SHARE   |  

[Webinar] The Practice of Innovation

2015-11-11 11:00:00

InnovationModerator: 

Keith Fulton, Chief Technology Officer, ADP

Date:  November 11, 2015

Description: 

Effective innovation doesn’t just happen by itself. Elite Industry-leading companies create and foster the ideal conditions that will drive innovation and then cultivate that innovative environment every single day so that it reaches and is embraced by every individual employee. The Finance Department has a key role to play in the pursuit of that Culture of Innovation!

What You Will Learn

  • Why creating a Culture of Innovation at your organization makes such business sense
  • How your organization might build its own Culture of Innovation
  • What Finance leaders can do to accelerate (or impede) innovation

Who Should Participate

This session will be ideal for finance executives from businesses of all sizes, but particularly valuable for those large companies, who have more than 250 employees and doing business in various jurisdictions.

 

 

Keith F

Keith Fulton, Chief Technology Officer, ADP

Keith Fulton, Chief Technology Officer, partners closely with business and R&D leaders across ADP to drive innovation, dramatically improve user experience and create an architecture and technology vision across all products that enables agility and drives business success against the competition.  The place this mission is most evident is heading up the new innovation lab in New York City, where his team has defined a new visual style for all ADP products and is building a new employee and manager experience for HCM.

Keith brings 24 years of experience in enterprise software development and architecture, with a solid record of success.  His career began at Accenture, where he worked on large-scale custom application development projects.  Keith moved on to run his own boutique consulting firm, specializing in Internet and eCommerce web companies.  These projects culminated in his nomination for Ernst & Young’s Entrepreneur of the Year award in Houston, Texas.  Most recently, he was VP, Enterprise Solutions at MoneyGram International, where he was head of all software development. During Keith’s tenure, MoneyGram outgrew its industry three-fold due to innovative and agile solutions in consumer web and mobile, global point of sale software, and treasury/settlement systems.

 

[Keith Fulton, Chief Technology  Officer, ADP] Thanks, Lisa, for the introduction. It’s really great to be here with all you guys and get a chance to talk about innovation which is certainly my number one passion in life. I love the idea that technology can change the world. And that we can—as all of our companies collectively— reap the rewards of doing that financially.

I’m going to talk about innovation today, but I tried to, as we discussed what to do with this talk, I wanted to try to avoid the clichés. And I wanted to try to look for opportunities to make it a little bit more relevant to finance folks and talk about how finance can support these functions because I’ve seen it through our partnership with Lisa and in the general partnership of finance with ADP. They’re a necessary part of the process and if you partner well with them, they can be an accelerant to the process, too. So that’s what we’re going to talk about.

Okay, so let’s start with a definition of innovation as a baseline to make sure we’re talking about the same thing here.  I think this quote really embodies the mindset of what we need to think about: “We can’t solve our problems today with the same thinking we used when we created those problems.”  So, if we have a certain set of problems today, we need a different way of thinking to get to new answers and undo those problems.

So how do we do that? Sometimes, there’s a single flash of genius. There’s the bolt of lightning and somebody invents something and it’s amazing, and that’s all there is to it. Generally though, that’s not what happens. Generally it’s an iterative process of sweating and going through the motions and getting things there. So, if you think about, you start with the research area. Sometimes it’s an entrepreneur who sees a need for themselves or sometimes it’s a company that sees a market gap. But then they ideate. They find the pain points. They think about ways to solve that, and they try to get creative and think out of the box about how to remedy the pain.

Then they create prototypesand they try to say, “what if we did this?” And it’s not the full solution; it’s a hypothesis about how to solve that. And they refine that, and they work on it over and over. They narrow down a hundred ideas down to two and then down to one, and they work on that.

Finally they launch it, and they take it to market. And at that stage, that’s when you really know for sure what the customers think. They vote with their feet; they vote with their wallets; but at that point, that’s not the end. The end is the beginning because now we can do market research and talk to actual customers about what they’re doing.

