The CFO, Innovation & Hitting the Numbers

Gary Hamel asserted in an interview with CFO magazine in 2000 that finance officers are the enemy of innovation. But!

We're spending more and more time with Chief Financial Officers these days than ever before. Why? According to some research done by CFO magazine, more than 85% of financial executives expect their companies to have to adjust to the post recession economy by shuttering or selling business units, deal with a significant increase in competitive challenge, and adapt to new and unwelcome business regulation.

Our friend Mark Pover, CFO at Virgin HealthMiles, puts it this way: "In the rapidly changing environment that we're seeing, you have to be innovative in how you approach those changes - those who embrace the unknown as opportunities are the ones who achieve and succeed. Panic will kill you every time. Remember, we've all seen this before and I guarantee you we'll get through it and then we'll see it again - take this opportunity to learn."

Pover and other forward thinking CFO's we are working with see the need for two major responses to this emergent condition.

1. They must energize their people to monetize their imaginations by rapidly finding new revenue opportunities, both via savings and growth.

2. They must build a "first in sector" culture of innovation that sustainably drives growth in value for the organization. 

Yes, the CFO. Formerly Hamel's enemy of innovation. Smart CFO's, focused on adding value to their organizations are doing what Jack Jenkins-Stark, CFO of BrightSource Energy, told CFO magazine he does: "The CFO needs to shape the conversation (on innovation) not stifle it."

And these two needs are exactly what is driving this attentiveness to innovation culture that we are seeing from senior leaders at the enterprise level. The operant question seems to be "What might be all of the things I can do to unleash short term revenue growth while at the same time building a long term growth engine?" From this question emerges the following two primary strategies:

• Purchase competency that can rapidly be monetized (M&A, hiring)

• Leverage the current capacity more effectively (efficiencies and more rapid development of new value)

CFO's following either path soon arrive at the realization that it is the asset that has the most potential value yield, the minds that are being paid day to day to drive growth (either current or newly acquired)  that must be more effectively utilized. When the question of how to do that emerges, the twin challenges of better collaboration and more effective creative problem solving / innovation skills show up as the most likely to produce value -- immediate and long term -- if solved.

Compounding this challenge is the shortening of the viewable horizon for planning. We're drowning in data, yet it has become much more difficult to predict the business conditions that we will all be operating in. CFO Magazine quotes the CFO of Starwood as deciding to forgo 5 year strategic planning in favor of more intensified one year planning. In a rapidly flexing business climate like the one we will be in for the predictable future, it will be the creativity and adaptability of the "mind capital" of any organization that will differentiate it for success.

Based upon what we are seeing in these days with our clients, it will be those CFO's who meet these challenges (collaboration, creativity, innovation culture) well and wisely, and who avoid the bad buys of an emergent field of competency who win the race to value. To those of us who were the early pioneers, who mapped the territory and researched the best routes to the gold fields, the field of practice that could be called "Innovation Experts" feels like the wild west right now. There is huge peril. While the science of innovation culture creation is well understood, and backed by research, few have been exposed to that research as part of their academic and career development. We will continue to share the truth of what works -- and what does not -  on these blog pages and in our newsletters. 

Pover puts it this way: "You have to force time and budget into the system for creative process to occur." Have a question about how to do that? Want to share a horror story or success? Teach us all, here, with a comment below, or give one of our people a call. We'd love to share more!

Mark Pover and Bob Eckert will be interviewed on a webinar about these dynamics on October 20th. Register here: Driving Profits, Corporate Performance & Business Agility