Balanced investment in both customer-facing and finance systems drives the best overall performance across a business, but most innovative investment is still concentrated at the front end. So how can companies rebalance this top-heavy approach?
The technological revolution has been a boon for customers, from online shopping to product recommendations, targeted advertising to precise delivery times enabled by logistics software. Customers have always come first, and so it should be – without someone to buy your product or service there is no business. But the focus on front office innovation (customer relationship management software, web analytics and digital marketing suites), has come at the expense of back office investment for many years, to the detriment of performance.
FSN’s recent Innovation in the Finance Function survey, one of the largest surveys of its kind, shows a stark imbalance in front and back office investment. Just 28% of companies have invested equally in customer-facing and finance processes. Meanwhile 49% have poured most of their innovative resources into customer-facing processes first. The survey shows clearly that almost half of companies are hindering their own performance by focusing on the customer to the exclusion of all else.
The data shows that balanced investors can reforecast quicker and more accurately than the rest of their peers who haven’t managed to implement innovation in all areas of their business. This vital insight allows companies to remain nimble in a cut-throat competitive environment, and provides vital insight to drive their business.
So how do organisations propose to redress this imbalance?
The silo mentality is a cultural malaise that profoundly affects efficiency. When different functions fail to share information and collaborate, work is either duplicated, stilted, ineffective, or all three. Instead, organisations need to ensure that their teams include people from across the company, to share ideas and encourage the sort of integration of processes that leads to seamless outcomes. The advantages are manifold. Finance already has a unique view across the organisation from its vantage point at the centre of the money trail, so can add a dispassionate but informed voice to the customer-facing functions. Likewise, the front-office perspective drives home the importance of the customer journey which can get subsumed by bottom line targets.
Breaking free from traditional ROI
Finance professionals are used to underscoring their investment plans with traditional return on investment calculations. But this only really works when the benefits are entirely tangible. Innovation comes in many guises, and the some of the benefits may be less tangible than others. The benefit of automation, for example, collaborative technologies, is not just the increased speed of processes, but the ability to pool efforts, share screens, communicate more effectively, breakdown operational silos and resolve issues more quickly. But putting a dollar value on this performance lift isn’t necessarily straightforward. However, if the finance function wants to make the case for investing in innovation in their own backyard, they will need to start considering more imaginative ways to calculate and present these intangible benefits to the board.
Dedicated innovation budget
With limited investment resources, the front and back office often battle for a share of the budget to spend on new and innovative projects. Instead of infighting, survey respondents said a dedicated innovation champion and budget was the best way to drive innovation forward in the finance function.
Setting aside a specific innovation budget, to be allocated across all functions, shifts the focus away from traditional ROI, and enables flexibility and freedom to experiment with new ideas. And the driving force behind the most effective use of an innovation budget is a dedicated innovation champion who can encourage and direct the risks and rewards of innovative projects.
The finance function needs to make the case for a more balanced investment strategy. Otherwise they risk falling behind the rest of the business which could jeopardise the very customer experience that front-office investments have worked so hard to attract.