When we think about technological transformation, companies have tended to segment between early adopters and another group of employees who are more resistant to change and who were called laggards. As organisations witness rapid transformation, this typical segmentation does not always capture the reality.
When it comes to investing in technology, chief financial officers (CFOs) have been traditionally positioned as resistant to change given not only the complexity of the task at hand, but also the costs without any reassurance of success and positive impact on business.
As the steward of resources, the finance department headed by the CFO is often seen as demanding cost efficiency, spending cuts and hitting revenue targets that would ultimately take their toll on the pace of innovation and digital transformation. This tension is understandable given the current macroeconomic climate, but does not justify following a no-innovation policy, especially with potential opportunities to increase productivity and customer satisfaction.
In such a complex and competitive environment, a knowledge-based economy thrives with talent providing companies an edge over competitors. In this context, CFOs are increasingly looking at leveraging resources to drive innovation and customer value, create growth opportunities, and mitigate risks.
As such, the opportunity for CFOs is to help the organisation master the balancing act when it comes to innovation by preserving the data-rooted business model. In this context, signing off budgets for innovation projects would stem from a realisation of their value in driving the core business and unlocking growth opportunities.
■ Determine your innovation purpose
Before starting any innovation project, team members including the CFO and CIO must be aligned on the purpose of innovation. Most importantly, this should be tied to the overall strategic business objectives. No party should have a different set of expectations, but rather agree on these upfront and measure successes along the way.
In most cases, the purpose usually reflects the following goals: transforming the customer experience, optimising operations and achieving greater efficiency, calculating income revenues, or simply investing to stay in business by adopting latest technology trends.
■ Bank on talent
Innovation is a complex, company-wide endeavour, it requires a set of robust practices and processes to structure, organise, and encourage it. Therefore, today’s CFOs should be open to the idea of adding new skills and capabilities to their team and the wider organisation in an aim to support the emergence of an innovation culture.
Also, CFOs should work with human resource departments to build a talent agenda that factors in tomorrow’s business needs. For example, in RSA’s line of business, it was only a few years back that the customer journey began increasingly shifting towards mobile and digital which requires a new set knowledge and skills.
■ Be prepared to face failure along the way
Moreover, it is critical for CFOs to work with other members from the leadership team to foster a company culture that encourages employees to explore ideas and experiment with them. Therefore, innovators should not be assessed on whether they have succeeded or failed.
Instead, organisations should have a performance management model that recognises that innovation requires failure, and even rewards employees; at the end of the day, projects can still provide valuable learning experiences that would reap benefit in the future.
■ Embrace change
A key ingredient to successful innovation projects is agility; being able to pivot around set targets when things are not progressing as planned is crucial. In these cases, CFOs must learn to encourage a culture of failing fast instead of trying to salvage it and ending up making more investments in the process.
More importantly, finance teams headed by the CFO should measure the success of such projects against business objectives by asking whether it is worth increasing the company’s risk exposure in the process of seeking positive results in the long-run.
If we put the inherent tension that innovation costs bring to the CFO portfolio aside, we can start to realise that there is a true opportunity cost for resisting innovation. The actual cost is when innovation ideas do not receive internal support and funding to generate value.
Elena Stukanova is chief financial officer at RSA, UAE & Bahrain.