How to think strategically about innovation

The big ideas that lead to innovative business changes may seem to happen outside traditional structures, but it’s important for organisations to be strategic when it comes to setting the stage for innovation to occur. Accounting tech expert Donny Shimamoto, CPA/CITP, CGMA, offers up the key components that entities should consider to stay ahead of the innovation curve.

What you’ll learn from this episode:

• The forces driving the need for change today.
• Examples of the change drivers not directly linked to technology advances.
• Four components of innovation strategy.
• The potential outcomes of innovation strategy.
• How work/life integration ties into an organisation’s innovation strategy.

Play the episode below:

To comment on this podcast or to suggest an idea for another podcast, contact Neil Amato, an FM magazine senior editor, at Neil.Amato@aicpa-cima.com.

Transcript:

Neil Amato: Donny, thank you so much for being here.

Donny Shimamoto: It’s great to be here again, Neil.

Amato: Talking on the topic today of innovation strategy. First, what are the forces driving innovation strategies for organisations? That’s a big opening question.

Shimamoto: It is. And there’s so many different ways that we could look at that. But the reason I think it’s really important right now is that we are seeing so much change that’s being introduced because of technology. And I should caveat to a lot of people will say innovation and technology and use them interchangeably. But really, it’s not just about technological innovation. It’s also about innovation in processes, in methodologies, in really the way that we do business.

And so, there are some core drivers. For example, there’s a lot of economic uncertainty now, which drives the need for us to be more agile, our organisations to be more agile in what we’re doing. Increased oversight and regulation because of all the things that are happening and all the technological changes. And so how do we respond to all of a sudden legislation coming through and changing perhaps the regulatory landscape?

And then customer price pressures, you know, or cost increases, but really, it’s price pressure and the fact that there are more options out there as we move into a global arena. And then, of course, even our internal companies’ needs. We’re being told that we need to shift a lot of our culture and be less work focused and have more work/life balance. So there’s all these different things that are really coming together that are driving what we’re seeing.

You know, but again a lot of people associate innovation with technology. And so technology when we look at cloud computing, which is now we would consider that mature. It’s not something like, hmm, should I do it. It’s more like, cloud first and if I can’t figure out a reason why I shouldn’t be in the cloud — which there are valid reasons to not be in the cloud — then I should be looking at some type of cloud solution.

Mobile and apps, different types of apps, really coming in strongly now as well, reaching a level of maturity where I can actually get real work done. Big data, artificial intelligence, robotics, also all coming into play. There’s a lot of technology drivers that again are reaching this maturity that say, hey, we need to start looking at this. We need to start incorporating this into our organisations.

Amato: Another wide-ranging question: What would you say are four components of innovation strategy?

Shimamoto: When we’re looking at innovation strategy, a lot of people are, I often think of sometimes they’re doing it just because everyone’s saying they need to do it. But in reality, there are four main things we look at when we’re looking at innovation strategies. The first of those and the most common is really workflow and process efficiencies, or what we typically think of as automation. So that’s a lot of what people often think of first.

The second thing, though, is this whole concept of staff enablement and work/life integration. And notice I didn’t say work/life balance. It’s really about integration in today’s world. So how do I do things differently so that my staff or my employees, that they feel more enabled to actually take action, to make decisions, to do things. I almost kind of struggle back to the whole staff empowerment or employee empowerment movement that we saw [a while] back.

And this work/life integration, I think, is a balancing concept on the Millennials, where people say the Millennials don’t want to work. It’s not that they don’t want to work. They want to work when and where they want to work, and so it’s more integration between work and life and being able to balance stuff out. And I don’t think that’s something that’s Millennial specific. I think it’s something that all of us really want and need.

The third major strategy that we see is the evolution of the service offerings. So this is what people will normally think of as the transformation of a product or service into a new arena. So new product, new service, or new market, or different way of really delivering digitally. Digital transformation of the organisation and the services that it’s providing.

And then the fourth and one which really is an older one, because it was enabled first by the internet, is the local to global. And so am I looking at my local markets, have I taken and figured out how can I actually take what I’m doing, look at more of a global market or a regional market or a national market. Really looking at that. And that was usually the first thrust that we saw in innovation, is now I can leverage technology to reach other places.

The other side that we’re seeing is now, that flipping back. So how do I leverage technology to perhaps gather global information but really leverage that locally. And that’s more about the service delivery and the differentiation. And, you know, you could get business from somebody anywhere else, but you’re going to be one of the masses. And so how do I actually differentiate by going local instead?

Amato: I’m not sure I ever would have thought that work/life integration would play into innovation strategy. I’m not sure why, but it seems like it would be like an obstacle to strategy.

