Digitalization: Eight Challenges for Controllers

How digitalization will change controlling and what controllers should do about it

In the coming years, controllers must face eight central challenges resulting from digitalization. Their task profile, toolbox, and mindset must be adapted to the new parameters. Looking ahead, the number of controllers will drastically decrease as controlling continues to become an element of management philosophy.

Challenges of Digitalization

Controllers must invest heavily in the foundation – the management of data is more important than ever. A prerequisite for the meaningful use of large amounts of digital data – such as with predictive analytics or value driver trees – are fine-grained, error-free raw and master data. If these are not available, any fancy tools and resulting digital renderings will be of little value ("garbage in, garbage out"). Accordingly, in the digital age, the traditionally much hated management of raw and master data plays an even greater role than ever before. An additional – and no less important – task of controlling is to ensure the consistency and compatibility of diverse data and analysis models within the company. This task is also still often neglected.

Who has the lead? From the controlling point of view, the answer is simple: Controllers must ensure that sovereignty over the management of financial and non-financial raw and master data lies in the controlling department. Today, the sales department is often still in charge of customer-related data, whereas personnel data belongs to HR, etc. Such practices, however, make little sense in the digital age.

Controllers must also define their role in relation to the newly emerging data science centers, where mathematicians, physicists, and computer scientists analyze structured and, especially, unstructured data (masses) from all relevant areas of the value creation chain. If controlling aims to remain the "single point of truth" within the company, this has far-reaching consequences – especially concerning the organization of data management.

Controllers must lead the democratization of information access and enable managers to turn the idea behind the controlling concept into action! Three basic IT trends will help them along the way: self-service, mobile data access, and real-time data. As a result, managers are able to gain access to data largely independent of controllers. At the same time, apps standardize analyses to a greater extent than was previously the case. When value driver trees are also provided with an attractive and interactive front-end (such as SAP’s ‘digital boardroom’, cf. Weber 2016), this implies not only a democratization of information access. Rather, the underlying logic of driver trees can also be integrated into decision-makers’ discussions.

It is clear that controllers can no longer rely on their established role as gatekeepers. At the same time, simple analyses will no longer be viewed as value contribution from controlling when they are highly standardized and can be conducted without a controller’s assistance. As context designers, controllers can continue to generate considerable value. In particular, it is important to monitor the degree of self-service and real-time in a company and ensure optimal levels of both.

Management control processes must become leaner, better integrated, and faster – in short: more agile. The implications of digitalization go well beyond the democratization of information provision. In order to successfully handle a digitized value chain, management as a whole must become slimmer, better integrated, and faster. Even today, predictive analytics can be used to generate automated forecasts from granular data, which are often more reliable than traditional forecasting methods. At the same time, the related automation of a large portion of the forecasting process promises significant efficiency gains. Finally, automated forecasts together with pre-defined decision parameters can subsequently be used to automate price and quantity adjustments – for example, in retail. Thus, a digital value chain leads to both a partially automated and significantly streamlined process of operational management as well as largely integrated and – when relevant – cross-company management.

Finally, digitalization will change the typical timeframe of management control processes. Rapid action during the course of the year is becoming increasingly important, whereas the frequency of feedback loops is growing. Thus, annual control cycles will lose importance. At the same time, controllers must learn to deal with strategic (and operational) uncertainty. When established business models are increasingly questioned and digital alternatives result in fierce competition, uncertainty increases – and the predictability of the business subsequently decreases. Accordingly, it is imperative that companies constantly review the validity of the assumptions underlying the planning and business models and develop a controlled trial-and-error culture.

Digitalization must be systematic in order to increase efficiency in the controlling department. On the one hand, digitalization entails a demand for lean, integrated, and responsive control. On the other hand, the aforementioned potential for automation as well as the global standardization and centralization of controlling processes make enormous efficiency gains in finance possible. Due to both closely related developments, a major portion of the traditional "unburdening" tasks held by controllers will be eliminated. As a result – at least as it is often claimed – controllers can then focus on more important tasks. In reality, however, efficiency gains typically are and will continue to be achieved through the use of shared service centers, which were developed with that exact goal in mind.

