Good morning. When Dan Durn, CFO and EVP of finance, technology services, and operations at Adobe, was just starting out in business, you just kind of followed the traditional protocols, he told me. But that was long before generative AI.
“People that are young in their career, they have an opportunity to put their fingerprints on how companies work in the future and just unlock that creativity—and bring an innovative spirit to bear on how companies operate,” he said.
When I sat down with Durn on Wednesday, he shared details of a four-month-long hackathon process in which the finance department sought to create opportunities for integrating generative AI into workflows.
Adobe crowdsourced 100 ideas, which were narrowed to a shortlist of 20. “We had a bit of a Shark Tank moment where the teams were presenting their ideas to me and my executive team,” Durn explained. “We selected five winners that we’re in the process of implementing right now. One of them is very close to being turned on, and we’re making progress on the other four.”
Each idea fit into a theme, Durn said. One is taking unstructured data and turning it into structured data. Another is a forecasting engine: How do you take all of the company’s data and synthesize it to accurately reflect performance? “Then that model sits alongside an annual planning process, and it gets you to those insights faster,” he said. Other themes include anomaly detection, powering chatbots, and also a general productivity category.
The use of AI and automation for finance and accounting is only going to accelerate. I recently spoke with research and consulting firm Gartner Inc. about some tests with accounting teams, which found that companies where technology is more readily accepted saw a 75% reduction in financial errors.
“Employee engagement is directly tied to the trust employees have in their manager and work environment,” Mallory Barg Bulman, senior director, research in the Gartner Finance practice, told me.
Adobe’s hackathon has created a “groundswell of enthusiasm in the organization to embrace the technology,” Durn said. Participants wanted to “have a seat at the table” and “be a part of the solution, rather than teams waiting to be told what to do,” he said. “Whether or not people buy into the journey, in my opinion, is the biggest determinant of success,” Durn added.
Another big focus for Durn is talent. In 2023, Adobe avoided the mass layoffs that were rampant in the tech sector. I asked him about his outlook for this year.
“We’ve always been disciplined operators,” he said. “We’re going to continue to do what we’ve been doing for a long period of time: drive innovation that serves our customers and shapes our markets, and be disciplined about capital allocation, the way we invest to drive that innovation.”
And when that innovation leads to major insights, a firm needs to be able to capitalize on those signals quickly, Durn added.
“There’s a speed of execution at play,” he added, “and those technologies get you to that signal faster.”
Sheryl Estrada
sheryl.estrada@fortune.com
María Soledad Davila Calero curated the Leaderboard and Overheard sections of today’s newsletter.
Leaderboard
Andy Roeder was named EVP and CFO of Patrick Industries (Nasdaq: PATK), effective March 5. Before joining Patrick, a manufacturer of building products and materials for manufactured housing and RV industries, Roeder served as CFO of Polaris Boats, and before that, CFO of Bennington Marine.
Giorgio Matteo Traditi was named president and CFO of United Natural Foods (NYSE: UNFI), effective April 15. He succeeds John W. Howard, current CFO, who will leave the company following a transition period. Tarditi began his career with GE in 1997 and held several leadership positions, such as CFO of GE Healthcare Japan, CFO of Avio Aero—GE Aviation, and in GE Oil & Gas, where he served as CFO.
Big deal
A new report by S&P Global Market Intelligence finds that operating expenses took a bigger share of U.S. corporate revenues in Q4 2023. The median ratio of operating expenses compared to total revenues for investment grade companies rated BBB- or higher rose to 83.7% in Q4 of 2023, up from 82.2% in the third quarter. (Companies with S&P Global Ratings' long-term credit rating of BBB or higher are considered issuers of investment-grade securities.)
The increase occurred despite total operating expenses for investment grade companies falling 5% in Q4 to $2.797 trillion, the lowest total since Q2 of 2022, according to the research. Meanwhile, non-investment grade companies had an 11.1% decrease quarter over quarter in operating expenses.
These declines show that companies are "cutting back on expenses like rent and payrolls as they deal with high interest rates and stubborn inflation," according to the report.
Going deeper
The Securities and Exchange Commission announced on Wednesday it is adopting rules to standardize climate-related disclosures by public companies and in public offerings. According to the SEC, the rules will require companies to disclose several factors. Here are a few of the factors stated in the announcement:
—Climate-related risks that have had or are reasonably likely to have a material impact on business strategy, operations, or financial condition.
—Actual and potential material impacts of any identified climate-related risks on strategy, business model, and outlook.
—If a company has undertaken activities to mitigate or adapt to a material climate-related risk, there needs to be both a quantitative and qualitative description of material expenditures incurred and material impacts on financial estimates.
Overheard
“It’s really unfortunate that a U.S. employer wants to be able to employ someone and it’s really up to chance.”
— Allison Ahern Fillo, a Boston-based immigration attorney, told Fortune about the current cap of the H-1B visa, which is for workers in specialty fields that have a job offer from a U.S. employer. The visa is especially used by STEM and technology companies, and economists as well as business leaders have argued that the 85,000 per year cap is hurting America’s economy.
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