CIMA and the AICPA report finds that management accountants play a vital and growing role in driving advancements at some of the world’s most innovative companies.
The whole world is engulfed in revolution; the advancement of technology, population and economic pressures, companies are out to recruit the most talented individuals. CIMA accountants are equally equipped to pave the way to business empowerment.
In those businesses, the CFO and finance team are deeply embedded in the process of innovation and have a clear framework to let new ideas take shape. They partner early with other departments to identify concepts with market potential, replace rigid financial metrics with staged measurements to avoid eliminating ideas too soon, and accept that failure is a tolerable outcome for projects along the path to commercialisation.
The conclusions are captured in a new CGMA report, “Managing Innovation: Harnessing the power of finance” and based on interviews with global finance leaders at companies including Coca-Cola, Royal Dutch Shell and BT Group.
Royal Dutch Shell CFO Simon Henry FCMA, CGMA, explains:
A finance function needs to be able to understand the business well enough to know what is a worthwhile activity but also, in this part of the business, to have a bit more of an open mind. It is less mechanistic and has the ability to live with ambiguity, to identify risk and to manage it.
Doug Bonthrone, Director of Global Services Strategy at Coca-Cola added:
There’s an art to innovation but there needs to be some science that goes with that; understanding the forward-looking side of strategy and being able to scope the opportunity in all these areas, the management accountant is really critical. Whether it’s a new product, process or business model, the management accountant can help assess the results, evaluate how things have gone and learn lessons.
The report recommends five areas where finance professionals should take action:
Create an innovation-centric mindset. Develop a framework in which innovation can thrive and accept that sometimes projects will fail.
Nurture creativity. Explore ideas like ring fenced budgets that offer more flexibility for the innovation process.
Prepare the path to profits. Finance can be a valuable part of innovation teams – for example, helping build more robust business cases to secure further backing.
Match metrics to the stage of development. Finance leaders shouldn’t put metrics used in the operational business around nascent or experimental initiatives. Consider a phased approach to give an idea room to breathe.
Take a balanced view on innovation risk. Companies increasingly employ a portfolio of strategies to drive innovation. Management accountants should seek to create an opportunity framework that promotes clarity, transparency and discipline across the total portfolio.