In any case, the elimination of many activity profiles in the controlling department as a result of automation as well as the existence of shared service and expertise centers will lead to new career paths for controllers and, possibly, a new professional identity, as well. An even stronger focus on "complementing" tasks – business partnering – appears to be the only viable path for the future despite, and because of, the aforementioned threat.

As a business partner, the controller must support the company’s digital transformation with constructive criticism! Several aspects can be distinguished.

In the digital transformation convergence phase, the controlling department must examine the relative allocation of resources to digital versus analogue business areas and, if needed, demand changes. It is not an easy balancing act but, nonetheless, necessary to drive the digital transformation vigorously while simultaneously maintaining sufficiently high short-term profitability.

If digital business models have not yet been integrated into a company’s traditional business model, the management control process will be confronted with additional challenges. In particular, it is important to prevent undesirable management activities from interfering with the transformation process. In this context, the proper allocation of digital revenues and change-friendly incentives for the traditional organization are just two important points that controllers must address.

At the same time, a fundamental cultural change must take place in many cases. If a company is to be successful in a context of high uncertainty and digital transformation, a corporate culture of open information exchange and constructive criticism must prevail and, if necessary, replace politically-motivated exchanges and a hierarchical silo-mentality. Tool- and process-based solutions may be necessary and helpful; however, the central driver in dealing with volatility (cf. Schäffer/Weber 2015b) and digital change is a company culture that encourages critical discourse and the open exchange of information. Controllers, in particular, must set a good example and, as business partners, transfer their distinctive trademarks – transparency and candor – to the company.

Controllers must strengthen the analytical potential of their companies! If controllers are to be taken seriously as a business partner in a digital context, they must not be limited to small data. Controllers must also develop their competency profile in statistics and information technology.

With regard to the new professionals known as ‘data scientists’, very basic organizational questions arise: Are data science centers part of controlling or IT? Is big data analyzed in a central unit or decentralized in a regional company? How do smaller companies deal with the issue? Our impression: Controllers have to date largely failed to address this questions. As a rule, they still perceive big data as a marketing and supply chain topic. The implications for management control processes are perceived only to a limited extent. Thus, the current rhetoric is satisfied when controllers and data scientists (merely) see eye to eye when working together: Controllers do not have to master all statistical methods in detail. On the contrary, it is sufficient to ask the right questions, have sufficient overview knowledge, and master the language of the data scientists. Yet, if this comes to fruition: What value do controllers still contribute? What keeps managers from turning directly to the data scientists?

Controllers must further develop their competence profile. The role of business partner in an increasingly digital context requires a number of important skills. In addition to ease when working with numbers and the traditional requirements for systematic and methodological competencies, knowledge in statistics and information technology, social and communication skills, and a solid understanding of the business are growing in importance (cf. Gänßlen et al. 2013). The requirements for the competence profile of controllers continues to grow.

Controllers must question their own thought patterns. Today, controllers typically focus on efficiency and profitable growth. In principle, this is not false and has been a success story for the profession for many years. The problem is that the associated decision and control logic performs superbly in comparatively stable situations but does not cope well with disruptive changes, thereby hindering digital transformation. However, the timely creation of prerequisites for mastering the digital future is not supported (cf. Christensen 1997). In particular, when controllers do their job well, they risk not fully addressing the digital challenges. Following Clayton Christensen, we speak of the controller’s dilemma in times of digital transformation.

Hence, controllers must learn to better deal with strategic (and operational) uncertainty. In this respect, the aforementioned tools can be helpful. However, it is important to change from thinking in parts of the year to reviewing projects, from individual measures to portfolio perspectives, and from safety-mindedness to a trial-and-error culture. For most controllers, this is truly not an easy step!

Professor Utz Schäffer & Professor Jürgen Weber

  • Schäffer, U., & Weber, J. (2016).  „Der Computer prognostiziert sehr gut" (in German). Frankfurter Allgemeine Zeitung, 16.
  • Schäffer, U., & Weber, J. (2016). „Die Digitalisierung wird das Controlling radikal verändern“ (in German). WHU Controlling & Management Review, 60(6), 6-17.
  • Schäffer, U. (2016). „Das Controlling muss unternehmerisch denken und agieren“. In Dialog with Reinhold Achatz (in German), WHU Controlling & Management Review, 60(6), 18-23.