Is the CFO an enabler or inhibitor.

AuthorHess, Edward D.
PositionInnovation

In the current low-growth environment, most businesses strive to be innovative to drive value creation. In many cases though, innovation initiatives underperform because leaders fail to confront key internal obstacles to innovation: the natural proclivity of organizations and people to be anti-innovative; an inability to accept the fact that most innovation initiatives fail; and the dominance of financial metrics inserted at inopportune times during the 'innovation processes.

Overcoming those obstacles depends on the nontechnical ability of the chief financial officer to create and manage dual financial systems (operational excellence as well as innovation) simultaneously. These dual financial systems require a fundamentally different mindset, along with processes and metrics.

Innovation has become a business buzzword, and though many companies invoke its use, it means different things in different organizations. For now, let's define innovation as "a big, new or different product, service or business process." The word "big" here is intendec to differentiate an innovation from an improvement. Notice this is not defining innovation as a big, disruptive innovation or industry game-changer. Yes, that is innovation, too, but it rarely happens.

"New" means attempting something significantly different than what has beer done. New is new to the company. It does not have to be unique. Innovation occurs when a company breaks out of its legacy thinking and acting model in a significant way.

For example, when a company cannibalizes its own productor delivery channe or when it captures some other business's value in the value chain that is innovation. When a company changes its customer relationship management process or initially enters social media marketing that is a big change it, to , is innovation.

Innovation Best Practices

There are requirements for a company to be successful at innovation: individuals and organizations have to have the right mindsets; organizations have to enable and promote innovation with .an internal aligned system; and individuals and organizations must correctly use the right processes to create innovation.

The right mindsets for innovation are growth mindsets characterized by curiosity, willingness to explore, challenging assumptions underlying existing practice! and the willingness to go outside one's comfort zone to explore and engage in low-risk experiments. That is, not fearing the unknown, uncertainty and failure.

An aligned internal system enables and promotes the right behaviors and utilization of the right processes that increase the probability of innovation. What has to be aligned in a seamless, consistent and self-reinforcing manner? Strategy, culture, structure, leadership behaviors, human resources policies, measurements and rewards must be aligned to send consistent messages that drive the right mindsets and behaviors necessary for innovation.

This internal system is mission critical. Culture and leadership behaviors determine in large part whether one will be successful. Innovation requires both high employee engagement and customer-centricity. The internal system has to produce those results. Innovation requires a holistic system approach not...

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