Shimamoto: Well, you know when you look at a lot of the startup world, when you look at the high-tech world, a lot of people will look at that. And especially people coming from bigger businesses. You know, more traditional businesses — maybe is the better way to say it — will look at it and scoff, oh, that’s just that trend. That’s just this thing. And you know, they’re just wasting money. I have to say I actually kind of agree with a lot of that.

But the change is really around the concept of we’re all responsible adults, is kind of the way that I think of it. So what we saw in the startup and dot-com boom and bust and all of that, which I look at, yeah, that was irresponsible. They’re playing a ton. But this incorporation of play and the ability to be yourself and not conforming to this corporate model, which leads toward the concepts of diversity and inclusion.

I think a lot of that pulls together more as we look at how do we leverage technology to then enable people to do what they need to do, whether that is core family events. Whether it’s somehow related to religious practice that they have to do, where they need to do something at a certain given time, right? And so they can’t be in the office. Or having different schedules and coordination of things, which really again is the staff enablement.

I don’t have to be in the office to work. I can work somewhere else. I can be at my kid’s soccer game. Although if you’re at your kid’s soccer game, I’m like, you really should be, shouldn’t you really be paying attention to the kid’s soccer game? Rather than doing work? But at least you have the option, right? And that to me is what we’re looking at, is giving people options to work when and where they need to work.

Amato: We’ve talked about the components of innovation strategy. Do you have four key outcomes of those?

Shimamoto: The four key outcomes that we would expect are not necessarily, I know it’s four and four, so, but don’t think of these as direct correlations. And the way that I like to use the outcomes is, whenever I see a project come up, I’ll start to look at, “OK, what are we really trying to do with this?”

Because the worst thing that I see people do is they will say, “Ooh, look at that cool thing,” or they’ll go to a conference and be like, “Oh, this vendor just showed me this really great thing that we can do.” And I always come back and go, “Well, what problem are you trying to solve, or what are you really trying to do?” Because, is that thing a solution looking for a problem? Or do you really have a problem that you’re trying to solve?

And so, the four outcomes that we really want to look at. I’ll start with — the first one really is aligned to that first strategy, which is an automated or an efficient process. What we’re trying to do there is really improve execution or improve profitability. Because normally we are reducing costs. We’re making things more efficient. And so we should see faster execution or we should see increased profitability.

But increasingly, it’s not just that single bottom line. It’s more about the broader picture. Like, we just talked about the work/life balance, or work/life integration. So the second one is actually tied to that, but it’s not a direct correlation, is improved work processes. Am I just trying to improve the way that we actually do work.

And if you think about the amount of coordination that’s required, or why things get delayed, sometimes it’s I’m trying to work with somebody and they’re not working the same way, or I can’t reach them, or I don’t know how can we actually work on something collaboratively, because we keep having to pass stuff back and forth on email instead of just sharing documents.

So improving the actual work process, when you think about it, actually leads to increased employee satisfaction. I’m not having to jump through all these hoops to get something done. Maybe not totally efficiently, but more effectively, because now I’ve got collaboration, now I’ve got human interaction involved. Because we can’t work on islands alone.

The third outcome that I normally start to look at is reduced risk. So am I reducing the risk of me actually accomplishing, or my employees accomplishing with their tasks. And so what we’re looking at is better workflow, or the movement of work through a work process or through multiple people, and project management.

So it’s more of a discipline. It’s more of controlling what’s actually going on as we’re working through something, rather than automating and making it more efficient. It’s more of an understanding of what’s happening, because are we going to hit the deadlines that we need to hit. Are we going to be able to deliver product or whatever it is that we need to deliver? Or, if we’re in the cyber world, am I reducing the risk that something’s going to go wrong, right? I’m going to have a data breach or something. So I think of that as that third outcome of reduced risk.

And the fourth outcome really is something, it’s just that final lens. And if you actually do all the other three, you should also get this fourth one, which is really increased customer satisfaction, or an increased impact. So that really as I start to mature, and that’s the way I think of a lot of these, is I’m maturing the way I’m operating. I’m not just kind of doing, I’m actually thinking about it. I’m managing. I’m actually leading. We have a higher quality of service or a higher quality of product.

And that’s what we’re going to see as something that starts to differentiate the way organisations are operating. That it’s the experience that they provide to their customers or to their clients if they’re like an accounting firm. That’s going to make a client stay with them, or a customer stay with you, rather than it’s good enough that I can just go to Walmart or something and go and get it.

Amato: You mentioned if you don’t truly have, you know, like a retail customer. If your customer is your client in the firm example. But if someone is working in a job where they’re not truly close to a customer, you know. I don’t really like that term, customer-facing, but I’ll use it. How do you get that across to them? I mean, if they’re a controller in a business or something like that. If you have a better example, use it.

