Regulatory hurdles, lack of budgetary resources, organizational aversion to risk, organizational processes and or policies—or lack thereof—lack of creativity, lack of urgency. These are all factors identified as significant impediments to innovation by CGMAs participating in the latest AICPA Economic Outlook Survey as summarized in Ken Tysiac’s recent article for CGMA Magazine, “How finance and accounting can boost innovation.” In fact, 41% of respondents cited regulatory hurdles and at least 21% of companies are impacted by each of the impediments.
On the other hand, only 31% of respondents say that they have a culture that drives or supports innovation and only 17% have financial incentives for employees who innovate successfully. Only 15% say their company regularly surveys its employees for ideas on how to innovate, 13% have a clearly defined risk appetite that sets the parameters for innovation, 10% have a “stage-gate” process for early stage innovations, and only 5% use crowd sourcing. Perhaps most significantly, 41% of respondents to the survey indicate that their company did not use any of the six factors identified to drive or support innovation.
So, does this look like a disaster, or an opportunity? Fortunately, while only 30% of the respondents indicated that the finance and accounting function contribute effectively to innovation efforts in their organization, 74% indicated that they thought finance and accounting should play an important (21%) or extremely important (53%) role in innovation efforts in their organization.
This definitely underscores the thrust of the recent CGMA report Managing Innovation: Harnessing the power of finance which is to show why and how management accountants can help promote a culture of innovation in their organization.
Financial professionals certainly have the skills to address the significant impediments to innovation. Our organizations look to us to provide leadership on the budget, risk management and dealing with regulations, and policy and processes are also parts of our skill set. With the proper mind-set we can leverage these skills to create not only the necessary conditions for sustainable business success but the greater sense of urgency that seems to be missing from the culture of many organizations.
Steps to supporting a more innovative business detailed in Managing Innovation include:
- Creating an innovative mindset – transforming finance into a business partner that can help innovation teams succeed
- Nurturing creativity – finance must work in an environment where uncertainty is part and parcel of the process
- Preparing the path to profit – from building cash flow models to understanding costs and building the business case, finance can pave the way to commercialization
- Matching metrics to the stage of development – a phased process allows for breathing room, but limits the downside financial risk
- Taking a portfolio and balanced view of risk – supporting innovation requires strategic as well as financial skills