CFOs and their finance departments need to be included in the early phases of research and development (R&D) to identify risk, but without stifling innovation, finds new research from IMA® (Institute of Management Accountants) and Association of Chartered Certified Accountants (ACCA). To see the full report, visit here.
The report confronts the important issue of how the CFO can add discipline to the R&D process, especially in highly innovative industries, and use Technology Roadmaps to better identify the link between risk, investment, and spending. Technology Roadmaps are documents that can be used as a reference point when choosing and managing R&D projects. They provide an overview of the future needs and technical challenges facing an industry and outline possible solutions.
The report finds that success in R&D is not solely dependent on the amount of time and money spent, but is also about collaboration and cross-departmental teamwork. It reveals that CFOs often leave important decisions, such as the selection of strategically worthwhile projects and how to reduce the likelihood of project failure, to others.
“R&D in the fast-moving tech sector needs to be well funded and aligned with the company’s strategy. CFOs need to be involved earlier in the R&D process,” said Narayanan Vaidyanathan, head of technology insight at ACCA. “This is where the use of Technology Roadmaps as a management tool can help identify risk, and ultimately, support the growth of an industry.”
Raef Lawson, Ph.D., CMA, CPA, vice president of research and policy and professor-in-residence for IMA, adds, “R&D and finance departments often have to meet half way. A Technology Roadmap can help bridge the monetary risk versus innovation gap that can sometimes happen when R&D is racing ahead and CFOs want to check the spend.”
Key Findings
The choice of appropriate R&D projects is highly interdependent on the future strategy of an industry. CFOs can use the information in the Technology Roadmap to evaluate their firm’s project appraisal process and consider if it gives a clear picture of the risks. The Technology Roadmap provides a basis for:
- Engaging other C-suite executives in conversation about how a business’s strategy aligns with industry forecasts
- Rebalancing investment strategies by signaling to firms which projects are high risk and those that are lower risk
- Validating the firm’s strategy with less effort
- Increasing collaboration through multi-agency R&D initiatives and achieving conjoint technical and cost targets that support growth and development of the industry
- Helping to identify the likelihood of various R&D outcomes and the risks that could affect the achievement of those outcomes
- Accelerating the “time to market” of new products
This report draws on a case study of the semiconductor industry to help improve executives’ knowledge of Technology Roadmaps. The semiconductor industry was the first industry to develop a Technology Roadmap, which has been the lifeblood of that industry for more than 20 years, allowing it to continually improve the performance-to-cost ratio of wafer chips.
Other industries, such as biopharmaceuticals and energy, have drawn on the experience of the semiconductor industry to learn how to plan and develop Technology Roadmaps.
To download the full report, please visit here.