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5 Ways That Finance Can Help With Innovation

Finance is not always seen as the father of innovation, what can be done to change this?

24Nov

Finance has not always been the father of invention throughout history. When people think about the biggest and most monumental innovations of the past 100 years, very few would consider the role that finance departments have to play in them.

Aside from creating the basics, like being able to measure the success of a product in terms of P&L, the role of a financial department can be vital in the creation of new company innovations.

Data

Far from being ‘bean counters’, those working within the finance departments often have the most important and insightful data for anybody looking to create new innovation.

From the sales data of a particular product alone, somebody with the mind of an innovator can see what is currently working and what isn’t, then build a product, idea or service based around this.

Having a finance department who are ready and willing to share this kind of data for innovation purposes is going to create the best possible environment for innovators to operate.

Evaluating Risk

A key facet to innovation is its continuation. Few innovations are going to work first time around and the ability to fail is only going to work for so long until a company is going to be unwilling to continue supporting innovation programmes.

Many companies are going to judge the performance of any individual innovation on its profitability, so making sure that there are not too many who are failing in this regard is going to make more future innovations possible. If a company begins to see an innovation department as a drain on resources then the likelihood of its continued existence or growth decreases.

If a finance department can identify the innovations that are definitely not going to work, then the success rate for the innovation department will increase.

Not Cannibalising Budgets To Take Risks

It is important for individual departments to feel that they can innovate without impacting their budgets.

This means creating a separate innovation chequebook, allowing people to innovate without having to cannibalise their own budget to fund a new idea. This is something that finance departments need to support by making sure there is sufficient funds available for this and that the fund is well managed.

Set Up A Capex Chequebook That Is Different From Growing Existing Products

Creating a capex chequebook that is different than growing existing products is important as it means that departments know that it is important to innovate fully rather than making incremental changes to existing products. Simply making small changes and calling it ‘innovation’ is the quickest way for people to to stop believing that true innovation can occur.

By allocating a budget for true innovation, it means that departments are more likely to create a genuine game changing product.

Expanding The Reward For A Patent

By creating budgets that allow for others on a patent to be rewarded by the company not only improves moral and team working ethic, but also means that people are more likely to work collaboratively on a project.

Generally companies tended to reward the main patent holder when they created a technology, idea or product. This meant that either the reward given to the primary name on the patent needed to be split by the patent holder themselves or not split at all.

By creating a system where everybody is rewarded equally, it allows for collaborative thinking and research to take place without the difficulties that money can often create. 

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