Guest Post: Making the Case for Innovation in the Finance Function
This is a guest post from Gary Simon, BSc, FCA, FBCS, CITP, Chief Executive of FSN and Leader of The FSN Modern Finance Forum on LinkedIn with 52,000 members.
In the fast-evolving world of start-ups and business model disruptors, it is foolhardy for any business to expect to grow and compete without innovating. Yet, two-thirds steadfastly remain unable to find the time or inclination to promote innovation in their finance function. After years of single-minded focus on customer-facing technologies, archaic finance functions are holding back entire organisations because of a torpid culture, a lack of time and the inability to recognise the very existence of innovation in the office of finance.
According to FSN’s Innovation in the Finance Function Survey 2018, early adopters of technology across the enterprise (taking in the finance function and other operational areas of the business) outperform their peers. They close the books faster and forecast more rapidly and more accurately, so they can stay ahead of market changes and effectively compete with agile businesses.
But the survey also shows that those early adopters make up only 23% of CFOs and senior finance executives surveyed. A further 11% said they innovate but only in the finance function. That leaves 54% who said they would like to innovate but rarely find the time, and 11% who said they rarely, if ever, even discuss it. These remaining two-thirds of CFOs run the risk of getting left behind their competitors when their finance processes can’t keep up with the rest of the business.
Cultural apathy in the finance function
One of main reasons why innovation slips down the corporate agenda is a lack of cultural buy-in. You don’t need a dedicated innovation department filled with inspiring gadgets and oversized beanbags, á la Silicon Valley. But you do need encouragement from senior management to propose new ideas, support to put them into practice and the opportunity to take risks, otherwise innovation will be stifled before it can even begin to grow.
Almost half of survey participants said their approach to innovation was too conservative, 34% are too afraid to make mistakes, so innovative ideas get shelved, and 45% said finance function initiatives were not perceived as innovative by the rest of the management team.
Lack of time leads to legacy system shortcomings
To avoid cultivating a culture of innovation, many organisations blame a lack of time. The common excuse is that there is not enough time to spend on projects that don’t get the job done. But saving time by shelving innovation is a false economy because it is precisely innovation that can ultimately save time. New technology is making processes faster, learning from repetitious tasks to find patterns and improve procedures.
In the meantime, 67% of CFOs agree that too many resources are tied up with legacy systems and traditional ways of working. If they don’t find the time to innovate away from legacy systems, they will not be able to compete effectively. And if your competitors are getting faster and nimbler as they innovate, it won’t be long before your company is trailing in their wake.
CFOs also know it is important to be able to measure the success of innovative projects in order to make the case for investment in the boardroom. But only a quarter of CFOs believe traditional methods of return on investment (ROI) are a suitable measure of innovation success. And 70% don’t think these methods adequately capture the intangible benefits of digital innovation.
Overcoming the innovation obstacle course
So how can businesses overcome the obstacles to innovation? Leadership is pivotal. CFOs play as important a role as CEOs in promoting a culture of innovation. If there is inertia in the rest of the business, the finance function must lead the charge, disseminating a culture of innovation from its key vantage point at the very centre of the business. Recognise that making time actually frees up time, and count the intangible benefits of digital technology into the investment case.
Being a trailblazer for the early adoption of innovative technology will attract the right talent. 73% of CFOs and senior finance executives would change organisations for the opportunity to be involved with leading-edge innovation.
Everyone would love to have a dedicated innovation lab, permanently staffed and full of inspiring, idea-generating tech geeks lounging on beanbags and playing ping pong. But this Silicon Valley-inspired stereotype of dedicated innovation is not feasible for most companies. And it doesn’t have to be. Innovation is an attitude translated into an action, and it can just as well be done sitting in the finance cubicle of a small London office as in the brainstorming suite of a tech giant in San Francisco.
You can read about some of latest innovations from Workiva in its Innovation Showcase.