Growth is back on the CFO agenda, with 89 percent of companies reporting growth in 2016 and 85 percent projecting growth in excess of five percent by 2020, according to recent Accenture Strategy research.1 So where is the growth coming from? The top 10 strategic growth drivers identified by business leaders (figure 1) include the usual suspects: expanding products and services, attracting new customers, and growing geographically. But also high on the list are accelerating innovation, implementing disruptive technologies, transforming business models and connecting ecosystems.
Metrics such as revenue from new products and services, market share, or revenue per customer do a decent job of measuring traditional growth. But what are the key performance indicators (KPIs) that track innovation, use of disruptive technologies, business model transformation and ecosystem connectivity? Most companies can precisely say how much they spend on travel each year, but have no idea how much they plan to invest in innovation or disruption.
Top 10 Strategic Growth Drivers 2
Replacing an accounting mindset with a decision-oriented mindset is a great starting point for defining relevant measures. Too often:
Today, the size of the strategic bets that companies are making in the areas of innovation and disruption demands a more rigorous measurement process. The first step involves understanding what outcomes innovation and disruption can deliver, and which measures can be used to inform strategy. We believe such measures exist at three levels:
These trends can be captured or reflected by external, market-focused measures:
|Outcome Desired||Strategic Growth Driver||Candidate Measures|
|Innovation|| Create new, more
products or services
|Disruptive technologies|| Encourage customers
to abandon traditional
models and adopt
new disruptive models
Looking further into the research, companies are clear about their investment priorities. The top five are talent (38%), brand (33%), innovation (31%), trust and sustainability (31%) and automation (30%).3 Yet within each of these areas, how do CFOs measure both the investments being made and the return on those investments? Rarely is there a budget line item for “Talent Investment” or “Innovation Investment.” Similarly, scorecard KPIs for “Return on Talent” or “Return on Innovation” are hard to find.
Given the importance of such investments, there is a compelling need for companies to define and calculate more effective metrics. For example, return on talent may reflect improvements in productivity (revenue per labor hour and cost per labor hour). Talent retention strategies can be tracked through unplanned attrition of high performers.
Bottom line: Developing credible measures of innovation and disruption will allow organizations to more accurately and effectively evaluate the success of their growth strategies and increase competitive agility. Today, CFOs have access to unprecedented amounts of data. As they seek to capture growth, they have the opportunity to use that data in new ways to rethink everything — from how they set targets and create budgets to how they measure performance.