Almost 90% of financial executives agree that innovation is more important to their companies now than five years ago, yet only 16% believe their companies are “highly successful” at achieving innovation, according to CFO Research.
More than 160 financial executives and CFOs from middle-market companies in the technology, health, and industrial/manufacturing industries participated in the national survey, done in in collaboration with Cherry Bekaert LLP (“the Firm”).
About half of respondents believe the CEO or business owner is the driving force behind innovation. However, more than half the respondents also say the CFO brings discipline and analytical thinking to the innovation process.
The survey, Finance Function’s Role in Managing Innovation, also brings to light the critical role CFOs play in the process of innovation. About half of respondents believe the CEO or business owner is the driving force behind innovation. However, more than half the respondents also say the CFO brings discipline and analytical thinking to the innovation process.
A majority of survey takers say they would like to see CFOs have a larger role in “evaluating and selecting innovation projects to pursue,” and more than 40% think financial leaders should be involved in “evaluating outcomes and measuring the success of innovation projects.”
“Middle-market finance executives understand innovation is critical to financial success and their role can be a key contributor to successful innovation,” says Dawn Patrick, CPA, partner and industry leader of THInc, the Firm’s technology, health, and industrial practice.
CFOs bring practical, analytical thinking that can often guide an idea forward into reality through process and establishment of quantitative goals and metrics. The role of the finance function in guiding a company’s decision-making around innovation should not be underestimated, Patrick says.
Other findings include 50% saying that developing new products or services to meet evolving customer demands is the most important action their company can take in the next five years to be successful at innovation. Making major changes to the business model comes in second, with 32.5%.
When questioned what their company consistently employs to help manage innovation, specific metrics for evaluating the success or outcomes of innovation projects ranks first with 44.7%. More responses include:
- 42.5% — Formal documented processes for evaluating progress on innovation projects (e.g. standardized milestones, stage-gating).
- 42.2% — Formal return on investment (ROI) calculations.
- 38.5% — Formal documented processes for developing and selecting innovation projects.