Will tomorrow be better than today?

Imagination and invention are the operating system of today’s society. The premise on which all is built. We continually strive to improve our everyday lives, while the organisations we work for are constantly evolving new ideas in order to compete more effectively. And why not? After all innovative societies are more exciting than their anti-innovation counterparts. 

As we dismantle long-standing practises in order to make way for innovation – a process known as creative destruction – excitement is accompanied by uncertainty. It’s a concept coined by the economist Joseph Schumpeter, who describes how industries are ripped apart and replaced by newer, smarter and more relevant alternatives. 

Finance leaders sometimes fall into the trap of believing this progress is linear and guaranteed. Today’s period of creative destruction can be summed up by the term which every business born before the current digital era is grappling with transformation. This digital transformation is complex and fluid, shaped by interactions between financial systems and forces; macro, technological, new business models, cultural, people, processes, and data. Once synchronised, these forces create the beating heart of today’s digital finance function. 

George Gilder, writing in Knowledge and Power: The Information Theory of Capitalism and How it is Revolutionizing our World, comments, “The most important feature of an information economy is the overthrow, not the attainment, of equilibrium.” The science that we have come to know as information theory establishes the supremacy of the entrepreneur because it appreciates the powerful connection between destruction and what Schumpeter described as “creative destruction, between chaos and creativity.”    

Making creative destruction work for you

How can your finance function capitalise on this concept of creative destruction and drive the innovation that fuels future growth?

Don’t build your finance future using yesterday’s knowledge. Horizons are too often curtailed by simply extrapolating what has been achieved in the past and using this as a benchmark to predict the future. Instead, we must accept that tomorrow’s finance function will be different, work backward from this assumption and carefully consider the forces at play.

Build ecosystems, collectively reinvent your business, and make it aspirational. Leave behind the centralised and internally focused mindset, and accept it will be impossible to solve all challenges alone. Create a culture that empowers your financial professionals to have a say on the future direction, with a focus on prioritising decision making and delivering value to customers, partners and communities. 

Calculate the cost of doing nothing. This will help to focus minds. Where does the current path lead, and what would happen if political, economic and technological shocks worsen? There are no predictable and linear solutions from where we are, but take comfort from all of us facing this dilemma.

Future finance function prosperity is reliant on getting this transition right. The UK has a number of dynamic regional clusters, and many innovative businesses too. But keeping this optimism in check is what’s called our long-tail. Andy Haldane, the Bank of England chief economist, describes this as, “Lots of companies that are often slow to adopt new technology, less sophisticated in their management practices, less able to raise finance and more domestically focused”. 

It is our two-speed economy that is a contributing factor to why many are experiencing a sense of stagnation. A job used to be for life, accompanied by progress up the career ladder and a liveable pension. The next generation diligently follows the rules of life only to find the game has changed – classrooms, workplaces and our politics have struggled to remain relevant.  

In 1960, the global population was three billion. Today it is approaching eight billion. Some 67 percent of that population own a mobile phone. The global volume of data stored in 2016 and 2017 was the sum of the 5,000 years that went before, and by 2025 estimates predict this will increase ten-fold. I’m not saying this will make tomorrow better. It is just an illustration of how different the finance function will be compared to yesterday.

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