So if you think about this like, there was a British guy who was dissatisfied with vacuum cleaners because his vacuum cleaner kept getting clogged up and they lost suction (is the term they all use now, right?), and so he started iterating and he built hundreds of different prototypes as he thought of ways to create a new way—a new kind of vacuum pump that would never get clogged. And so he refined it and he prototyped and he refined it and he prototyped, and he launched it.  And he realized that that was a really good vacuum cleaner, but it didn’t fit under the bed well, and it didn’t vacuum under couches. So then he made a skinnier version and then he made a detachable version.  And then he became Dyson, and he made a bunch of pretentious commercials about vacuum cleaners. So if that’s the dream, if that’s what we want to be—I think in his early ads he said he did something like 600 prototypes before he brought one to market, so—that kind of dogged persistence and determination is part of what it takes, and you’re going to hear me talk a lot about this iteration as we go forward.

I think another example that I just noticed was the iPad—is you know—a hit that seemed to be an overnight success. And one of the things that floors me the most about the iPad is that I read that they had the first working prototype of the iPad was built, and it was given to Steve Jobs in 2003. And it wasn’t actually launched until 2010. And in 2006, they decided the phone was more important, and they pulled the whole iPad team off to work on the phone, and they launched the phone in 2007. And they completely stopped the iPad project. And so when they went to launch the iPad in 2010, to think about a seven year gap from the first working prototype to when they went to market—do any of us think that our companies would do that kind of thing? And have that much delay and that much iteration and polish? It’s hard to imagine, but the overnight success actually takes time to do.

(5:11 Fail Fast= Fail Cheap)

“Fail fast” is another term that I think is an interesting one for people to think about. Generally, when people that are not immersed in the innovation lingo hear this, they emphasize the word “fail,” and it’s like, “Okay, let’s build up a big team and then we’ll tip it over quickly, and we’ll be a giant failure it’s like, how does that make sense?”

I think the way to think about this is the word “fast” is actually the word that matters here because we’re meaning a different thing by failure (that we’ll talk about). But I think from a finance perspective, I thought this was a fun chart. You can imagine this as two vertical axes with two different dollar values signs on it, but you have the linear curve of the growth of the team and the incremental spend per month of the team, but then you have the exponential growth of the total expenditure on the project. And so what we really mean by “fail fast” is “fail cheap.” Don’t over invest in things before you…right, Lisa? We mean fail cheap so that means fail there, where that line is instead of [oops okay, it doesn’t animate right but imagine—oh there’s the line, it doesn’t show on here—] Okay, so, let’s fail here instead of over there. That’s all fail fast means. Let’s minimize the investment we make to know and to learn, and then let’s learn quickly with low investments instead of learn slowly with high investments. So when you hear “fail fast” in the future, just remember, we’re talking about speed and failing cheap. And whenever you hear a TEDTalk and a guy is I talking about failing fast, just agree and just tell him yes because what he really means in failing cheap.

So why is innovation important? What drives the need for companies to innovate? I think it really comes down to three basic categories of needs. First, there’s disruption: the idea that the Ubers of the world and AirBnB and Facebook and Google and all these dot coms, they’re trying to disrupt markets and dislodge the incumbents, and they’re trying to take the financial rewards of doing so for themselves.  And that’s what Silicon Valley is trying to do.

I think defense is actually really important, too though, because these are for the incumbents. Probably most of you guys in this room are incumbents rather than disruptors, and you need innovation to play defense against the disruptors. You want to keep that disruption from happening or want to do it to yourself, so the value of the disruption comes to you instead of to someone else.

And third, is this notion of profit, right?  We want to innovate because we want to get the profits, and that’s true of the first two as well, so disruption and defense.  Really, it’s all about maximizing total shareholder return whether it’s a private company or a public company. So at the end of the day, we in finance and the FEI know the third one is the only one that matters, right?

So now we’ve talked about what is innovation and why does it matter, and what do we think we can get out of it. But what does it take to do this? And I think really that comes down to culture.

We have Peter Drucker here, the famous management consultant, and he said, “culture will eat strategy for breakfast.” And I think that what he’s getting at with this is that for the CEO to say that we need more innovation, doesn’t actually create more innovation. And having the executive committee of the company or any subgroup go to a strategy offsite and say, “Okay, we all agree.  Innovation is good; let’s innovate more.” That’s not enough to do it, either.  So how do you create the environment where innovation is possible and where innovation becomes almost inevitable? Let’s drill into that a little bit. I think another way of saying the culture thing is that effective innovation doesn’t just happen by accident.

