The words “innovation” and “finance” don’t always go together – right? In many organizations, the office of Finance is often the last place the organization is looking to invest in innovation. But that’s been changing in recent years. In fact, in a recent FSN survey titled “Innovation in the Finance Function Survey 2018”, 34% of respondents indicated their finance functions are actively involved in innovation with around two thirds of these, pursuing opportunities for innovation more widely across the enterprise. The research also shows a strong link between innovation in the finance function and performance. Read on to learn more about the findings.
FSN’s Innovation in Finance Research
FSN’s Innovation in the Finance Function Survey 2018 is one of the largest surveys of its kind – with responses from more than 1,000 senior finance professionals worldwide. It is the first time that there has been an in-depth study of attitudes towards innovation in the finance function. And the results reveal startling insightsabout the appetite for finance innovation, including the impact of culture, attitudes towards risk, organizational politics, style of project investment and levels of confidence in measuring return on investment.
There’s a great deal of data and insights contained in the survey results, so I’ll highlight a few key findings here.
Attitudes Towards Finance Innovation Differ Around the World
According to the report, finance executives in North America are the least risk averse while those in Europe are held back by the perceived risk of failure. Not a big surprise given the “pioneering” spirit of many Americans. Just 31% of North Americans take a conservative approach to innovation, preferring instead to experiment with and try out new technologies when they become available. This compares to half of Europeans, 49% of Middle Eastern companies and 48% of Africans and South Americans. Asia Pacific respondents fell squarely between these two camps, with 38% conservative and risk averse.
There are certainly cultural issues here, but fear of making mistakes is a big factor. According to the survey, fear of making mistakes holds back twice as many companies in Europe than North America. Spurring an organization to invest in Finance innovation can be challenging, given the risk-averse nature of Finance executives. But presenting a compelling business case can be a powerful tool in jump-starting investment in innovation. Finance executives in North and South America reported they are better able to make a business case, whereas 37% of Europe respondents report this as a stumbling block to innovation.
Early Adopters of Innovation Perform Better
Based on their responses to the survey, respondents were profiled into 4 categories regarding their attitudes towards finance innovation. True Innovators made up 23%, Committed Innovators 11%, Uncommitted Innovators 54%, and Laggards 11%. Putting the last two groups together – 65% of respondents are not actively committed to finance innovation.
At the other end of the spectrum, True Innovators were characterized as those finance functions that are “early adopters of technology, have an active culture of innovation, make time for it, reward innovation and play an active role in innovation across the entire enterprise.” And the survey results showed that these early adopters of technology performed better than their peers. True Innovators are able to close their books faster, produce more accurate financial forecasts and are less tied to legacy systems and traditional ways of working. Furthermore, innovative finance functions attract the best finance talent.
The Recipe for Successful Innovation
The FSN survey report concluded there is no silver bullet to overcoming the obstacles and driving innovation in the finance function. Instead there are several ingredients that organizations need to add to the corporate mix to deliver real change. The key ingredients reflect the golden triangle of essentials in finance transformation – people, process and technology.
87% of survey respondents rated people as the #1 factor in implementing change, someone to manage and drive the processes and technology that will affect the change. Technology came in second place, with 66% of CFOs believing that innovation success requires utilizing the full potential of technology. Process came in a close third, with 59% of senior finance executives needing to ensure a marked improvement in productivity and finance function effectiveness to push forward with innovation projects.
In driving change, CFOs surveyed cited 3 top priorities:
- Dedicated innovation champion
- Dedicated innovation budget
- Incorporating innovation objectives into personal appraisals
Another key ingredient respondents cited for success in driving innovation in finance is how to measure it. Surprisingly, 58% of senior finance executives said they don’t have an agreed method of evaluating return on investment on technology-driven initiatives, which may mean some projects never get started, and those that do go ahead aren’t easily evaluated.
OneStream Software is pleased to co-sponsor the 2018 Innovation in the Finance Function survey. The results are consistent with what we’ve experienced with our clients. Finance organizations that modernize and eliminate spreadsheets and legacy performance management systems gain a number of advantages. They are able to reduce costs of ownership, streamline planning and reporting processes, improve management insight and shift more time to value-added analysis and decision support. But technology alone is not the answer – this must be balanced with improvements in financial and operational processes, as well as investments and training in people.
John O’Rourke is Vice President of Product Marketing at OneStream Software. With a background in accounting and finance, John has over 30 years of experience in the software industry, including 20 years of experience in product marketing at Hyperion Solutions, Oracle and Host Analytics. He has worked with many customers and partners on financial reporting and planning initiatives and has spoken and written on many topics in corporate performance management. John has also held positions in strategic marketing and product marketing at Dun & Bradstreet Software, Kenan Systems and Decisyon.
This article originally appeared on the OneStream blog. Used with permission.