CGMA Research: CFOs Must Take Hands-On Approach to Innovation

June 28, 2013 Leave a comment

CGMA Research: CFOs Must Take Hands-On Approach to Innovation

New report from AICPA and CIMA reveals how finance professionals at Coca-Cola, Royal Dutch Shell and other global innovation leaders help to drive new advancements

May 22, 2013 07:00 AM Eastern Daylight Time

NEW YORK & LONDON–(BUSINESS WIRE)–Add another duty to the expanding role of CFOs: Innovation catalyst. New research from the American Institute of CPAs (AICPA) and the Chartered Institute of Management Accountants (CIMA) finds that management accountants, led by the CFO, play a vital and growing role in driving advancements at some of the world’s most innovative companies.

“Managing Innovation: Harnessing the power of finance”

In those businesses, the CFO and finance team are deeply embedded in the process of innovation and have a clear framework to let new ideas take shape. They partner early with other departments to identify concepts with market potential, replace rigid financial metrics with staged measurements to avoid eliminating ideas too soon, and accept that failure is a tolerable outcome for projects along the path to commercialization.The conclusions are captured in a new Chartered Global Management Accountant (CGMA) report, “Managing Innovation: Harnessing the power of finance,” and based on interviews with global finance leaders at companies including The Coca-Cola Company, Royal Dutch Shell plc and BT Group plc.

“The role of finance in all of this is multifaceted,” Royal Dutch Shell CFO Simon Henry FCMA, CGMA, explains in the report. “A finance function needs to be able to understand the business well enough to know what is a worthwhile activity but also, in this part of the business, to have a bit more of an open mind. It is less mechanistic and has the ability to live with ambiguity, to identify risk and to manage it.”

“There’s an art to innovation but there needs to be some science that goes with that: understanding the forward-looking side of strategy, being able to scope the opportunity,” adds Doug Bonthrone, ACMA, CGMA, and recently retired director of global services strategy at Coca-Cola. “In all these areas, the management accountant is really critical. Whether it’s a new product, process or business model, the management accountant can help assess the results, evaluate how things have gone and learn lessons.”

The report recommends five areas where finance professionals should take action:

Create an innovation-centric mindset. Develop a framework in which innovation can thrive and accept that sometimes projects will fail.

Nurture creativity. Explore ideas like ring fenced budgets that offer more flexibility for the innovation process.

Prepare the path to profits. Finance can be a valuable part of innovation teams – for example, helping build more robust business cases to secure further backing.

Match metrics to the stage of development. Finance leaders shouldn’t put metrics used in the operational business around nascent or experimental initiatives. Consider a phased approach to give an idea room to breathe.

Take a balanced view on innovation risk. Companies increasingly employ a portfolio of strategies to drive innovation. Management accountants should seek to create an opportunity framework that promotes clarity, transparency and discipline across the total portfolio.

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About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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