How CFOs can innovate their way to success
FSN’s 2018 “Innovation in the Finance Function” research confirms the crucial role that innovation plays in finance function success. The global study, comprised of more than 1,000 senior finance professionals, revealed that innovative finance functions not only reforecast the enterprise more swiftly and accurately, but they also close the books more quickly, which is a key measure of finance function effectiveness.
The contrast between companies that embrace innovation and the laggards that don’t even discuss innovation is very marked. Thirty percent of truly innovative functions can close the books within three days, compared to just 17 percent of laggards. Equally striking is that 55 percent of true innovators can forecast revenue to within plus or minus five percent, compared with 31 percent of the laggards.
More innovation, more advantages
True innovators can also enjoy more subtle advantages and chief amongst these is the luxury of time. Previous FSN studies around planning, budgeting and forecasting (PB&F) reveal the importance of process standardization and automation. It further supports the benefits of managing data within a unified environment rather than scattering data across the organization through the use of different databases and data sources.
As more finance functions transition from traditional roles steeped in financial stewardship and governance to more strategic roles, it is the availability of time that makes the difference to their contribution. Innovation around core financial processes, for example, such as migrating to cloud-based PB&F systems, means that finance functions now have the time they need for better business partnering.
Although technology plays a vital role in innovation and finance function success, it’s not the whole story. The survey shines a light on the behaviors that characterize true innovators in the finance function. In nearly half of all organizations, culture issues and in-house politics block the path to change. In contrast, innovative finance functions are not easily derailed by in-house politics and cultural barriers. Instead, they embrace innovation and do not punish failure—they know that early failure is part of the learning experience.
People are the ingredients to success
At the top the list of successful innovation ingredients are the people. Eighty-seven percent of senior finance professionals say they need people capable of implementing change, like an “innovation champion” that can manage the processes and technology essential to driving change. Forty-five percent of CFOs and senior finance executives cited a lack of tech-savvy talent in the finance function as an obstacle to innovation, yet only 18 percent of truly innovative organizations cited lack of tech-savvy talent as a stumbling block.
Incorporating innovation objectives into personal appraisals and a dedicated budget for innovative ideas are also drivers of change, and this reaches the heart of cultural buy-in for innovation across the organization. CFOs understand that finance innovation must be driven from the very top of the organization, beginning with senior management and filtering downwards to cultivate a culture of innovation that’s connected to personal development goals.
The good news is that success breeds success; innovative finance functions attract innovative people. Nearly 90 percent of senior finance executives would relish the opportunity to lead a truly innovative project, and 73 percent would even change organizations to be more involved in innovation.
What drives innovation in finance? Read the report.