So How Might a CFO Lead Innovatively?

So How Might a CFO Lead Innovatively?

By Ralph Kerle

This article is Part 4 in a four part series on the CFO’s Role in Innovation Series.  

An expensive operational black hole surfaced in a recent creative leadership workshop I conducted with 14 senior leaders in a multi-billion dollar South African headquartered retail chain. A Management Innovation Index benchmarking diagnostic revealed the main cause of this was the senior leadership team totally lacked any idea development skills capabilities. As a result, the $750,000 consultant’s report, recommending the reengineering of the IT infrastructure to find the efficiencies, productivity and growth to make the organization profitable again, lay dormant.

A simple internal idea generation software platform internally designed to solicit ideas to assist in implementing the report’s recommendations had not worked. Employees lacked any understanding of how to use the platform and what its real purpose was. There was no discernible focus and no real motivation to be involved. It was perceived as nothing more than an old fashioned suggestion box promoted by the IT department that already had a bad internal reputation culturally. In the CFO’s view, idea generation had been a huge waste of resources and time – nothing more than expensive hot air.

Research to try and gain some value out of the consultant’s report surfaced the Dupont Model, a business tool designed to analyse an organization’s return on assets (ROA). The model requires an organization to break the firm’s profitability down into component parts to see where it actually comes from.

The COO suddenly had an insight and recognized there was an opportunity to become the idea developer in the senior leadership team, to make the consultant’s recommendations tangible!

Could the CFO be persuaded to re-engage in an ideation programme using this sophisticated financial modelling tool directly linked to the balance sheet as the framework for idea generation?

The CFO bought in. The company rapidly redesigned a more nuanced sophisticated idea generation programme focused on exploring the earning and cost capacities of each individual asset base within the organization. As a result, leaders in all parts of the business now had asset responsibility as well as operational responsibility. This approach gave purpose, motivation, context and focus for managers and team leaders at all levels to ideate meaningfully and began producing outstanding results almost immediately. The creative flow of ideas within the group is now flourishing under the COO’s mantra “Why ideate in a business if the ideas don’t have some financial outcome that can be assessed?”

Many Chief Financial Officers see themselves as future CEOs. Could there be any more powerful way of convincing a Board a CFO is ready for the next step than by having been responsible for leading successful innovation programmes framed and managed for financial outcomes – the operational benchmark of a dynamic 21st century organizations?

And with this, we rap up the four part series, the CFO’s Role in Innovation Series.

In case you might have missed the previous 3 articles, you can find them here: Part 1, Part 2 & Part 3.

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