The ideal conditions I think—you could characterize them, you know books have been written on the subject, but I think we chose to divide it up into three main areas. And we’re going to do a double click on each one of these areas.

So, shared strategy. We need to agree on what we’re doing and what we’re trying to accomplish. The agility side is we need to be ready to change what we agree on and how to get there. And then the empowerment side is we need to have a team carved out that is able to accomplish those and has degrees of freedom that the rest of the company might not have to achieve that because they’re trying to break out of the steady state.

(10:18 Creating a Shared Strategy)

So what do we mean by creating a shared strategy?  I think in this picture, right? It’s important that in a tug of war game, it’s important that everyone on the team is pulling the rope the same direction, and so at the end of the day, we can use lofty MBA terms for this, but what we really mean is we all have to be pulling the same direction.

So to pull the same direction, what does that imply? I think the idea of a sense of mission is a good place to start. I watched a talk by the CIO of Johnson and Johnson and he made the point that the shared vision –something that’s inspiring—is the first step in this. He said that people will rally behind an inspiring vision naturally; it doesn’t take a lot of crackdowns to do that. And his one-liner about it was: “this was why we put a man on the moon before we put wheels on luggage.” Okay? Wheels on luggage are actually quite useful, not very inspiring, but I’m glad we have them.  But you know, thousands of people got behind the man on the moon thing because it was this aspirational goal.

I think another great example of a sense of mission—I don’t think anyone does this better than the military.

So, I was watching a documentary about the Navy, and in the Navy, like in the military, they do have clarity of goals which is to win wars. And so they need to win wars. And everybody in their different respective roles knows how their job contributes to winning the war. So they interviewed the fighter pilots, and the fighter pilots said, “Hey, you know, we’re bringing it to the enemy; we’re dropping the bombs; we’re doing this stuff.”  And they interviewed the flight crews on the aircraft carrier deck, and they were saying, “Our job is to turn around the airplanes as fast as we can to keep as many in the air as we can and do it all safely because that’s how we win wars.” And then they interviewed a guy from the kitchen I don’t know, maybe they call it the mess, or something. But deep in the bowels of the boat, there was guy who was literally peeling the potatoes into a giant pot, and he said, “We can’t win these wars if the navy isn’t well-fed, and I’m here to make sure we win this war.”

Everyone knew how they contributed to that. And they all had a sense of mission and a sense of how they fit into that mission. I think that that type of communication about the larger picture and about how each group fits into that larger picture is crucially important if you’re trying to set an aspirational mission for your company or for a team inside your company.

Audacious goals are another thing that is really important. I think you know, this notion that, no one…you know, like a computer company doesn’t set out and say, “we have a vision to build the tenth  fastest computer ever built in the world.” You want to be fastest . You want to be the best. You want to do something that’s the greatest, or you want to be the cheapest or the fastest or something like that. There is some superlative that you’re going for that’s part of how you get the inspiration. I think the other side of this is that the time element can also be really important. You can’t have an audacious goal to build the fastest computer automatically because other people are trying to build the fastest computer, so there’s a sense of urgency to giving yourself time deadlines as well.

Sometimes a time deadline is the audaciousness. Many of you have probably been through acquisitions in your companies where you’ve bought other companies or you’ve been a part of that. Sometimes those acquisitions can take two or three years to execute and to merge the teams together and to realize the savings resulting from the synergies and so forth.

But you know, I was at a company where we bought another company and the CEO said, “You have 90 days. Get it done. This is stressful on everybody. We need to cut the cord, rip the Band-Aid, make it happen. You have 90 days.” And we said, “that’s impossible,” and he said, “I don’t care, you have 90 days.” And we got it done, okay?  So the timebox itself forced us to innovate how we did it, and it forced us to flatten structures and create quick decision-making and do all this other stuff because it was the only way to meet the timebox that we had. And so being the best or being the cheapest or being the superlative that you want, but doing that in a certain timeframe that is itself an audacious goal is part of the sense of urgency that the team will have. And so I like to say we’re doing great things in Chelsea here, but we’re in a terrible rush. The sense that the sands are ticking through the hourglass all the time is something every one of us wakes up every morning thinking about.

