Investing in innovation should be a CFO priority

With another challenging economic year behind us, chief financial officers (CFOs) today are balancing cost-cutting priorities with the need to remain forward-thinking. While many are cautious in their investment strategies due to ongoing economic pressures, holding back on innovation may be a misstep, says Alex Smith, the newly appointed CFO at e4.

For CFOs in technology, innovation is not just a consideration but a core priority. While there may be a lot of pressure on businesses and CFOs from a profitability perspective in the current market, it is never a good idea to let innovation slip. The risks of stagnation by overlooking innovation during tough times far outweigh the gains made by cutting such costs.

Historically, CFOs have been seen primarily as cost managers, but today’s business environment demands a broader and more forward-looking role. A recent Gartner CFO Survey suggests that 78% of CFOs are prioritising digital acceleration and innovation investments despite economic uncertainty, showing a shift from cost-cutting to value creation.

This transformation reflects the emergence of the CFO as a chief value officer: a leader whose role extends beyond financial oversight to actively shaping business strategy, driving digital acceleration and ensuring capital is allocated to the highest-impact initiatives.

While the traditional role of the CFO is changing and the many hats we wear in today’s business world can be demanding, many find they can create the most value in a company by focusing more on strategic leadership rather than solely on financial management.

Here’s how you can leverage your unique position within a company to ensure future growth – especially during and after economic headwinds:

Look at the big picture

CFOs must assess the company’s overarching strategic direction rather than getting lost in granular details. By understanding broader market trends and revenue drivers, CFOs can allocate resources effectively and identify opportunities for innovation that can yield higher returns. This approach moves away from managing costs to the role of evaluating which investments in technology have the potential to support long-term business growth.

Teamwork makes the dream work

Research shows that many business unit leaders view the CFO and the finance team as obstacles, not allies, in the innovation process. To become true collaborators, CFOs need to change this perception. Involve all business unit leaders to assess innovation projects, outline the costs of doing so, and estimate the savings or growth it could generate. Innovation should be seen as a business enabler rather than a cost.

Keep an open mind

The difficulty with innovation is that, by its very nature, it often lacks the track record required in the approval process of other business decisions. And though that carries some level of risk, it doesn’t mean innovation decisions have to be made blindly. Consider other approaches to validate the untested assumptions associated with innovative ideas. This could involve deeper research, surveys, mock products or beta launches.

Speed things up

Traditional approval processes can take months, while innovation never stops. To make innovation spending effective, it’s important to find ways to speed up approval processes where possible to ensure the business will benefit from new technology. Consider high frequency reviews and inserting decision points into a development process to create natural and relevant review timings.

Keep track

Measuring the success of innovation goes beyond traditional return on investment metrics. While financial returns remain important, CFOs should also track indicators such as customer engagement, market positioning and competitive differentiation.

Importantly, innovation investments should follow a structured review process and milestone assessments. Not every initiative will succeed, and that’s to be expected. Venture capitalists operate with the understanding that only some of their investments will yield substantial returns. CFOs should adopt a similar mindset around innovation: If market conditions shift or initial assumptions prove incorrect, CFOs must be prepared to halt underperforming initiatives swiftly and redirect resources to higher-impact opportunities.

Ultimately, the role of a CFO shouldn’t be to approve or deny expenses, but to create a framework that optimises the use of scarce resources and drives long-term value. It’s easy to say no to innovation requests, but the real challenge and opportunity lie in fostering a culture where smart, calculated risks fuel both growth and sustainable value creation.