This is the final blog in a series of posts written by May Van, Executive Coach at Kelleher Associates, on the importance of fostering an innovative culture in today's business society. Thank you, May, for your continued contributions and insights to The CFO Alliance.
The CFO's role in risk management, be it innovation or investment, is an integral part of the business management process. The CFO's primary role is to minimize the financial risks. Discipline in long and short-term planning is the key to ensuring innovation risks are well managed. It is counter-intuitive. We tend to think innovation just happens when it takes planning to make innovation and its benefits a reality.
- The executive team establishes the strategic framework for three/five years where potential products, M&A, and others investments are discussed and agreed upon.
- The CFO provides the financial framework that is acceptable to investors. It should include some placeholders for revenue growth and cost reduction from innovations.
- The CFO is part of the team selecting/confirming innovations to be continued/initiated the coming year.
- The CFO ensures the financial plan, including the benefits of the innovations, meets the expectations and are aligned with the operational plan.
- As the operational plan is being implemented, the CFO ensures accurate and timely data and analyses, including financial, are available to provide insight.
- Using dashboards and indicators, the CFO makes recommendations to the executive teams if and when changes need to be made to the operating portfolio to meet the financial plan. If the above planning activities are done well, changes can be implemented quickly to minimize any negative financial impact.
The first two of the three innovation essentials in my recent blog posts, where to find innovation and how to fund it, should be fully adopted by the CFO in the business risk management process. The third, how to nurture an innovative culture, is the responsibility of the entire enterprise.
There are two additional points in creating an innovative culture that are worthy to repeat. Consistency is required in creating and preserving a culture of innovation. Implementing innovation practices for a few years does not make an innovative culture. Second, the idea that innovations require a large investment in resources and time is outdated. Many modern inventions are created with the intention to improve rather than transform. It is my hope that with these blogs, CFOs can play a critical role in creating and sustaining an innovative culture through their excellence in financial planning and risk management.
The CFO Alliance Q3 Roundtable will focus on leading during business and industry disruption. Join us in your major market, or for our Roundup webinar, to discover the growth drivers that your peers are investing in to build a culture of innovation and the obstacles they face in managing innovation-related risks.