(15:14 Drive to Do Better)

I think the drive to do better fits into this, too. This picture is a guy named Pablo Casals who was a cellist, and he died in 1973. But he was a world-famous grand master cellist. And I read an interview with him at the age of 90, where he was…he had made it; he was done. He’s 90 years old; he’s world famous; he’s rich. He’s done it; he’s done everything there is to do in the classical music world, and the interviewer said, “Pablo”—or Mr. Casals, I guess—“you were known because you practice every day. Still at the age of 90, you practice every day; why do you do that? And his answer was, “Because I still think I’m getting better.” Okay?

The idea that a grandmaster at the age of 90 still thinks he’s getting better and still wants to get better,  and he wants to hear the piece done just a little bit better. He doesn’t think he’s perfect. The humility of him saying that, I find very inspirational. I think his sense of restlessness there in that bullet point is like the idea that it’s never good enough, and there’s a sense of dissatisfaction. We can think about that. I know at ADP, we have that. We’re the number one player, we’re not the number one player in all of our spaces that we’re in but we’re the biggest, and we’re the number one in several different areas. And yet, the sense of respect for our competitors, the sense of humility about we could be disrupted, and the sense of urgency that we could do better ourselves even if we’re number one is crucially important to the sense of urgency and the sense of mission that we all feel here in the lab.

Anyway, once you’ve agreed on the sense of mission, and you’ve felt the urgency and the restlessness, and you’ve timeboxed yourself and you’re very inspirational, what you’ve done is you’ve basically agreed on where you want to ski to down the mountain. So this is our skiing analogy here, and so you’ve agreed on a destination or you’ve agreed on the type of destination you want to get to. The path to get to that destination is not clear. And so the ability to skate between the flags and adjust your path is crucially important as well. It’s not enough to agree on the destination.

So how do you get to agility? I think the first step on this is the talent play. You have to get the right kind of people who can bring outside-in thinking into your business and get fresh ideas to kick this stuff off. If they have… passion isn’t enough, though. They need to come in with that kind of thinking that I think this execution mentality is important. Analysis paralysis will kill you. You need iterations, you don’t hit the bulls-eye on the first try, and you shouldn’t assume that you are, and you shouldn’t try. You should shoot and then see what happens; and then measure and then shoot again; and then shoot again and again and again and again.

I think this idea of client focus—if you’re talking about innovation in areas for the products that you’re selling to your customers—then relentless focus on bringing benefit to the customers and doing what’s best for the customers rather than what’s best for company (your own company), it will come back to you. And by having outside-in people, new hires, and people who are relatively newcomers to your company, they have a tendency… it’s easier for them to get to this stage than for people that have been around for a long time to do. They tend to think company first, rather than customers first.  In Chelsea, for example, we have a 180 people here so far. We’re growing up to a size of about 300, and so far, 94 percent of the people who work here were new hires to the company.  I’ve been with ADP a little over two and a half years, and I’m considered part of the six percent, so I’m weighing them down with legacy.

So anyway, I think… I love this photo, too because clearly this sculptor is very passionate, and she’s doing the work. She’s not looking at it and thinking about it; she’s carving the statue. And I like to think, in my imagination, that she’s making the statue of her client, and she’s totally focused on making the best statue that she can for him, the best representation of her client.

Creativity, obviously, is important. You can’t have innovation without creativity. I think openness, flexibility, and collaboration are obviously all aspects of that. I would say that creativity comes best—it’s not because you hire one amazing genius who figures this out—creativity comes because of conflict between (constructive conflict)  people on the team. And so what you see is, if you have a meeting, you’re thinking about the path forward and somebody says, “well, I think we should do option A,” and everyone nods their heads to that, and everyone says, “Okay, let’s do option A,” that’s actually not the most creative solution.

