For modern finance functions to succeed in today’s cutthroat business environment they need to innovate, yet disappointingly few finance organizations embrace the opportunities that innovation can provide. The consequences of remaining stagnant in the face of innovative competition can be very damaging for both the efficacy of the finance function and the entire organization.
State of the Market in Finance Innovation
According to FSN’s Innovation in the Finance Function Survey 2018, just 23% of finance functions say they are early adopters of technology, have an active culture of innovation and make time for it, reward innovation and play an active role in innovation across the enterprise. A further 11% are involved in innovation but limit their remit to finance function innovation only. This leaves a formidable 66% that either do not regularly discuss innovation or have simply given up trying for lack of time, funding, or support from the rest of the board.
These laggards are missing a valuable opportunity. The survey, thought to be the first time that there has been an in-depth study of attitudes towards innovation in the finance function, found that finance professionals who put innovation high up their agenda outperform their peers. For example, they close their books more rapidly and forecast their results more quickly and accurately. By contrast, finance functions that do not engage in innovation say that not only do they risk getting left behind the rest of the organization, but that the wider organization risks falling behind the competition as well.
The broad lack of innovative impetus leaves many finance functions tinkering at the edges of legacy systems, for example implementing small steps in automation and integration rather than embracing the innovative technologies that could propel them to superior performance.
Moving Finance Forward
Thankfully, the report shines a light on some of the steps that finance organizations can take to break free from the shackles of legacy systems, and unsurprisingly it requires a combination of cultural and organizational change as well as some of the latest technologies.
Fear of failure is corrosive, and an unsupportive company culture can easily stifle innovation. Enlightened organizations allow their workforce to experiment, viewing early mistakes as part of the learning process rather than punishing individuals that don’t succeed the first time around. They nurture ideas, fund them and give the proposers room to develop. The research finds that appointing innovation ‘champions’, carving out dedicated innovation budgets and building innovation objectives into employees’ personal appraisals are three vital steps to kick-starting innovation.
But the survey also highlighted that finance teams expect their CFO to lead the charge. CFOs must be seen to drive innovation and are uniquely placed to help ensure that knowledge is shared across the enterprise. They are also best placed to develop the business case for change, after all, lack of an agreed method of calculating ROI means that 54% of innovative projects fail to get off the ground.
Finance functions must keep pace with technological change or risk obsolescence and there are clearly many areas that require innovative improvement. You can read about some of OneStream’s latest innovations in their “Innovation Showcase”.
But in attempting to break out of the legacy rut it is important to remember that successful innovation is contagious. 88% of CFOs say they would relish the opportunity to lead a truly innovative project, with 73% going as far as to say they would change organizations for the opportunity to be involved with leading-edge innovation. Success breeds success - it just requires CFOs to take the first step.
To learn more, download the FSN Innovation in the Finance Function Survey 2018.
Gary Simon, BSc, FCA, FBCS, CITP is the Chief Executive of FSN and Leader of The FSN Modern Finance Forum on LinkedIn with 52,000 members.