Technology drives transformation

This time, I had an interesting conversation with Stephan Hablutzel, Chief Operating Officer at Fresh Accounting in Hong Kong. Currently, Stephan helps growing the business of an accounting start-up in Hong-Kong. We talked about the importance of technology for transformation, discussed the question what stablished companies can do to not lose track and how governments in Asia influence the drive of change.

Stephan, tell me what did you do the last years?

I tried to retire (laughs). I bought a house in a tropical resort in SE Asia, I also have my sailing yacht there. After having invested in a start-up I »accidently« stepped into the technology world. I learned so much during the last 5 years so that I not only am »reactivated«, but really rejuvenated. After some stations at the law tech start-up sector, I just joined a friend of mine, he started the company I’m working with, »Fresh Accounting«, that is an accounting and virtual CFO start-up which has been growing in leaps and bounds. The strategic intent is to target more mature SME and Fresh needed someone more senior to match expectations from such customers.

From your technological angle, how do you see the transformation in companies? What drives transformation?

Technology drives change, technology drives transformation. Nowadays, traditional or established companies and organizations might be leapfrogged by smaller, nimbler start-ups with a bigger focus on technology. That means, that in order to take advantage of technology, these organizations must change their processes and, as consequence, their organizational structure. Technology reaches in every single corner of an organization (manufacturing, sales and purchasing processes, accounting, etc), it forces you to change in a different way. It’s not a strategic change anymore which goes top down, the driver of change is more the competition, the technology which forces to embrace the organization and the way it works.

Can you give an example?

Nowadays the majority of companies use ERPs based on SaaS applications. As a matter of fact, it’s 64% of all ERP. One of the drivers of this trend is that in the SaaS world specialized, smaller providers create solutions for individual markets, offer continuous improvements and add new features all the time. Given the nature of SaaS ecosystem the Company is completely in charge of deciding which Apps to implement and at what speed. It can hence slice the introduction of an ERP in portions and match the readiness of its organization. As a consequence, even small and middle-sized enterprises nowadays can have a fantastic ERP, providing up-to-date, granular information about all the aspects of an operation. That means: Change is always driven by the technology and the cost pressure that comes from the other side to become more efficient and quicker.

What can traditional companies do to not lose track?

A good example to see how change happens is Unilever’s Foundry. This behemoth of a company has recognized that their company culture is the diametral opposite to the way people work and collaborate, and the way innovations are made. Their organization would essentially kill every effort that is outside their ‘box’. As a consequence, they started this foundry, which is completely separated from Unilever and where they are partnering with start-ups to accelerate innovation on a global scale. It is also a bit like the Google approach where people can spend their working time to investigate and develop new business models or products, having a massive freedom the way they want to do it. And Unilever doesn’t even know if one of these projects will be resulted at the end of the day or not.

Now imagine that, in terms of change management, they recognize that their core organization has too keep on running. Meanwhile, outsourced in »a small island«, they have an innovation lab where you never know whether or when a new business model or product is popping up. But once they have stablished market fit and can expect to gain traction they can pull in their production and marketing might to fund what may the next best seller of tomorrow.

What is your personal transformation story?

I was always an early adopter of technology, but have worked in a traditional environment. But once I stepped into this brave new tech world, I suddenly discovered how exciting it is. Next thing I realized is that a lot of things I’ve been doing manually or, maybe, supported by some office automation can already be done by technology much easier and quicker.

One of my favourite examples, is Receipt Bank. This because this is the only case where I did not experience any pushback due to change. In order to create an expense claim, you take a picture of the receipt with your smart phone. The software then uses an ORC engine to convert the scan into data, recognizing the merchant, date, currency, amount etc. Machine learning algorithms make a suggestion how this item should be booked, and the only task for you to do is to perform a review. You then »publish« the item and it goes straight into the accounting software, where it is collated into an expense report. The next step is to be approved it by a superior and then it can be paid.

So, it is about efficiency.