Shimamoto: That actually is the perfect example, because I hear that a lot, when we’re working with controllers or CFOs. They’re like, we don’t work with customers. You do. You have internal customers. So, if we’re looking at a controller or CFO or even as valid for this whole thought process, is valid for the firms as well. The customer or the client is the person that’s consuming your services and somehow going to use your services to improve whatever they’re doing.

So, if it’s the internal controller or CFO, their customers are the other department heads. Maybe it’s the CEO. Maybe it’s the board, right? And what we’re doing is we’re trying to give them information and help them improve their decision-making. So whether, if I go back to one of the impetuses, which is this increased organisational agility, part of increased organisational agility comes from the ability to make better, faster decisions.

Being able to make better, faster decisions means I have better data. Or I can run what-if scenarios. Or I can do better forecasting to say, hey, if we keep doing what we’re doing now, this is not going to work. Or, this business condition just changed or this assumption that we’re working with just changed. Here’s how it impacts the forecast.

And now we can shift and say let’s redeploy resources. Let’s look at the impacts. Let’s shift perhaps some of our investments, and investments not just in dollars but in time and people and what’s happening.

Amato: I’m glad you touched on that, the customer aspect. Because we actually have an article in Financial Management magazine, and it’s about customers but in a government accounting function. And just kind of thinking about who the customers are in that instance was interesting for all of us. But it’s a good way to learn. There are customers, like you said, in that CFO/controller example.

Shimamoto: If you even take that whole mentality, it’s an interesting one, too. Especially when we’re dealing for example with accounts receivable or anything that there actually is an endpoint customer. Because as a customer support person is dealing with that actual customer, maybe they’re coming back to finance to be like, hey, what about their credit limits or what’s going on.

They said they sent in a payment. Did the cheque come to us? Why are we showing a past-due balance? I mean, accounting and finance’s ability to respond to those inquiries quickly and to provide the information back to the consumer support person who is then dealing with that customer impacts that customer’s perception of the organisation itself. So even though sometimes we’re two steps away from the customer, there still is a customer in the end.

Amato: Moving on from customer satisfaction to competitive advantage. As innovative technologies that you’ve mentioned reshape the accounting profession, the business world at large, what can CPAs, finance professionals, and their employers do to maintain or capture competitive advantage?

Shimamoto: I actually hinted to it earlier. You know, it’s the competitive advantage is really going to come from this ability to have organisational agility, which is enabled largely by the ability to make faster, quicker, better decisions. And faster than your competitors is really the way we think about that.

So when we look at, you know, how do I actually enable this, it’s about having more, a greater understanding of the business, and not just the financial aspects of the business, but how does the business operate as a whole. What are the business processes? What are the data, not just financial data but perhaps nonfinancial data? Operational data that is really going to help us better drive and understand what’s happening.

I like to use the example of a car dealership. When we look at the revenue from a car dealership, we’re looking at it and saying OK, here’s the endpoint revenue. This is what’s happening. How do I increase car revenue, dealership revenue? Well, it’s actually by selling more cars, and more inputs into those cars. But really the ability to sell more cars is driven by having more people come to the dealership.

And so by having more people come to the dealership, my salespeople have more opportunities to sell more cars. Well, how do I get people to the dealership? It’s really about marketing. And getting marketing to actually spend money to get people to the dealership so my salespeople can sell more cars, which then should end up generating more revenue. And that’s a super simplistic example, but if you think about it, it actually gives you a way to say, I can now hold marketing accountable for revenue generation.

And it’s like, usually when I give that example when I’m teaching, people are like, “Whoa, wait, I can hold marketing accountable to something, to a dollar amount?” Yeah, because you can see the impact from the end, or from the start all the way to the end of the revenue being booked.

Amato: Marketers everywhere listening to this podcast and maybe getting nervous.

Shimamoto: Perhaps, perhaps, perhaps. But it’s, you know, one of the things I like is that it comes back to accountability. And that’s one of our jobs as accountants. Hold people accountable.

Amato: Donny, thank you so much. Anything in closing that you’d like to add on this topic? I know there’s a lot of different ways you could go.

Shimamoto: I always just want to encourage accountants. You now, innovation seems like a scary thing, and a lot of people think of it as technology. But it’s more about what you do with the technology and how you leverage the technology. So rather than fighting the technology, figure out what’s going on. How can I use that? And also think about, “What are the risks? What controls can we put into place, or how can we get better information from this?” And those are the keys that really, only we as accountants are trained to do. And if we leverage that, we can help our organisations truly transcend the technology and have competitive advantage.

Amato: Donny, thank you very much.

Shimamoto: Thanks, Neil.