CFOs continue to have an innovation problem—or, rather, teams in their organizations think they do. Research shows that many business unit leaders view the CFO and the finance team as obstacles, not allies, to the innovation process.
That perception isn’t the reality, of course—but it’s easy to see why it exists.
Boards, CEOs, and others on the senior-management team rely on the CFO to be an independent arbiter and guardian against overoptimism—or conservatism—in annual planning and budgeting discussions and in performance management meetings. During these conversations, CFOs must help the rest of the senior-management team assess proposals from business unit leaders.
CFOs must also quantify the potential value from those proposals while accounting for the inevitable financial and strategic uncertainties associated with new products or services or with process or systems changes.
To become true collaborators and allies for innovation—not just seen as authority figures holding the purse strings—CFOs need to change their colleagues’ (and in some cases their own) perceptions of their role in innovation.
In our experience, a CFO can take five actions to flip the script: formally build innovation goals into the company’s plans for growth, discover and validate untested assumptions about an innovation project, speed up the standard budgeting process, establish metrics specific to innovation projects, and upskill finance teams and empower them to help lead changes in the company’s culture.
Making changes in these areas will take time and a commitment to developing an innovation mindset. But CFOs who make the effort may end up working more effectively with project teams and advancing corporate innovation in a way that dovetails with the company’s overall strategic aspirations and promotes growth and resilience.
How the CFO can better support innovation
At base, the innovation process is about allocating resources toward initiatives that create value for a company and, ideally, change an industry. To innovate successfully, companies must identify the most promising projects and set clear goals for realizing them, regularly measure progress in reaching those goals, and change hearts and minds—internally and externally. The CFO can promote success by focusing on the following five steps associated with objective-setting, metrics, and culture change.
1. Build innovation goals into the company’s plans for growth
2. Discover and validate untested assumptions about an innovation project
3. Speed up the standard budget process
4. Establish metrics specific to innovation projects
5. Upskill and empower the finance team
Read More:
Courtesy: McKinsey & Company
ABOUT THE AUTHOR(S)
Ankur Agrawal is a partner in McKinsey’s New York office, where Scott Schwaitzberg is a solution associate partner. Matt Banholzer is a partner in the Chicago office. Eric Kutcher is a senior partner in the Bay Area office.