Innovation is a top priority for the CPA profession. Gary Bolinger discussed innovation at this year’s Professional Issues Update and INCPAS just released its white paper on innovation. And, in recent months, there have been several posts related to innovation on the CPA Center of Excellence® Online Community. It’s imperative for CPAs in public accounting and industry to embrace and influence innovation within their organizations.
Several articles have been published this year on innovation within accounting firms, specifically Big Four firms. Some of these ideas include cognitive computing, big data analytics, surveyor drones for inventory observation, and machine learning technology. Many published examples of innovation in the CPA profession are occurring within public accounting.
So what about CPAs in industry? How can CPAs in management accounting positions (e.g. CFO, controller) influence innovation within their organizations? Innovation requires an investment that translates into cost. A management accountant will have significant involvement in “crunching the numbers” for innovation. This may include building cash flow models, budgeting costs, allocating resources and advising on financing. But focusing solely on these traditional responsibilities of a management accountant wouldn’t be innovative.
How else do management accountants influence innovation? A CGMA Report issued by the AICPA and CIMA provides deeper insight into managing innovation. This report identifies the following areas where management accountants can influence and support a more innovative business.
- Create an innovation mindset: Fostering a culture that encourages innovation has to start with leadership at the top, including CFOs. CFOs can help develop incentives to encourage employees to be innovative. CFOs can also help determine the proper metrics to utilize based on a project’s stage.
- Nurture creativity: “The goal of operational excellence is to drive businesses toward certainty, while the goal of promoting innovation requires a high tolerance of uncertainty, ambiguity and constant change,” according to the report. CFOs will need to assist companies with adapting financial processes and metrics to align with the stage of each project. Financial measurements for projects in the early stage will most likely be more relaxed than at a later stage.
- Prepare the path to profit: In this area, CFOs will perform some of their traditional responsibilities. Innovation takes those responsibilities to the next level as CFOs need to move from being viewed as a constraint on innovation (saying “no”) to becoming a valued contributor (helping assess “how”). CFOs are essential in managing both projects and risk.
- Match metrics to the stage of development: CFOs will need to help create “stage gates” through which each idea can be challenged and refined to prepare for the next stage of investment. As discussed above, part of this process will involve tailoring metrics to each stage of a project.
- Take a balanced view on risk across the innovation portfolio: Portfolio management is crucial for a company’s sustainability, and CFOs play a vital role in this process. Management of the innovation portfolio includes defining and understanding a company’s strategy and risk appetite, strategically managing risk, and building both tangible and intangible risks into strategies.
The areas above identify several examples of how management accountants can support and influence innovation within their companies. Are there other examples of innovation that you have observed in your company or clients?
Interested in learning more about innovation in the CPA Profession? Read the Indiana CPA Society’s innovation white paper at this link.