January 2017 / STRATEGIC FINANCE / 21

For example, CMAs can usetheir decision support skillsto model the projectedfinancial performance of anew initiative, such as anew product line, calculat-ing a range of net presentvalues, and testing the sen-sitivity of critical variablesto identified risks.

One very significantreason for organizationalfailure is the inability toinnovate. Not anticipatingthe future and not adaptingto new technologies andmarkets can quickly dis-rupt the business model ofa once profitable company.Senior management, sup-ported by the skills ofCMAs, need to seize oppor-tunities that create value.Innovation can lead tocompetitive advantage, or

Yet many companiesignore the fact that it’s nec-essary to evolve, believingthat what they are doingnow will enable them to besuccessful forever. Forexample, Kodak held adominant position in pho-tographic film during mostof the 20th Century, but as aresult of its slowness intransitioning to digital pho-tography, it filed for bank-ruptcy protection. Compa-nies are failing at a higherrate than in the past, andtheir average life span isgetting shorter. Organiza-tional leaders should becontinuously evaluating therisks and opportunities ofthe changes taking placetoday, and CMAs areuniquely qualified to helpwith and support this effort.

CERTIFICATION

CMAs: PARTNERS INVALUE CREATIONInnovation is key to a company’s success, and CMAs play several roles to enable it. BY DENNIS WHITNEY, CMA, CFM, CAE

THE PACE OF CHANGE in today’sbusiness environment isunrelenting, and it’simperative that all of usadapt quickly. Companiessurvive by creating acompetitive advantageand delivering sustained

value for customers and owners. Accountingand financial professionals who hold theCMA® (Certified Management Accountant)certification support the strategic managementprocess, enable innovation, and drive value intheir organizations by using their businessinsight skills of planning, analysis, risk man-agement, performance measurement, anddecision support.

it can completely disruptthe business model and puta company out of business.

SECRETS TO SUCCESS

When a company has acompetitive advantage, ithas attributes that allow itto outperform its competi-tors. This usually meansdelivering a unique valueto its customers that willlead to profits in excess ofthe industry average. Asustained competitiveadvantage is one that lastsbecause it’s difficult to imi-tate. Innovation can createthis sustained competitiveadvantage, which, in turn,creates value for customersand owners.

Successful companiesfocus on the unmet needsof their customers. Meetingthese needs with innova-tive product solutions cre-ates value. To formulate astrategy that’s designed tomeet the objective of creat-ing sustained value forboth customers and own-ers, it’s necessary to use adisciplined approach, eval-uating opportunities anddeciding whether it’s betterto develop in-house, whichis an organic approach, orthrough partnerships oracquisitions.

CMAs play a role inmany of the stages of inno-vation from idea generationto building the businesscase to leading the innova-tion initiative and up topost-implementation eval-uation. One particularlyimportant role for CMAs isto use their strong analyti-cal skills to evaluate theopportunities that innova-tion creates. Another isinnovation governance.Though difficult, measuringinnovation is essential tothe success of an innova-tion process. If you don’t

measure it, how can youreport success, and howcan you improve it?Reporting the results ofinnovation to top manage-ment and the board ofdirectors is imperative togain and maintain theirsupport. Measurementshould be done in a bal-anced way, similar to thebalanced scorecard, includ-ing both financial and non-financial measures.

The finance team mustalso ensure that enoughresources are allocated forinnovation and plan fordynamic allocation ofthose resources. No onecan be certain how innova-tion projects will play outduring the year or whatnew opportunities willarise. In addition, perform-ance measures should bealigned with the goal ofsupporting innovation.Penalizing too much forfailure can stifle creativityand risk taking. CMAs canbuild robust financial plansand performance measure-ment systems that lead togoal congruence. Forexample, at a basic level,management accountantscan prepare flexible budg-ets to account for differ-ences from the plan in vol-umes and/or prices. Thisprovides insights into thekey drivers of change. Tak-

ing this a step further, theycan create financial plansthat account for a range ofpossible outcomes. That is,there wouldn’t be just oneset of projected financials,and not just best, mostlikely, and worst cases, buta series of possible results.This acknowledges thereality that the future isunpredictable but assignsprobabilities to the variousoutcomes. In support ofinnovation and value cre-ation, it’s imperative tobuild a financial plan thatcan adapt to changing real-ities in the business environment.

ENABLING INNOVATION

The skills that CMAs bringto the job make themuniquely qualified toenable innovation, facili-tate the strategic planningprocess, and help createvalue in the organization.Planning, analysis, riskmanagement, performancemeasurement, and deci-sion support enable aninnovative and resilientorganization.

Companies must antici-pate disruption and buildand refine their radar sys-tems to be on the alert forimpactful change. CMAs canhelp a company be adaptiveso that it is positioned to

quickly recognize a uniqueopportunity or risk, evalu-ate options, and seize theinitiative to become an earlymover. Organizationalresiliency is the ability to actdecisively on revisions tostrategic and business plansin response to changingmarket realities.

MANAGING RISK

An integral part of the plan-ning process is risk man-agement. In fact, risk man-agement should be builtinto the plan from the startwhen senior managementand the board of directorsset objectives. It shouldn’tbe a separate function builtonto other responsibilities.Effective risk managementis integrated into the every-day work of a CMA in plan-ning, analysis, and decisionsupport, particularly toassist management in set-ting and achieving organi-zational objectives. CMAscan help an organizationidentify what might betterenable it to reach its objec-tives or what might preventit from doing so.

Anticipating and adapt-ing to change throughinnovation is imperative intoday’s business environ-ment. The CMA program isuniquely aligned with thevalue-creation activities ofan organization. With theirstrong business insightskills, CMAs enable inno-vation, build resilientfinancial plans, and man-age risk in such a way thatorganizations can reachtheir objective of sustainedcompetitive advantage. SF

Dennis Whitney, CMA, CFM,CAE, is senior VP, certification,exams, and content integration atIMA. You can reach him at dwhitney@imanet.org.

CERTIFICATION

22 / STRATEGIC FINANCE / January 2017

For more information, see:“Why Innovation Should Be Every CFO’s Top Priority” byMark L. Frigo and Darren Snellgrove in the October 2016issue of Strategic Finance.

“Risk Management: It’s What We Do!” by J. StephenMcNally, CMA, CPA, and Vincent H. Tophoff, RA, in theSeptember 2016 issue of Strategic Finance.

“Advancing Innovation: What’s Your Role?” by Patrick J.Stroh, CMA, in the September 2015 issue of StrategicFinance.