I estimate that because of the use of SaaS solutions the efficiency boost is about four to one in the finance & accounting area alone. Similar efficiency ratios manifest itself in many other areas. Asking me about my transformation journey for me, technology takes always the lead. I structured all the processes according to how I could take the most advantage of the features that are offered by the new software.

That’s why I believe technology drives the transformation. And when there is a new feature coming out, one must look at it again and constantly ask the question, whether one is still doing the best possible job or whether it must be changed. Now, we all know how unpleasant change is for most people and the resistance that results as a consequence. However, I firmly believe that flexibility and the readiness for change are the most competitive advantages of an organization of the future.

Change is always driven by technology on one side and the pressure to become more efficient and quicker on the other side.

Stephan Hablutzel, COO at Fresh Accounting in Hong Kong

What does that mean for a globalized business world?

Nowadays a company with 25 people has the same information available as a big organization with a traditional ERP system – at a fraction of the costs. And that’s what technology does. It levels the playing field. At the same time, it leads to an enormous increase competitive pressure. A small and middle-sized company in the past used to have their geographical protected market within they’ve had their well-known competitors. But that’s obviously gone out of the window with the internet. Every industry is immediately global. It is exposed to global competitors and you are busy no to lose connection.

Let’s talk about corporate politics on executive level. Old style versus agile. What’s your experience on that?

There, I still deploy the proven and tested approach. When you manage change, you look for the early adopters and you look for the champions. That classic model is still applicable and has its use because technology changes, humans don’t. I see it very often that people try to discriminate or block new solution or change. For the success of change, it is important to neutralize these negative influences.

What is your feedback of the influence of cultural diversity in Asia, focussing on transformation?

Asia of course contains a lot of different cultures, which influence the preparedness for change, and it is difficult to make a valid statement. But in terms of commonality there is maybe one overarching, trait: filial duty and the respect of the elderly. Needless to point out that this is not supportive of change. Contrary to this I observe that in certain countries, companies get driven by government induced activities. Under these circumstances’ businesses are much more open to change, particularly if it is incentivised by grants and subsidies. Also, change is something that is cool, and so there one finds less resistance.

For example?

The Singaporean government is on a concerted drive for companies to adopt technology. There are so many programs where they push manufactures or service providers to adopt technology solutions. The government has programs where up to 75 percent of the costs for the implementation of new technology are subsidized. All in an effort to make an organization more productive. Just recently, the Government started to embrace the cloud. In other words, the Singapore government is very supportive and that certainly has a positive impact on transformation.

In Europe, it doesn’t work that way. I think, if you dive deep, you will find examples, and I know of an effort even from Germany in the form of the German Accelerator in Singapore. But I think one of the most impressive examples is from Ireland: Enterprise Ireland. This government supported initiative works like an incubator, commanding over an impressive global budget in support of Irish companies to come out to Asia, Singapore for example. They have teams in all sorts of different hubs, where they have an infrastructure to help Irish companies to expand abroad Whilst Irish Enterprise and the German Accelerator are very focused on transformation,

I believe there are many more examples. As a matter of fact I sometimes have the feeling that every government, every Chamber of Commerce, even Ernest & Young or PwC operate incubators and accelerators, all because everyone wants to tap into this new economy.

How is change driven: more passive, out of the need to adopt to competitors? Or more active, in the way of creating the own way of doing business?

To change an organization is always very difficult. It must come from the outside. Competitors, customers, even potential employees are important for change. Nowadays, good people from younger generations more readily refuse to work for established companies, particularly if they are technology laggards. It seems that, overall, they prefer to create their own business. So, when you need change you have to look for it outside.

What leadership style is needed to stay on top to handle the change?

Nowadays, we are the first time in human history in the situation, where older people do not have the exclusive right of knowing everything anymore. It is a shared space now. Senior people have a certain level of experience. But a lot of that becomes ever more irrelevant. So, managers should find create an environment where older and younger people learn from each other, mixing teams and stimulate their communication between the different people. It is important to create an atmosphere, where people never stop asking themselves: Am I doing a particular process in the most efficient way? Can I do it differently, can I do it better? These questions are the key learnings from my experience in the tech sector.