Why Tough Times Demand Finance Innovation

BF: In light of the current economic climate, you would think that most companies are not as focused on innovation as they were even six months ago …

Champy: I actually think that innovation is very relevant at a time when the economy is challenged, because companies all the more have to distinguish themselves, and it's all the more important to learn how to operate well. What happens during recessionary periods is that people are often fighting for the same customer. Innovation becomes absolutely critical. How you're able to innovate, both in the value you deliver to customers and how you do it, will determine the winners. It's actually very possible to grow your business during a recessionary period.

BF: Why do finance executives often fail to become primary drivers of innovation?

Champy: Let me identify three behaviors that I think finance people in particular have to watch out for.

The first is around risk. The fortunate or unfortunate condition is that innovation doesn't develop within larger companies or even ongoing companies unless that company is prepared to take risks. Innovation and risk go hand-in-hand. If I look at the companies that I used as examples in this book, none of them ever talked about risk. It was always, "Hey, we had a good idea." Or, "Intuition tells me now that we have to change our business model." They fact is, they did not get hung up on risk. And for better or for worse, finance folks can actually delay innovation -- delay what their companies need to do -- because they're so focused on risk.

Second, there are a lot of companies in which good ideas bubble up in the middle of the year. And too often the response from finance to those good ideas is, "Well, we won't do that now. We can't do that until next year." Or, "We don't have the money to do that." And the budgets start to dictate what innovation looks like.

I think that finance people have to be prepared to take some risks around budget, to let good decisions be made about strategy, and to not be constrained by decisions based on the budget. So, be careful about how budget constrains what the company is actually able to do.

There's a third learning point for finance people in this book. Finance people, again because of where they come from, often see their jobs as putting controls in place. Controls and rules. None of these companies I discuss ran on controls or rules. They didn't control behaviors by rules. The controlled behavior was by culture, by beliefs -- you know, the fundamental beliefs of a company of what's right to do. I think that finance folks would do well to recognize this, particularly in a big company. You can write all the controls you want, but they don't determine behavior. Behavior in a company, particularly around innovation, is driven by culture.