The CFO: at the forefront of innovation

Historically, the Chief Financial Officer (CFO) role had been strictly focused on accounting for financial information. These days, there’s a need — and even some pressure — for CFOs to evolve their scope and influence the innovation agenda within their enterprises. For starters, they can help prioritize and invest in it.

At IBM Consulting, our finance consulting practitioners have seen first-hand how the CFO can help foster enterprise-wide change. In many cases, CFOs drive progressive end-to-end transformation agendas that help deliver business value.

Our own finance leaders have weighed in on the value of innovation and the role a CFO plays in transformation. One perspective holds that at a company built on innovation like IBM, the CFO ought to have broad-based knowledge and experience with driving business transformation. Another perspective is that a transformed finance culture creates an environment that focuses on personal growth, responsibility and fostering innovation.

The CFO can play a vital role across the enterprise going forward:

• Proactively: The CFO can deliver immense value by staying tethered to cross-departmental efforts to innovate, automate and modernize both core functions and business critical processes.
• During scoping and implementation: We know that product innovations that deliver enterprise-wide value can be capital intensive. As a result, the CFO has a vested interest in ensuring that these are implemented in a cost-effective manner.
• Continuously: Leaders that want their product innovations to be sustainable must align with their finance peers. If the funding stream must be secure and continuous, a certain degree of CFO vetting may be necessary.

Let’s not forget: the CFO facilitates shareholder trust that makes all investments in innovation possible. We’ve seen that they can therefore be effective agents of change and stewards of transformation, making them even more equipped for driving innovation.

Many agree that the CFO is at the forefront of innovation: consultants making tactical and strategic recommendations to business process outsourcing consultants working on the ground to implement products and innovations to finance and accounting (F&A) clients. These are the consultants that are often engaging with collaborative CFOs on ways to deliver new value- and work-streams within the finance function, as well as across the enterprise too.

Take for example the role that senior finance leaders play with respect to the adoption of innovations such as artificial intelligence (AI). In a recent IBM Institute for Business Value study, we learned that AI-driven innovations are leading to concrete improvements in process quality, cost and efficiency. The study, which focused on AI’s quantified impact on the finance function, indicates that top finance performers credit AI for a bigger decrease in the finance function’s cost as a percentage of revenue. As many as 4 out of 10 finance leaders surveyed are already piloting, implementing or optimizing AI in key areas, including financial planning and analysis, order to cash, general accounting and reporting, and purchase to pay.

A second study about the integral role finance plays in sustainability initiatives found that 87% of transformational finance leaders foster a culture focused on speed of innovation, compared to less than half of their peers. It’s clear to me that CFOs are making great strides to advance innovations within their enterprises.

Our finance transformation practice leaders believe that the CFO role has evolved from transactional work to relational, value-generating and business partnering where transformation is constant and essential. We anticipate that we’ll see well-defined, enterprise-wide, value-generating outcomes associated with any investments in product innovations within the F&A function, as a result. Here are the top 4 perspectives we’re keeping top-of mind:

• The F&A industry needs transformation partners who will be accountable for both the tech adoption and the outcomes they generate:
  • According to Gartner, “CFOs making investments to create intelligent, automated workflows should partner with F&A business process outsourcing providers.”
  • It’s increasingly the case that any leader — particularly the CFO — who wants to be an effective leader may have to become an expert in the tech-stack that powers their respective function going forward. Some, however, are challenged with existing finance and accounting capabilities.
  • The CFO now has a greater seat at the table for both the outcome of technology that is adopted and the way in which its implemented.
• There’s a clear sense of urgency around innovation and transformation:
  • Left to meet economic hardships, CFOs must become stewards of company strategy with a focus on how to strengthen their business’s operational efficiency. This means cutting costs and getting the best return on investments while implementing key factors that make end-to-end finance transformation possible.
  • It’s an imperative for both client and consultant to have a sense of urgency around innovation and to be on the same page with respect to business transformation – especially given the headwinds posed by inflation and an eminent recession.
  • These economic headwinds necessitate that CFOs act with urgency in their transformation efforts.
• CFOs have a greater responsibility in being agents of change and experts at change management:
  • Effective change management can start with the CFO. To gain widescale adoption of transformation initiatives, CFOs must ensure that relevant stakeholders have a purpose and a place in the planning efforts and design principles. A culture and atmosphere that embraces change can be helpful in driving innovation.
  • CFOs should align with counterparts in the broader organization to develop an agile innovation incubator to create automation and AI-enabled finance capabilities.
  • The CFO can facilitate the enterprise’s ability to meet key goals, such as going to market faster, improving ROI and increasing innovation, by sharing their successes with transformation. By blending business strategy, design and technology, they can demonstrate how to rapidly turn new ideas into actions.
• Sustainability is an imperative:
  • Research suggests that CFOs must take a leading role as sustainability becomes integrated within organizations’ business strategies. They are uniquely positioned to reshape the future of corporate finance and investment as a catalyst for growth, value creation and social impact.
  • Automation and AI can enable the CFO to collect data, identify risk, validate documentation and provide audit trails in support of sustainability efforts.
  • We’re seeing that CFOs have a greater role in the sustainability efforts driven by the c-suite.

To prepare themselves to shift toward the forefront of innovation, CFOs can start by learning about how to equip their finance organization to propel the broader business.