Do finance professionals count - when it comes to organisational innovation?

Are finance professionals key players or just cheerleaders on the fringes of innovation. Does it matter...?

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My partners and I at Eureka!Europe, and our colleagues at AICPA-CIMA, are intrigued by the role of finance professionals in enabling innovation in organisations.

In our experience, the process and practice of bringing to market successful new business models, products and services is a team sport. Rather than the preserve of a few clever individuals in a back office somewhere, effective and sustained innovation is driven by collaboration, diversity and informed participation.

Rebecca McCaffry, in her article, 'Risk and Innovation - Polar Opposites' (CGMA) quickly gets to the heart of challenge when it comes to the role of finance professionals in innovation: "We don't like failure, losses, negative net present value (NPV), unbalanced balance sheets..." It's a professional culture thing; a preference for precision, certainty, and facts. Perhaps it's a 'right-brain preference' thing...

"[As finance professionals] we don't like failure, losses, negative NPVs, unbalanced balance sheets..."

But beyond the territory of cliches and stereotypes lies the simple reality that finance professionals hold privileged positions in organisations. They have excellent analytical and problem-solving skills. Paraphrasing AICPA's Dr Martin Farrar in a recent report, finance professionals are at the heart of organisational governance, strategy, risk management and business performance. They usually own the processes, systems, and management information that control change and measure value.

So, does this particular community of organisational influencers impact the process and practice of effective innovation? How do they interact with innovation currently, what role might they play, and what challenges do they face in doing so?

We suspect that CFOs, FDs, Management Accountants, and Commercial Directors are often left out of the innovation process. Or perhaps they're engaged only when it comes to asking for money to fund an innovation project; usually, when it's too late for them to help shape the assumptions and thinking at the heart of the concept.

This is a frustrating experience for everyone involved, and the 'big idea' loses value along the way.

Gate-keeper behaviours can erode innovation value by an average of 50%...

In fact, research from the Innovation Engineering Institute shows that reactive, 'gate-keeper' behaviours and corporate processes (focused more on risk elimination than value creation) can erode innovation by an average of 50%...

That's how big and bold ideas become boring 'safe bets'… It doesn't have to be that way.

So how can finance professionals help? What role should they play in innovation as value creation? What innovation skills might they need?

What do you think? Share your experience and help us get smarter by contributing to our 5-minute survey ... click on the button below 👇🏻

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How did the father of Lean and 6 Sigma help Pixar make great Films?

"You don't have to ask permission to take responsibility."

Ed Catmull's 'Creativity Inc.' alongside WE Deming's 'Out of the Crisis'

Ed Catmull, former President of both Pixar and Disney Animation Studios and the author of Creativity, Inc., explains in his book how a key tenet at Toyota influenced the way he managed his creative teams.

W. Edwards Deming, an American statistician who introduced just-in-time manufacturing and total quality control at Toyota, had a lasting impact on Catmull's management philosophy.

In his book Out of the Crisis, Deming writes about how changes in which products and services are offered are needed to assure the long-term success of an organisation. This means that leadership accept certain obligations.

1. They must innovate. A basic requirement for innovation is faith that there will be a future. Innovation, the foundation of the future cannot survive unless leadership have declared unshakeable commitment.

2. They must put resources into research and education.

3. They must constantly improve design of product and service.

Catmull was inspired by the analogy of what Deming had done with Japanese Manufacturing and applied it to the creative process of making films.

Effective Feedback

At Pixar, Catmull created teams responsible for helping Film Directors see problems. As you can imagine, giving and receiving effective feedback is challenging, so Catmull introduced a system for everyone.

“Good feedback says what is wrong, what is missing, what isn't clear, what makes no sense. Good feedback is offered at a timely moment, not too late to fix the problem. Good feedback doesn't make demands; it doesn't even have to include a proposed fix. Any successful feedback system is built on empathy, on the idea that we are all in this together”

It was this belief in empathy and shared experience that allowed Pixar to focus on the idea and not on the person; to identify the flaws in the film so that problems could be addressed without attacking the creator.

An Experimental Mindset

Iterating on a story can, and does, take months; many of Pixar’s Directors start to worry if a story comes too easily. Instead, a good story emerges from being able to run experiments and learning from them. Catmull understands that this process can be draining and acknowledges the importance of maintaining the right mindset.

“Experiments are fact-finding missions that, over time, inch us toward greater understanding. That means any outcome is a good outcome, because it yields new information. If your experiment proved your initial theory wrong, better to know it sooner rather than later.”

Catmull also acknowledges the importance of leadership, to set an example and to allow others to fail. “If we as leaders can talk about our mistakes and our part in them, then we make it safe for others. Management's job is not to prevent risk but to build the ability to recover.”

Protect the New

Catmull identifies a key challenge to sustaining innovation.

“The natural impulse is to compare the early reels of our films to finished films -- by which I mean to hold the new to standards only the mature can meet. Our job is to protect the new from being judged too quickly.”

Protecting the new creates space for new ideas to flourish. Few ideas are good right from the start. A good idea is born through the maturation of lots of bad ideas.

The onus remains on Pixar's leadership to deliver successful films and by using the analogy of Deming’s approach in manufacturing, Catmull introduced a system for his creative teams that enabled everyone to help make great products:

• by giving and receiving effective feedback.

• by having an experimental mindset.

• by protecting the new.

Ed Catmull enabled Pixar to make great films by learning a better way to create, communicate and ultimately commercialise, based on what he learnt from Dr W Edwards Deming.

👉🏻 How does the analogy of Pixar inspire you?