Is Your CFO the Key to Unleashing Innovation?
Why is innovation so challenging for companies? Be it financial, cultural, a lack of resources, or because there’s no one advocating innovation with the executive team, overcoming this difficulty often comes down to one key C-suite role: the Chief Financial Officer (CFO). Leaving behind the perception of them as the one from the finance department who says “No,” CFOs are being recast as innovation enablers. With the trust and ear of the CEO and other members of the leadership team, as well as the board of directors, in this post we examine how CFOs can take the lead in accelerating innovation and driving cultural change.
With their day-to-day role consisting of budgeting, planning and monitoring the organization’s financial performance, CFOs have a true centralized view of the entire business and an understanding of what parts of the business may be impeding growth, where digital innovation can improve efficiencies, and what is critical to future-proofing the business and maintaining a competitive advantage.
The CFO as Innovation Partner
This KPMG white paper positions the modern CFO as the company’s growth copilot, and states how “Boards and CEOs are looking to CFOs to be their copilots in pursuit of growth, active advisers in both flagging opportunity and pivoting the business to embrace it.” By expanding the CFO’s role, they’re empowered with the ability to foster innovation by determining where certain guidelines need to be enforced and where they can be relaxed.
To clarify, innovation isn’t just about new digital solutions or new products. Rather, innovation covers a broad range of areas impacting services, experiences, how the needs of customers as well as employees are addressed, and entirely new business models that can expose new possibilities to generate growth, increase productivity, or streamline processes.
“Boards and CEOs are looking to CFOs to be their copilots in pursuit of growth, active advisers in both flagging opportunity and pivoting the business to embrace it.”
This article by McKinsey identifies innovation as a resource allocation problem, not an ideas problem. “We have never come across an organization that lacks ideas. The challenge is unleashing innovators by giving them the resources they need—not only monetary, but people, time, leadership attention and physical assets. In some ways, the CFO is the corporate equivalent of the venture capital investor looking at a start-up. It’s just that the start-up is a group of motivated people within your own company.”
“In some ways, the CFO is the corporate equivalent of the venture capital investor looking at a start-up. It’s just that the start-up is a group of motivated people within your own company.”
Doblin, the innovation strategy team within Deloitte, has broken innovation down into a framework consisting of 10 types of innovation. Doblin’s research suggests that those organizations that adopt five or more types of innovation displayed in the chart below outperform the S&P 500. With a comprehensive view of short- and long-term business objectives and how innovation can sustain financial performance, this strategy affirms how the CFO can unleash innovation.
“Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how they’re led, and how much they get it.”
As a reenvisioned ally of the organization, below are several ways the CFO can expedite innovation across multiple areas of the business:
With Strategy: Work alongside the CEO and leadership team to define where innovation can activate the company’s overall business strategy and its vision to positively impact the business, its customers and employees, set against financial parameters and effectiveness metrics
With Culture: As the advocate for innovation, empower and motivate teams as if you are a start-up. Focus on agility, speed to market and the ability of the team to embrace innovation without the fear of failing
With Customers: Identify where the benefits of technology and automation can remove customer pain points or enhance the customer experience
With Planning and Processes: Work to implement strategic innovation initiatives across the organization, or by singling out where innovation can eliminate manual processes that are creating workflow bottlenecks or redundancies
With Resources: Validate the hiring of new talent and of technology innovation investments that will bolster the organization’s position with prospective and current clients due to new products or services, resulting in new revenue streams
In closing, I strongly agree with how this article by Deloitte defines culture as being the most critical piece for executing successful innovation, and with this quote by Steve Jobs about the influence culture has on innovation’s effectiveness: “Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how they’re led, and how much they get it.”