The traditional role of the CFO is quickly being overtaken by a role that performs many invaluable tasks necessary for success. Driving innovation has just been added to the list.
CFOs have often been the most risk-averse of C-suite inhabitants, but in a world of constant challenges posed by globalism, evolving technologies, changing customer behavior and expectations, and growing regulatory issues, some risk is inevitable. In today’s competitive climate, that risk is often tied to innovation and experimentation, all with a goal of satisfying customers and growing the customer base.
Innovation plays a critical role in a company’s growth
A recent article in CFO, “New and Improving,” states that CFOs need to be ready to take on this new challenge, “spreading the impulse to innovate throughout the business.” This conclusion is based on a CFO Research survey of 161 finance executives at middle market companies. These executives acknowledged that innovation is absolutely necessary for their company’s growth. Of those surveyed, 50 percent said that their company was somewhat successful at innovation; however, only 16% considered their company highly successful.
And it isn’t enough to implement incremental innovation; instead CFOs acknowledge that bold moves are necessary. A full 88 percent noted that innovation was more important to their company now than it was five years ago. But innovation carries with it the need for organizational changes and that can be difficult and costly. On the other hand, companies have found that innovation can result in cross-functional collaboration which strengthens a company’s culture. The result: failure is an option that must be accepted though not sought after.
The biggest reason for innovating…meeting customers’ needs.
When asked what action over the next five years would be most important for the company to take in order to be successful at innovation, the number one response by far (50%) was developing new services or products to meet evolving customer needs. The next closest response was making major changes to the business model (33%). Companies acknowledge that whether they are B2C or B2B, we all live in a customer-centric world and maintaining and strengthening the company/customer relationship has never been more important.
Even though article after article stresses the value of big data and the need to accumulate more information, that information is meaningless unless it’s followed by specific actions. The growth of the business still depends on using the accumulated data to better understand customer behavior and respond to it.
The CFO survey found that C-suite leadership is the driving force behind innovation, with half of respondents indicating that that role is played by the CEO or owner of the company. Yet CFOs see themselves as either as equal partners with others (24%) or as advising others (23%). That driving force should be embraced and encouraged throughout the organization.
As business changes, so undoubtedly will the CFO’s role, but for now, the CFO will need to play a starring role in focusing on and encouraging innovation.
Read the full article to see how finance executives are embracing this new responsibility.