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Putting the Value Back in Value Innovation

Finance officers achieve their key decision-making status for a reason: it’s their expertise that’s critical to far more than a successful firm’s bottom line. But there’s always room for improvement, and it’s time for CFOs to fine-tune their collective image when it comes to working with entrepreneurs.

The entrepreneurial spark is driving the business culture – but far too often, driving away with talented innovators who shy away from a CFO evaluation of their ideas. Whether from a sense of futility or even more oppositional frustrations, the entrepreneur packs up her bags and starts to leave.

OK, everyone knows that CFOs are the gatekeepers. But the perception that they’re strictly numbers-crunching dream killers who squash creativity and shoot down the best ideas out of fear – crippling creativity and progress – doesn’t have to be the CFO reality. Or even the CFO caricature.

CFOs can and should change their collective image, and there are good reasons and creative ways to do so. Finance professionals with well-developed leadership skills and even better approachability and openness are best poised to facilitate entrepreneurial success as well as their own.

The company’s real goal should be not just innovation but value innovation.  What is the difference?  Well, innovation is still any idea that takes the company in a new direction – a new product, a new service or a different way of delivering that product or service.  Value innovation takes the process one step further and asks the question, “Does the innovation either reduce the company’s cost or increase the value to the customer?”

Simply put, does this idea make money for the company and solve a problem for the customer?

 From Stumbling Block to Smooth Sailing

So where does the CFO start to remove barriers? How do they start, not only to revamp their images, but also promote their positions in the process so the entire organization sees them as creative and valuable members of the innovation team? Here are some ways to move forward:

  1. Lead the march. Show the team that finance won’t kill innovation and will add value to the process – and this needs to happen with both verbal and nonverbal communication. The mere 7 percent of a CFO’s style that is verbal should be encouraging, helpful and noncritical.
  2. Don’t bring financial analysis in too quickly in the creative process. Let the creative process blossom first, allow the development of some good ideas in a safe environment, and then look at the commercial viability of the best options to see which ideas warrant further testing.
  3. Test the ideas on the market. Knowing in advance that this step is coming later in the process, and planning, will mitigate concerns.
  4. Introduce the financials. If the company can’t make a profit at the price point the market demands, it goes back to the drawing board or it gets scrapped. The price determined by market testing doesn’t get raised to make a profit. What must change is the cost, so either get the cost down so a good profit can be made, or scrap the project

Where does the CFO look for Value Innovation?

  1. Look at the Company. Review its structure, vision, mission, culture, values. Are they enhancing or crippling innovation?
  2. Look at the products. Are they designed with the customer in mind? When was the last time you went to people who do not buy your product, and ask them what would make them want your product? Nintendo did just that when the “customer” was the young, antisocial male. They went to females, families, senior citizens and assisted living facilities, and when they analyzed the information? They discovered a lot of commonalities. They made a product these groups would love and the Nintendo Wii was born.
  3. Look at the people. Look at their contracts, their benefits, their loyalty, their rewards, their compensation, the culture they have to work in. Think about how these factors might shape relationships.
  4. Look at the deal. Consider a range of options that include price, delivery, financing, leasing, subscriptions, coupling and tradeups.
  5. Look at the market. Look at the current market, the adjacent market, untapped markets, and the markets that would never buy your products or services.

The CFO may or may not come up with the value innovation, but she is usually in the best position to determine if the idea is financially viable.

This means that pulp-fiction stereotypes of the CFO hiding behind his desk, counting his beans while a geek with thick glasses comes up with new ideas are about as current as the floppy disk.  Today’s CFO needs to be leading the charge for value innovation that will differentiate his company from the competition, and grow the company’s bottom line – and culture.

1Dr. Sarah Layton, CEO of the Corporate Strategy Institute, is a thought leader in corporate strategic planning and execution. Her visionary outlook helps corporations discover new revenue streams, identify trends and future growth paths, and find new markets.  Dr. Layton’s approach to corporate strategic planning has played a key role for clients across multiple industries. Her straightforward approach pairs planning with measured execution, and defined goals for growth, increased revenue, and value innovation.

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