What you want is for somebody to say, “I think we should do A,” and someone else says, “well I think we should do option B,” and someone says, “actually, I think C is the way to go.” And then, most of the time you’re not going to end up with any one of those three solutions. You’re going to go with option D.  Or you’re going to figure out E, F, G, H, I, and you’re going to go with one of those. But conflict, if done respectfully, I’m not saying people should punch, conflict breeds creativity. And that’s where you get your best ideas from.

And so this notion that on innovation teams, you have the, what we call: the obligation to dissent.  The idea that if you think you have a better way, you need to raise your hand and say it no matter who else is in the room and no matter who else is advocating the ideas. There’s an acronym I read recently that I’ve been socializing around ADP, which is that we have to avoid HIPPOs—a HIPPO stands for the Highest Paid Person’s Opinion. The boss in the room is not automatically right.  And in this lab, it’s easy to see that everybody knows that they have the obligation to dissent and they’re not bashful about disagreeing with anything. And that’s really important.

What does it take to that obligation dissent and to have constructive, creative collaboration discussions and arguments? I think a big part of that is having a flat structure. If you have militaristic hierarchies, as I was just lauding the Navy, not sure they’re great at creativity, they’re good at missions. But I think that very rigidly hierarchical organizations lead to suppression of dissent whether they want to or they mean to or not. And so a flat structure where everybody feels the same and feels on a peer level, is a way of encouraging dissent and discussion and creativity as a result. I would also say that this idea of open doors, personal touches.  If you know your boss, you feel relatively flat. If you know your boss, and you can walk in there and talk to them any time you want, you should.

In this lab, me and the SVP of innovation, we’re the two main people who worked with the architects to create this. And there came a moment where they asked us where we wanted our offices in this building, and we said “We don’t want offices. We’re going to sit with everyone else, side-by-side, and visitors coming in will not know who is the leader of the lab and who is the last person we hired, the biggest newbie that we have.” This notion is that we’re intermingled together. So here we’ve taken the open doors to another level where we don’t have any doors at all. I think the idea that this open communication is really important and is the only way to get to openness of communication, which leads to dissent, which leads to creativity, which leads to innovation, crucially important on teams like this. The other thing I would say about the flat structure is that it leads to empowerment. If decisions all have to be run up the flag pole, then you end up with slow decision making cycles and that leads to slow iterations and slow execution. And so speeding up execution, a lot of that comes down to eliminating blockers, which comes down to eliminating decision-making layers. So it applies to both communication and to decision authority. And so that’s going to lead into the next section.

I love this picture because I have a four year-old son—he would correct me and say he’s four and a half—but I was living this with him as he was trying to learn to ride a bike this summer. And to me, the innovation team…you’re setting them off and they have this sense of exhilaration and freedom and now they’re pedaling and they can go wherever they want and do whatever.  They feel amazing because they’re now empowered to go ride, and they’re learning and struggling and getting it. But what I saw this summer was that I’m the father in the picture, and the father is having just as much fun as the son. And we as the kind of parent organizations or the finance groups that are funding this stuff—we, you guys—in some ways are the fathers of these innovation teams, and you’re pushing them out and telling them to go. And it should be something that by empowering them, you get to see it through their eyes and enjoy that process yourself. And so I love the spirit that if we can get the corporate governing bodies to feel like the father pushing the bicycle of the son out and letting go of it and letting them see what they can do, I think that alone encapsulates the spirit of what I hope we can get across in this meeting today. So let’s go into more detail, though. Can’t all be in one picture, right?

So commitment: iterations take time. These cycles do take time to do. The learning from the failures takes time. And I think if you agree that the mission is compelling and that you have the right talent with the right culture and the flat structure that you need to lead to very creative solutions to the same old problems that you always have, you need to have the fortitude to stick with it and keep with that commitment.  You’re not always going to get immediate ROI from these things, and when they fail fast, you may not get anything from them other than learning. If you don’t get learning—I probably have this on another slide—if you don’t get learning, then it is a complete failure and you should cut that and find other people who will learn.  I think this notion of watering the sprouted plant is a good one, where you have to water it and water it and water it. And if you ask for deliverables in the form of fruit every 90 days or you’re going to crush the sprout and start over, you’ll starve.  You have to be able to stick with it and nurture it and keep investing and keep investing if you want it to bear fruit. That doesn’t mean you shouldn’t have milestones. You might say that the sprout needs to be two inches high and then four inches high and then six inches high. You want to measure progress along the way; there’s an accountability aspect to it. But to measure it only by the fruit that it bears, by the revenue that the product generates, in this case I think is, could be a short-sighted way to look at it that will kill off innovation before it’s allowed to start.

