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. Too little investment and organizations can fall behind on the innovation power curve. But too much investment, as it turns out can actually be far worse.
However, making those smart investments to fuel innovative financial strategies is difficult for CFOs lacking operational insight. This is especially challenging in today's era of digital disruption; CFOs must now grapple with more data sources, more channels, more numerous and complex business models, a more global nature of business, and more reliance on external partners. All of this is necessitating greater information accessibility and responsiveness.
Data Deficit is a challenge for CFOs
In a recent global survey of over 1,500 financial decision makers conducted for Epicor Software Corporation, over 46 percent of CFOs said they rely on "gut-feel" and instinct to make business decisions in lieu of fast access to accurate internal data.
The research reveals that many CFOs are dealing with a "data deficit" that threatens decision making and fiscal management and financial operations. The inability to access the right financial information is having a direct impact on business performance and CFOs' reputations. Of those polled, 45 percent say poor data hampers timely decision making, and inaccurate information is the main cause of organizational mistakes.
Obstruction to Profitability
The more the CFO relies on empirical data for decision making, the greater the chances of higher profitability, suggests the survey results. Within the survey sample CFOs that rely on empirical data for decision making as opposed to instinct had greater profits, with 72% experiencing a profit increase.
And while a lack of operational insights is pilfering profits today, the real losses may be yet to come. There's a link between opportunism, innovation and growth, and without the right data, organizations can't be opportunistic and exacting in making the right smart investments to fuel innovation.
Considering the 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, we can ascertain that 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.
Considering innovation is key to growth, organizations need a process that enables them to be more exact when planning these investments. Financial executives must be confident whenallocating resources to grow the business in areas such as customer service, sales, and marketing, and in critical innovation investment areas such as new product development and partnerships.
Financial System Reboot
While there have been significant changes in business models and financial governance requirements and the volume of data over the years, many organizations' business systems have stayed the same. The research reveals an incredible 60% of CFOs and finance directors still rely on Excel spreadsheets to gain access to data - even those in businesses with over $1 billion in annual revenues.
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.
To be fully prepared for the future, finance professionals must invest in the right technology tools, so they can make the right decisions, foster organizational responsiveness, and confidently take advantage of windows of opportunity - to propel growth and profitability.