Are finance professionals key players or just cheerleaders on the fringes of innovation. Does it matter...?
In our experience, the process and practice of bringing to market successful new business models, products and services is a team sport. Rather than the preserve of a few clever individuals in a back office somewhere, effective and sustained innovation is driven by collaboration, diversity and informed participation.
Rebecca McCaffry, in her article, 'Risk and Innovation - Polar Opposites' (CGMA) quickly gets to the heart of challenge when it comes to the role of finance professionals in innovation: "We don't like failure, losses, negative net present value (NPV), unbalanced balance sheets..." It's a professional culture thing; a preference for precision, certainty, and facts. Perhaps it's a 'right-brain preference' thing...
"[As finance professionals] we don't like failure, losses, negative NPVs, unbalanced balance sheets..."
But beyond the territory of cliches and stereotypes lies the simple reality that finance professionals hold privileged positions in organisations. They have excellent analytical and problem-solving skills. Paraphrasing AICPA's Dr Martin Farrar in a recent report, finance professionals are at the heart of organisational governance, strategy, risk management and business performance. They usually own the processes, systems, and management information that control change and measure value.
So, does this particular community of organisational influencers impact the process and practice of effective innovation? How do they interact with innovation currently, what role might they play, and what challenges do they face in doing so?
We suspect that CFOs, FDs, Management Accountants, and Commercial Directors are often left out of the innovation process. Or perhaps they're engaged only when it comes to asking for money to fund an innovation project; usually, when it's too late for them to help shape the assumptions and thinking at the heart of the concept.
This is a frustrating experience for everyone involved, and the 'big idea' loses value along the way.
Gate-keeper behaviours can erode innovation value by an average of 50%...
In fact, research from the Innovation Engineering Institute shows that reactive, 'gate-keeper' behaviours and corporate processes (focused more on risk elimination than value creation) can erode innovation by an average of 50%...
That's how big and bold ideas become boring 'safe bets'… It doesn't have to be that way.
So how can finance professionals help? What role should they play in innovation as value creation? What innovation skills might they need?
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