I think responsiveness—I’ve touched on this already because I think it’s so important—but this idea that as we iterate we have to be learning and we have to build on our innovation to get to the next innovation. So by the time we’ve done it five times, we have something that genuinely solves a real problem for our customers is really important. And learning by itself, if the team is just getting smarter but they’re not adapting and they’re not changing the product, then that’s not right either. So learning without adaptation is useless. I think “pivoting” is the other word we use there. It’s a big word in the industry right now and the startup world. It’s an even more drastic form of adaptation, where sometimes what you thought was your problem and that you thought your company was trying to solve is actually not what you’re solving, and what you really need to do is solve a different problem.  And now you need to point the team in another way. And so pivoting is an art form of when to do it, and when are you really pivoting to something of higher value and when are you abandoning your strategy and being too wishy-washy it’s hard to know in advance, but it’s something you need to be open to doing.

Accountability is important, too. This isn’t about giving innovation teams unlimited freedom. We have to define success as I did with the seedling analogy. We need to define milestones along the way and measure people according to those milestones. Celebrate winning when wins happen, let’s celebrate them. Let’s reward the team; let’s be sure they feel good about what they’ve accomplished because innovation is hard, but we also need to own our failures and we need to see them for what they are. So, that’s where facing the truth is really important. We need to be able to see the truth of what worked and what did not work at a detailed level.  And if the emperor has no clothes, we need to say it rather than continuing to prance around in no clothes. And so, saying it and seeing it and acknowledging it is the only way to really learn and to really adapt. And so the team has to create a culture of candor about what’s working and not working. If the team feels pressure that everything is a success and everything’s amazing, then they’re not learning, and they’re not going to help those around them change and adapt to what’s really there.  So this idea that you see the reality and the unvarnished truth of what it really is—crucially important for innovation teams, and it’s crucially important for those supervising innovation teams such as yourselves.

I think the other thing to talk about here related to the picture is this conveyor belt and the boxes are jammed up on the conveyor belt. And the idea here is that you could have a great culture and you could have a great mission and all this stuff. One naysayer in the group, one person who is the obstacle organizationally to being successful can undermine everything else that everyone else is doing. They can be the blocker to block the entire group from being successful, and so I think accountability at an individual level isn’t just about the success or failure of the project or the product. It’s accountability to are you an accelerant to this process? Are you adding energy into the process? Or are you taking energy out of the process and are you a blocker? One log in the river can block all the other traffic on the river from going, and so accountability is not just at a team level for measuring the progress of innovation, but it’s about getting the blockers out of the way and enabling further acceleration of the process, further progress.

 

(31:35 What Can Finance Do?)

So now let’s talk about you. Now it’s your turn. What can finance do to help? So let’s bring this back around and talk about what we can do, right, Lisa? [Lisa says, “what Can I do?”] Great question, glad you asked. I think innovation sounds like something for the product development team. Sounds like something for the IT group or the pharmaceutical scientists or whoever.  I don’t know what all industries you guys are in, but we all have our spaces, and generally it’s someone else doing that—it’s not finance.

And so I think it’s interesting to think about how does finance help with this? I think this quote is interesting. Wayne Gretzky said, “You miss 100 percent of the shots you don’t take.” I think finance people, (my perception, you might disagree) but finance people often view themselves as, one of their goals is to protect the company from risk and to make sure that groups are measured and accountable and really it’s about risk management as much as anything else. But the fact of the matter is that innovation protects risk, too. So that same sense of “Don’t take the shot because you might miss it”…well, you might make it, too. Having a balanced view of risk management is really important.

So if finance is expressing doubts about innovation, are they the overall business risk that the CEO is feeling?  Or are they raising it? I would say, in ADP’s case, our CEO is a guy named Carlos, and this lab and our innovation drive here is a part of Carlos’ risk mitigation strategy for the company. And luckily, finance was crystal clear on that. We are all here to lower the disruption risk for ADP, and so finance sees themselves as part of that effort not to limit what we do.  So I think that’s really important going forward.

