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Be willing to endure some growing pains, says an innovation guru.
Marielle Segarra, CFO Magazine
February 1, 2012
Companies often declare that "innovation" is a top priority and spend hours in conferences and meetings discussing it, to little effect. That's because many businesses don't know what innovation really means — or what challenges it presents, says Steve Faktor, author of Econovation, former vice president and head of the Chairman's Innovation Fund at American Express, and founder of Ideafaktory, a company that develops patents and incubates start-ups. "When you have something that sounds cool and gives you hope that creativity will flourish in your business, people gravitate toward it," Faktor says. "But the reality is that most large organizations aren't built to innovate."
To succeed, Faktor says, companies must be willing to occasionally "cannibalize [their] own business" and endure some growing pains as a new product finds a market. Those aren't easy decisions, and that's where the CFO comes in. If an R&D team came up with a new technology that would replace or make obsolete a product with a predictable revenue stream, for example, would the company push ahead with it, even if it meant taking a step back today in order to eventually take two steps forward? Is the CFO prepared to "talk people down" from unrealistic expectations or help them avoid analysis paralysis?
Faktor says that CFOs should set reasonable criteria, using an uptick in adoption rate as a measure of success, for instance, or establishing trigger points at each stage of development that will determine whether a new idea continues to receive funding. Compensation plans that reward people for taking careful risks can also help, because they send a powerful signal that the company is serious about innovation.
Perhaps most important, innovation should not be something people forget about when they leave the conference room. If a company is truly innovative, Faktor says, it won't need to call meetings to discuss its "innovation strategy," because that strategy will have become part of business as usual.