By Andy Burrows
This is my second article looking at the relationship of Finance with innovation. In the other article I shared a few thoughts on how Finance can support strategic business innovation, which benefits customers and provides competitive advantage.
This time I want to turn my attention to innovation within Finance, affecting what we do on a day to day basis.
One question we’d probably better get sorted in our minds is, what is innovation?
I remember attending a presentation a while back. In it they expressed great concern that a survey showed very few CFOs had priorities in innovation within Finance. (Well, of course, they did. The event was sponsored by one of the big software vendors! Ok, I’m being cynical, I know!)
And I sat there thinking, what do they mean by innovation?
And why is it such a high priority thing to do?
We’re all so busy. And some software sales person comes along and says we really need to consider their interesting technology product that we’ve never heard of before. Why?
And to make us feel worse, if we’re not convinced by the pitch or don’t have time to listen, we’re referred to as “part of the problem with Finance”... as if we don’t like change and we prefer working with rocks and prehistoric tools!
At the same time, in my career, I’ve seen some really good use of technology in Finance, to the extent that when I go somewhere less advanced I wonder why they haven’t kept up.
But what is innovation? What is it we have to do to get the gold stars in the annual vendor-sponsored surveys?
Is it innovative to scan invoices and have access to them electronically, rather than in paper files? I worked for a company doing that in 1996! Similarly, is workflow, OCR, and intranet collaboration, still counted as innovation? They’ve also been around for 15-20 years or more.
Is it still innovative for companies to bring themselves up to date with 1990s technology?
Or (cynically) is it innovation by definition if we just buy the latest product from Oracle, SAP or IBM? Or perhaps it’s more innovative if we go for a smaller vendor that no one has ever heard of?
Well, if you look up the definition of innovation – for example, the one I found on the Business Dictionary website - it’s just translating an idea or invention into something that creates value.
Well, that kind of takes the wind out of my sails. Because I always got the impression that innovation was transformative. Innovation, it turns out, doesn’t have to improve something very much to count as innovation. It just has to be new. And it doesn’t have to be brand new, just new to whomever is using it.
And it doesn’t have to be technology-related, although it normally is. For instance, I’d say that “Beyond Budgeting” is pretty innovative (as well as transformative), even though Handelsbanken was doing it in the 1970s!
But the other thing to note is that innovation is not invention. Inventors create new things. Innovators use those inventions to make improvements to things and to add value. Innovators come up with good uses for new inventions, or even new uses for old inventions.
So, where does this lead us in thinking about innovation within the Finance function?
This time we’re not talking about offering innovation to customers of the business, but introducing it into our own activities.
Some would say, how can we ask our customers to accept innovation if we’re not ready to accept it ourselves? But, that’s illogical.
We know that our external customers won’t accept the innovations of our business unless it clearly makes their lives better. We have to demonstrate, in our marketing, how it does that.
When we turn our thoughts towards innovation within Finance, or anywhere within our business, we don’t have to be ready to jump on every innovation bandwagon.
We are the customers. We should only take something innovative on board if it makes things better for us. And just as our customers are cautious, we should be too.
So, there’s a positive and a negative here.
Positively, we should be on the lookout for ways to use new inventions and innovations presented to us, to help us improve.
Negatively, we shouldn’t just implement something just because it’s new.
This is simply to say, there must be a good business case for whatever we propose to do.
If workflow technology, RPA, Artificial Intelligence, won’t bring net benefits for our business, we don’t have to feel compelled to implement them, even if the Finance media gently sneers at us for being backward. If there is a good business case, we should implement with enthusiasm and confidence.
But Finance technological innovation faces a significant problem. And it’s the same problem we have with the Finance function in general – how can we justify the value of it? How can we articulate the value of cloud technology, artificial intelligence, etc? In other words, what is the value of better quality data, speed of access to information, better presentation of information?
We often resort to looking at efficiency – because we can measure the amount of time people spend on things. But in my experience, efficiency in Finance doesn’t often pay enough to cover even the software maintenance costs of new technology. And it also gives the wrong impression – that Finance can only add more value in the business by being cheaper.
So, where is the business case?
This is where the software vendors can help. Instead of just coaxing customers towards their new technology because it suits them, they need to get better at articulating and quantifying and measuring the benefits... in terms of value.
As an illustration, I once had a conversation with someone at one of the big ERP software companies. As we were chatting, he talked about how they were trying to get customers to “move to the cloud”. And he asked what it would take to get the company I was working for to the make the move. My advice was that they should talk more about the benefits, rather than the technology – sell us the why, rather than the what.
If we can be innovative in technological solutions, why can’t we find innovative ways of articulating the value of things like speed of decision making?
The problem for Finance is that if we have to rely on subjectivity and mere trust in software vendors, we can’t impose anything more stringent on the business. If our project business cases are subjective, how can we ask for more objectivity from the business in their business cases?
My parting shot on this is that to build a business case for implementing innovation in Finance, we need to be clearer on our vision and strategy for Finance. That means being clear on where our value lies – and it’s not just in being cheap.
If you want to put more thought into where the value of Finance comes from, why not take a look at my white paper, How Finance Can Drive Business Performance?
I don’t have all the answers on this. What are your thoughts? Have you come up with ways of quantifying and measuring the more intangible benefits we can get out of innovation in Finance?
Do you have opinions on what counts as innovation in Finance? I’d love to hear.
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