CFOs must take a "hands on" approach to innovation
Chief financial officers (CFOs) have a vital and growing role to play in driving innovation, according to research published today by the Chartered Institute of Management Accountants (CIMA) and the American Institute of CPAs (AICPA).
The research found in the world's most innovative companies, the CFO and finance teams are deeply embedded in the process of innovation and have a clear framework to let new ideas take shape.
It stated that whether its shepherding new ideas from concept to commercialisation or considering the risks associated with various choices, finance can play a vital enabling role.
The research found CFOs and finance teams in innovative companies partner early with other departments to identify concepts with market potential, replace rigid financial metrics with staged measurements to avoid eliminating ideas too soon, and understand failure is an acceptable outcome for projects along the path to commercialisation.
"The role of finance in all of this is multifaceted," Royal Dutch Shell CFO, Simon Henry explains in the report. "A finance function needs to be able to understand the business well enough to know what is a worthwhile activity but also, in this part of the business, to have a bit more of an open mind."
"It is less mechanistic and has the ability to live with ambiguity, to identify risk and to manage it."
Doug Bonthrone, director of global services strategy at Coca-Cola, said: "There's an art to innovation but there needs to be some science that goes with that: understanding the forward-looking side of strategy, being able to scope the opportunity.
"In all these areas, the management accountant is really critical. Whether it's a new product, process or business model, the management accountant can help assess the results, evaluate how things have gone and learn lessons."