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In Search of the New

Most CFOs say innovation is a top priority. How can they make their efforts pay?
Kate O'Sullivan, CFO.com | US
April 19, 2010

After fading during the financial crisis and the recession, innovation has returned to the top of executives' agendas, according to a new study by The Boston Consulting Group, which surveyed 1,600 senior executives around the world on the topic. Sixty-five percent of finance executives say innovation is one of their top three priorities, and 85% of them say it is an important part of their company's strategy to emerge from the recession.

While CFOs clearly see innovation as important, there are many differences in how they view the issue compared with other senior executives who participated in the study. There is a disconnect between how much CFOs are emphasizing innovation compared with their executive peers, 72% of whom call it one of their top three priorities. Finance chiefs are more satisfied with their company's ability to measure innovation than other executives. To be sure, all respondents say funding the right ideas is the biggest challenge their company faces with regard to driving innovation during the next five years. But CFOs are significantly more focused on reducing the cost of innovation than are their colleagues. Other executives, in contrast, are more focused on prioritizing the right ideas.

The biggest discrepancy in the study lies between how CFOs view their role in innovation and how others see them: while 22% of finance execs say they are the biggest force driving innovation at their company, just 3% of non-CFOs see them that way. Jim Andrew, head of BCG's global innovation practice and a senior partner at the consulting firm, sees an opportunity for CFOs to become more involved in the innovation process and to close the gap between their views and those of others in their organization. "CFOs have a very important role to play in innovation. I think precious few actually do that, however," he says. "But literally every CFO I've ever talked with has a desire to play a bigger role in innovation."

One area where finance chiefs can have a major impact is in helping their company figure out how to better measure and prioritize its investment in innovation — two areas where other executives are dissatisfied, according to BCG's survey results. "We frequently see that companies don't have agreed-upon criteria for evaluating innovation projects across the company," says Andrew. He suggests that companies not only measure the results of their innovation efforts — such as whether the company is gaining market share — but also track metrics related to the innovation process and the resources the company is putting into its innovation efforts. For example, how many ideas are being generated? How long does it take to make a decision about an idea? How many of the company's top people are working on innovation?

With the world's largest developed economies facing years of low-single-digit GDP growth, "the CFO more than anybody else understands the growth imperative that's facing most companies today," says Andrew. "If you've got 70–80% of your business in the U.S. and Western Europe, you're going to have a real problem if you can't find a way to grow faster than those markets are growing. In most cases, innovation is the best way to do that, and CFOs understand that."

 




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