Horseshoes, Hand Grenades and Innovation: How Access to the Right Data Can Boost Business Growth
In our recent survey on instinct versus insight for CFOs, it is revealed that access to better data allows the Office of Finance to make better decisions faster. It means financial executives can be more confident when allocating resources to grow the business in areas such as customer service, sales, and marketing, and in critical investment areas to support innovation such as new product development and partnerships.
The link between innovation and growth has been well established; but we believe there’s also a link between opportunism, innovation and growth.
A groundbreaking PwC study shows a deep correlation between innovation and growth for all businesses. Given today’s corporate growth imperative, and the leverage gained through innovation, it’s important for organizations to make smart investments. High R&D spend, for example, is often a good indicator that a company is dedicated to innovation and willing to do what it takes to stay out in front of the competition. That leads to increases in revenue and earnings, and rising stock prices for publicly traded companies.
But how do companies know how much to invest in innovation?
Considering our survey shows nearly 1 in 2 CFOs rely on “gut-feel” and instinct to make business decisions in lieu of fast access to accurate internal data, many are making educated guesses. This reliance on gut-feel versus empirical data can work out for many; however, the decision-making process becomes less data-driven and more of a ‘judgment call.’ It’s only by luck or chance that an organization will arrive at the exact right answer as to how much investment they should make to foster innovation and growth. It’s more likely they will arrive at a figure that’s either under or over par. Erring on the side of financial conservatism may put organizations at a competitive disadvantage.
On the flip side, being over-zealous with innovation investments can cause organizations to miss market expectations, or even outspend revenues. And there’s evidence that spending too much on innovation can actually undermine growth and profitability. A study from Bernstein Research found that tech companies spending more than 18% of revenue on R&D tend to underperform the market, while those that spend less outperform.
Considering innovation is one of the keys to growth, organizations need a process that enables them to be more exact when planning these investments. Designing innovative financial strategies can’t be like horseshoes and hand grenades -- based on luck or a one-size fits all approach.
To support smart financial strategies for innovation and growth, organizations must be able to access information and analyze it quickly to aid smart, agile decision making. The solution is to have a modern financial IT infrastructure in place that delivers the right data to the right people at the right time in the right way – providing a solid data decision framework.