So let’s talk about some dos and dont’s. I think the embedding side is, I think to the extent you can, be a part of the journey, embed yourself with the innovation team. Don’t position yourself, try not to position yourself, as the parental oversight over the kids that are doing the innovation. We’re all in it together, and it’s the responsibility of the entire company to innovate. It’s the responsibility of finance and many other groups—I’m singling out finance because it’s FEI. But the idea is the support groups need to be there to help be part and parcel of the solutions to this as well. And so I think being embedded and living and being invested in the goals of how we’re going to change the world on X, Y, Z is just as important for the finance people on the team as it is for the development people on the team. I think be a problem solver. This is one where I think we have had so much success in our partnership with finance at ADP in this, and that is the idea of providing air cover to the innovation team, so the innovation team doesn’t have to mess around with all the corporate governance stuff.

So something you can do that no genius programmer can do is argue with the auditors and get the project capitalized instead of expensed. Okay, so that discussion is not one that any programmer or any pharmaceutical scientist can have. Only finance can do that. And if you can get the project moved out of expenses and onto the balance sheet, you can fund the whole project just by doing that, and no one else can do that. You guys are key enablers of things like that to help the innovators get the space they need to do what they can do.

Enabling the practice of innovation I think is really back to this risk management idea. Sometimes finance has a unique view of what the risks are for what the company’s facing: what are the clouds on the horizon? And that’s a place where your voice can be heard, and what areas do we need the innovation in? Where should we start? What problems should we be attacking? And so in addition to air cover and being a part of the team, I think there is an opportunity for finance as a department to influence the direction and the focus of that innovation. So those are all really good things. On the don’ts side of the equation, and I think I touched on this, innovation does take time to do, and projects that have non-trivial returns take non-trivial time to do. So you can’t demand immediate ROI. You can have other milestones and lots of ways to keep people accountable that are not financial, but it can’t always be financial ROI.

I think focusing exclusively on the downside risk is a trap that sometimes people fall into. The downside is there, and if we spend a million dollars to innovate on something, and we get nothing for it, then we’ve wasted a million dollars in essence. Hopefully we’ve learned from it, and we haven’t wasted the whole million, but maybe we have, and that’s our worst case.  But if we spent a year spending that money, I would bet that your CEO feels worse about losing the year than they do about losing the million. Time is the enemy of all this. And the opportunity to make 100 million or to make 20 million off of that one million dollar investment, we need to look at the upside. We need to look at the time and the commitment—that is the precious resource in a lot of places. So let’s think about the upside and let’s think about the time value of money as well.

The last thing I’ll say is don’t get discouraged by failing fast. I started with failing fast; I’ll end with failing fast, too. Failing fast is iterating. It’s learning and it’s doing it without an overly costly investment to do that. So the faster your team is iterating and the more they’re coming to you with new findings, they’re coming to the steering committees—or however you do your governance—that should be encouraging to you that you’re seeing progress, that’s forward progress. And so encourage the team to do more of that; to be a part of that. Back to embedding:  be a part of that candid conversation about what worked and what didn’t work, and be a part of advising on how we should adapt and pivot our strategies going forward.

This is my last slide, here. Ask yourself: is your organization—your finance organization in your company—ready to support the practice of innovation in your company? And I don’t know the answer. It’s a rhetorical question. I’ll just leave it out there, but I would like you guys to think about this. I hope this has helped you understand how your group can support it, what it means, why it matters, what the innovation teams are trying to do, and how you can water the sprout and help it grow and make sure that the innovation helps your company disrupt other industries or disrupt your own industry or helps you defend against other disruptors, and in the end, bring better shareholder return to everybody. That’s what we’re all measured on and compensated for, and that’s what we’re here for. So, thank you very much.

 

First Name:
Last Name:
Email:
Phone:
Company:
Zip:
Number of Employees:
ADP Client
Prospect
Client
 

TAGS  

1-855-864-1712

Sign Up for
Email Updates

featured webinar