How can the CFO be a valuable ally for innovation? - A multiple-case study on what current methods CFOs are using for fostering innovation in an organisation

Abstract

Globalisation, digitalisation and rapid advancements in technology are creating faster business environments which demand organisations to be more innovative. At the same time, it has been proven difficult for companies to successfully manage innovation. To accomplish innovation, different resources are required from the organisation and the top management team. One key player in the top management team is the Chief Financial Officer (CFO), which is responsible for the financial ambit of a company. Traditionally, the CFO has focused on minimising risk, controlling budgets and delivering good financial figures in quarterly reports. CFOs tend to work with short time horizons, which doesn’t support the longer term thinking often required for successfully designing and implementing innovation. Research suggests that the role of the CFO has evolved during the recent decade and that the modern CFO possess bigger responsibilities for fostering innovation. However, contemporary reports also indicate that few CFOs understand exactly how their actions can promote innovation, and many think this responsibility is challenging. By providing a multiple-case example of six Swedish mid-sized and large enterprises, this report aims to provide an increased understanding of what methods CFOs are using for fostering innovation. Furthermore, the report will investigate how the found methods relate to five different elements of innovation; innovation strategy, people culture and organisation, ideation, selection and implementation. These elements are identified by the Pentathlon Framework for innovation. The findings indicate that the CFOs of the case-companies have a rich understanding of innovation and experience having a large responsibility for these endeavours within their organisations. Furthermore, the results show that CFOs are more directly involved in the selection and implementation phase of innovation rather than the ideation-phase. For ideation, influence by the CFO is more indirect through higher-level tasks. Regarding innovation strategy, the findings show that separate strategies for innovation do not exist within the case-companies. Rather, innovation is incorporated in the overall business strategy. Regarding people, culture and organisation, the findings show that CFOs are concerned with promoting the right corporate culture and have direct influence over organisational structures i.e. through setting structure for reporting. The methods which have been found in the research that CFOs use for fostering innovation are: Establishing a language for innovation to institutionalise a definition, use corporate culture as a control system, standardising internal processes, fostering a learning organisation, knowledge management through digitalisation efforts, exercising leadership that show failure is OK, participating in resource allocation that consider additional values, engaging in project management through financial control and lastly to impose measurements and surveillance systems in the overall business.