How CFOs Can Drive Innovation  

15 March 2017:

Innovation is not often spoken of in relation to the finance function. Many still labor under the misconception that it is the preserve of bean-counting number droids. However, the strategic importance of innovation initiatives, and the potential for them to turn into financial black holes, mean that it is now something they have to be heavily involved in. Roughly 95% of innovation attempts fail to return their capital, according to research from Doblin, the innovation arm of Monitor Deloitte, and CFOs play a vital role in ensuring that their organization bucks the trend.

The CFO, and the finance function as a whole, has a number of responsibilities key to ensuring innovation is managed carefully and optimized for growth, particularly when it comes to early stage investment and acquiring funding. They must strike a careful balance between keeping the financial risks in check and and encouraging projects. One idea floated by John Levis, Senior Principal of Deloitte, is to take a portfolio approach to funding and investing innovation. He notes that this approach allows CFOs ‘to manage the overall level of risk in innovation projects while allowing the organization to pursue innovation initiatives that might have a higher level of risk than the standard risk threshold.’

CFOs must also stay up-to-date with consumer trends, as they could necessitate potentially costly infrastructure changes. They need to ensure the capital flexibility is in place so that this can be done without putting the bottom line at risk, while also maintaining a level of capital that allows for funding of innovation projects to exploit any changes in consumer behavior.

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Source: innovation enterprise

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