Balancing Act: CFOs Must Meld Innovation and Control

Here's why companies should look to their CFOs as "chief financial innovators."
Tom CrawfordJuly 2, 2018
Balancing Act: CFOs Must Meld Innovation and Control

Risk and caution. Speed and patience. Creativity and restraint. Innovation and control. Life, and business, are made up of finding the shifting balance between extremes and knowing when to drift toward one pole or the other.

Tom Crawford

As a former CFO, I firmly believe that the role of finance goes far beyond financial control. Forward-thinking finance functions can support the business with its aspirations — from delivering new products to devising new business models or driving a richer customer experience.

Finance leaders should be enabling their business to have full control of their processes, end products, and ultimately their trajectory.

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The requirement for finance to support both innovation and business control can be seen across many types of businesses. For example, The Fat Duck, a Michelin star-rated restaurant in London, produces dishes that are highly creative but executed with strict process guides and tightly controlled cooking temperatures.

Napa Valley winery Opus One pursued the creation of the greatest wine in the world, using some of the most sophisticated processes and technologies available. And SpaceX imagined nothing short of the perfect rocket launch with the engineering and financial control to deliver it at 10% of the cost of alternatives.

Those are all great examples of equally applied innovation and control in business.

So how should CFOs look to apply this potential to accelerate their own business?

Innovation as a Core Competency

Historically, finance has just been a back-office function. However, CFOs now expect to take an active role in driving innovation across the enterprise.

At our recent RevConnect conference, Mark Flournoy, chief accounting officer at Intuit, commented, “Running the finance processes effectively and efficiently, that’s kind of table stakes. But [keeping] up with the pace of the business — making sure the back office is actually continuing to innovate and becoming as efficient and effective [as possible] in support of the revenue, the growth, and the offerings that come through — is absolutely critical.”

That sentiment matches what we’re seeing in the wider market. CFOs are pushing back against systemic underinvestment in finance architecture and “badmin” tactics such as the use of Excel spreadsheets to deliver reporting and information to the business.

Systems and processes that only provide backwards-looking data no longer support the kind of leader today’s CFO wants to be. Today’s CFO wants to use data and analytics to help deliver front-office innovation, advising on new business models, products, and services and helping guide the company into new territory.

But leaving behind “badmin” is not just crucial for innovation. The reality is that spreadsheets, constrained ERP systems, and manual processes increase risk, stifle creative thinking, and are a recipe for disaster.

If your back-office systems and processes don’t support front-office innovation, you cannot thrive.

To be sure, maintaining a deep understanding of the organization’s financial position is still a critical and highly valued role for CFOs. Efficient use of capital, tightly controlled costs, managing risk, and meeting compliance requirements are all necessary for a healthy organization.

Walking the Line

So how do forward thinking-finance teams maintain the balance between innovation and control, thereby helping their companies push the boundaries in smart ways that are backed by analytics while also keeping an eye on the bottom line?

We’re inspired by companies like T-Mobile, where the finance and marketing teams are constantly working together to develop new offers and products. When implementing the new revenue recognition standard, one finance executive acknowledged the importance of the finance function to product development and marketing, stating, “We had to think about how we were going to address new marketing offers and products in a way that didn’t stall innovation.”

In the insurance world, Asia-based FWD Insurance Group has added new offers, segments, business lines, and geographies. It should not be any surprise that it’s the first insurer in the world to kick off the implementation of a solution to address the IFRS 17 insurance-accounting requirements.

If you consider that most finance teams in 2018 still operate using spreadsheets, ERP systems that are unfit for their purpose, and black-box IT solutions, CFOs are constrained, curtailing innovation at the highest level.B

As the pace of business continues to move faster and complexity increases, this is the time for CFOs to step up and help their organization find the shifting balance between innovation and control.

Tom Crawford, a former CFO, is CEO of Aptitude Software, a provider of financial software.