uncertainty is far more likely to win out against a business that deploys its employees unnecessarily on a 20% remainder of uncertainty.