– By Deepal Shah
Efficiency is the cornerstone of any business, especially in an industry like logistics, where optimising costs and improving speed have a direct relationship to the bottom-line. To CFOs, application of technology has been presented as an indispensable tool to achieving efficiency. In the AI-era of today, tools such as Chatbots, RPA (robotic process automation), machine learning, and advanced analytics are showcased as boosting the sustainability and innovation quotient of an organisation.
However, technology may not serve as a panacea. Although technology seems simple, quantifying or justifying its application may require deeper foresight and persuasion skills for the finance team. A 2024 IBM study shows that 65% of finance leaders across the world felt the pressure to improve ROI across an organisation’s tech portfolio.
EFFICIENCY, INNOVATION, OR?
The availability of disruptive technologies and their propensity to create efficient business models is alluring to enterprises across multiple sectors. To the CFO therefore, the agenda is to focus on extreme automation and integrate newer technologies with the objective of maximising the bottom-line. For instance, a logistics firm that begins its digital transformation journey with automating route planning, could reduce fuel costs and delivery times.
In this case, the success of the firm’s technology investment not only relies on the underlying platform but also other factors which are usually not in direct consideration to business users. There could be further questions and introspections such as – does the technology support the existing infrastructure? Are there any regulatory aspects that need attention? Or, standardisation processes and SOPs (Standard Operating Procedures). The number of factors that could determine the success or efficiency of a technology enablement are endless – availability of skilled workforce, organisational culture, etc. Efficiency therefore is a variable – a value which can be a guesstimate and only when the other parts can be calculated. But how can CFOs guestimate long-term growth with a variable factor? A reasonable approach could be to design a Technology model aligned around the core objective – one that aligns with long-term growth, accelerates ROI, is innovative, and is efficient.
SETTING EXPECTATIONS RIGHT
Strategies such as balanced scorecards and before and after KPIs could offer a multi-dimensional perspective on ROI. While balanced scorecards offer continuous performance tracking, collaboration, and performance improvement; KPIs and other ratios can help measure intangible assets. Such a practice allows for a more comprehensive evaluation of how technology is driving the business forward, beyond immediate cost savings.
Metrics like Return on Investment (ROI) and Total Cost of Ownership (TCO) are foundational. However, it’s equally important to track metrics that capture innovation’s impact, such as new revenue growth, customer satisfaction scores, Go-to-market time, prospect inquiry ratio, market-improvement, and market expansion. It is also advisable that the finance team keep a track of metrics on a before—and-after basis which could also define control points, accountability standards, and clear definition of roles and responsibilities which in turn helps set transparency, governance and consistency.
PROMISING EFFICIENCY
Beyond scorecards and KPIs, efficiency standards also need to be scrutinised periodically. Automation is only effective when it is consistently fine-tuned. More importantly, for technology to truly drive innovation, it needs to be supported by robust processes. Last year, a particular team took eight hours to achieve a task; hence, new technology ought to improve speed and accuracy. Introspection has to be on the grounds of whether the organisation is optimising the new technology. That, as an ongoing evaluation.
To maximize ROI from digital transformation, organizations should focus on clear strategy alignment, measuring relevant KPIs, and continuous improvement. The journey from efficiency to innovation against the backdrop of a competitive landscape is an imperative. Balancing such priorities requires a strategic mindset—one that is always looking beyond today’s efficiencies for tomorrow’s possibilities.
(Deepal Shah is the Group CFO at Allcargo Group.)
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