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5 Ways Modern CFOs Can Drive Innovation Within the Finance Function

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As a CFO or finance leader of your organisation, your work influences each operation, product and service. Your organisation's innovation methods (and corresponding budget) are no exception.

Knowing where innovation avenues exist in your company and the value they bring can give you the necessary foundation for improving your related accounting, finance and treasury (AFT) decision-making. 

Below, we uncover some of the different types of innovation your company can explore and discuss how CPM software solutions can help grow your business planning and resource allocation efforts.

Key Takeaways:

  • How to think of innovation as value creation that provides outcomes of either increased revenues or decreased costs.
  • The types of innovation you need to be familiar with and how you can impact these approaches and bring added value.
  • How CPM software can improve your company's innovation development through integrations that unify data for stronger decision-making by providing greater context and identifying correlations between different datasets.

Defining Innovation as Value Creation

Think about innovation within your company as an opportunity for creating added value. Innovation usually presents itself in at least one of two possible outcomes that could either deepen an existing value pool or create a new one.

The first option is through the increased value of your organisation's products and services, which translates to greater revenue and returns. The second outcome of innovation comes from improved business strategies and operations that decrease costs to deliver a product or service. 

Truly beneficial innovation will often find ways to provide both outcomes (i.e., increased value with decreased cost). In other words, innovation is the continual practice of evaluating and adjusting the value-to-cost ratio of a project or operation. For today's CFO, this practice benefits from the use of CPM tools that offer accurate, up-to-date data for making quick and effective adjustments to value-to-cost ratios.

Recent data from the U.S. Census Bureau's ACES Report shows industry leaders understand that driving innovation and staying competitive often involves investing in capital expenditures.
Source: U.S. Census Bureau

Different Innovation Avenues for CFOs To Explore

Innovation depends on the creativity of your personnel's ideas, which naturally includes an element of risk and uncertainty. Your company's R&D projects and other brainstorming endeavors will always cost money, and your FP&A work, as the CFO, is the necessary bridge for identifying how to spend for continued innovation. However, the two rely on each other's continued success. The company needs your financial analysis to identify areas for innovation. Likewise, you need the company's innovation for financial growth.

Expand and reframe your perspective on innovation by learning about each avenue in the descriptions below.

1. Product and Service Innovation

Product and service innovation is about finding ways to modify or add to the portfolio of offerings you have that meet the needs and demands of your customer base. You may think of product and service innovation as the following types of activity: 

  • Developing a new item or accessory to address the customer's pain point of a current product 
  • Reconsidering your materials or manufacturing process to match customer expectations (e.g., environmental or societal concerns) 
  • Increasing the potential use of a product through redesign

2. Innovation from "Lightbulb Moments"

Your lightbulb moments are innovation breakthroughs that result in a major shift in your business. These are pivots outside the expected course of your business that lead to transformative growth. You may think of breakthroughs as innovation in its rawest form because you take bold ideas not necessarily grounded in the current business to achieve new heights. As a CFO, your skill set is especially useful in making lightbulb moments become a reality through careful attention to logistics and financial detail.

Representatives of businesses largely agreed that an open innovation process is preferable to traditional R&D or internal incubators.

Source: Alcor Fund

3. Innovating Through Your Processes and Operations

Process innovation is about deepening your existing value pools by improving methods for delivering your product to the market. The focus of this form of innovation is taking the inefficiencies of your company's time, money and other capital resources to decrease costs. We often find these inefficiencies in our production procedures or the operations that are ancillary (but critical) to accessing the market, such as: 

  • Shipping and delivery methods
  • Sales, marketing and client acquisition efforts 
  • Costs of compliance and quality assurance checks 
  • Leveraging technology to reduce overhead 

Innovations that come from improvements in your current business operations are often incremental, small adjustments that snowball into sustainable value. Having CPM software that provides opportunities for connecting your financial and operational data can shed light on new opportunities for driving your company's process innovation. 

4. Private Innovation

You may also think of innovation as being either private or public. Private innovation refers to your company's research and development department that is responsible for creating the trade secrets and other sensitive information that differentiates you from competitors. Your private innovations are about either creating a new and unique market opportunity or positioning yourself as a unique option in an industry ripe for disruption.

5. Public Innovation

Public innovation, in comparison, focuses not only on the actual innovations of your company but on how your customer base perceives those innovations. A natural link exists between your branding strategies and the innovations of your product or business operations. It's about the story you tell the market about your business and how its actions establish it as a leader in your chosen field.

Prioritise Business Innovation with CPM Software

Your company's financial and operational data are essential for creating innovation opportunities. Finances are the singular most important metric for not only identifying opportunities, but for gauging innovation's success. CPM software helps CFOs and finance departments integrate data points across the many silos of a company (e.g., R&D, sales, manufacturing, legal, compliance, customer service, etc.) to establish a single source of truth for instant insights. 

CPM software solutions unify financial reporting and analysis that allows decision makers to have the most accurate and holistic information available when planning for growth. Budgets, forecasts and other financial hurdles are not roadblocks to innovation. Rather, CFOs and finance decision makers are the gateways to innovation through the insights of their data. Nurture your company's growth strategies by leveraging the power of CPM software for greater financial reporting and operational insights.

Meet With a Vena Expert Today

At Vena, our mission is to help you Plan To Growâ„¢. We offer a wide range of solutions in FP&A, extended planning, regulatory compliance reporting and other business planning functions. Our CPM software can benefit all industries, but we do have tailored solutions for fields such as SaaS, banking, insurance, higher education, professional sports, healthcare and many others. Transform your business's financial and operational planning to jumpstart innovations across your company's products and operations.

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