Innovation Returns to the Priority List

CFO.com
May 27, 2010 | COMMENTS

After fading as a priority during the financial crisis and the recession, innovation has returned to the top of executives' agendas, according to a new study by Boston Consulting Group (BCG), which surveyed 1,600 senior executives. About 65% of finance executives say innovation is one of their top three priorities, and 85% of them say it's an important part of their organization's strategy to emerge from the recession.

While CFOs clearly see innovation as important, there are many differences in how they view the issue compared with other senior executives who participated in the study. There's a disconnect between how much CFOs are emphasizing innovation compared with their executive peers, 72% of whom call it one of their top three priorities.

Finance chiefs are more satisfied with their organization's ability to measure innovation than other executives. To be sure, all respondents say “funding the right ideas” is the biggest challenge their organization faces with regard to driving innovation during the next five years. But CFOs are significantly more focused on reducing the cost of innovation than are their colleagues. Other executives, in contrast, are more focused on prioritizing the right ideas.

The biggest discrepancy in the study lies between how CFOs view their role in innovation and how others see them: While 22% of finance execs say they are the biggest force driving innovation at their organization, only 3% of non-CFOs see them that way.

Jim Andrew, head of BCG's global innovation practice, sees an opportunity for CFOs to become more involved in the innovation process and to close the gap between their views and those of others in their organization. "CFOs have a very important role to play in innovation. I think precious few actually do that, however," he says. "But literally every CFO I've ever talked with has a desire to play a bigger role in innovation."

One area where finance chiefs can have a major impact is in helping their organization figure out how to better measure and prioritize its investment in innovation—two areas where other executives are dissatisfied, according to BCG's survey results. "We frequently see that organizations don't have agreed-upon criteria for evaluating innovation projects across the company," says Andrew.

He suggests organization not only measure the results of their innovation efforts, such as whether its gaining market share, but also track metrics related to the innovation process and the resources the organization is putting into its innovation efforts. For example, how many ideas are being generated? How long does it take to make a decision about an idea? How many of the organization's top people are working on innovation?