CFOs often hold the weight of the company on their shoulders. Leadership might question the need for new tools and technology updates. Successful brands may pause before making changes that deviate from the status quo. Yet, without significant changes, growth stagnates.
When boards hesitate, it is not a lack of trust in the CFO or a misunderstanding of the idea. They are wrestling with the timing, the risks and the proof. The challenge remains in achieving the maximum return on investment without disrupting the entire business.
To provide a clear framework for navigating this challenge, we’ve partnered with Marisa Kopec, President of Lux Research — a leading technology research and advisory firm. Drawing from Lux Research’s extensive work with global corporations, Kopec has developed a practical methodology for CFOs to measure and prove the ROI of corporate innovation. This guide will walk you through her expert insights, providing a step-by-step approach to transform how your board views and values innovation.
Demonstrating Innovation ROI to the Board
Executive teams often ask finance leaders to put innovation on the same footing as capital investments and operational improvements. They expect new ideas to deliver transparent financial returns and make a contribution to the company’s overarching goal of achieving long-term growth.
Convincing the board that innovative ideas yield significant returns requires CFOs to adopt more flexible financial presentation methods to demonstrate the effectiveness of their ideas. So how do you prove the ROI of corporate innovation to a board? The following tips should help.
1. Redefine What ROI Means
When measuring the ROI of a new idea, companies often find that traditional financial calculations are insufficient to capture the full value of the concept. Coming up with something completely new that is guaranteed to succeed is virtually impossible. The value that new initiatives deliver is often irregular, sometimes appearing at the wrong times or over the course of years, so conventional return models fail to paint the whole picture.
According to Kopec, companies can fall into the trap of prioritising short-term gains under economic pressure, which makes their quarterly numbers appear better but erodes their competitive edge. Evaluating the ROI of an idea is not just about financial returns — it also encompasses non-financial benefits. Leaders need to view it as a combination of economic returns, strategic leverage and future advantages.
2. Segment Initiatives
Companies often treat all investments as equal in value. One strategy to make your ideas stand out is to segment the innovation portfolio into three primary areas —core, adjacent and transformational innovations.
Core innovations are those that enhance current products, processes or revenue streams and yield a guaranteed return. Adjacent innovations take the organisation’s offerings into brand-new markets. Here, you might have a good idea of what the return might be, but it can be tricky to pin down.
Transformational innovations aim to revolutionise the business model or introduce brand-new technologies. It may be challenging to justify their massive up front costs with traditional ROI projections. This can make it difficult to get anyone excited about them when pitted against other ideas.
However, Kopec says, “Relying too heavily on low-risk, incremental projects leads to … ‘low-risk mediocrity’ — safe work that preserves the status quo but fails to meaningfully shift long-term growth trajectories.” Organisations need to balance their portfolios and dare to have bolder, more innovative ideas to target large opportunities.
3. Focus on Leverage
One of the most underutilised arguments for the ROI of innovation is leverage, where high-performing companies amplify their internal investments to achieve greater returns. Chevron Tech Ventures is an example. With a $400 million investment in two funds, Lux Research’s analysis reveals that the group participated in over $3 billion of total funding, nearly eight times their investment, significantly altering the picture of their financial returns.
CFOs may now have additional metrics to assess ROI, including external capital flowing to companies per dollar invested and strategic partnerships facilitated through research and development. These methods provide clear-cut insights into economic efficiency, a central boardroom discussion point.
4. Use Portfolio-Level Metrics
The collective weight of numerous small projects can significantly impact the success of an initiative. Boards can get bogged down in the failures of individual elements and question the project’s effectiveness.
Portfolio-level metrics are effective at reframing the discussion from individual project outcomes to a single system performance evaluation, which is precisely what boards can latch onto. The most valuable metrics include the percentage of revenue generated from projects launched in the last five years and aggregate value creation relative to total innovation spend.
Risk-adjusted expected value across the pipeline can demonstrate alignment and control of innovation and even help CFOs understand the program’s financial value. Such metrics show companies what works. As Kopec points out, “As economic pressure intensifies, many companies now find themselves over-optimising for quick wins at the expense of long-term competitive advantage.” By presenting aggregate results, a CFO can strategically shift the board’s focus from individual project returns to the sustained, long-term value of the entire innovation engine.
5. Show Short-Term Value
Some people may think that the benefits of innovation are exclusively long-term and will not appear on the balance sheet anytime soon. However, many innovations can deliver immediate value. Short-term wins include the money saved through streamlined processes and the time knocked off the launch schedule for new products, thanks to forward-thinking technology scouting.
Demonstrating these kinds of benefits does not downplay the significance of long-term bets. It is a straightforward way to show that innovation can address current issues and position a corporation in a strong position for years to come. Lux Research found that companies that can effectively explain the dual benefits of innovation are significantly more likely to retain their investments, even during economic downturns.
For example, a report found that 66% of CFOs believe artificial intelligence will only deliver a significant ROI within the next 24 months. Knowing how to present the immediate benefits of becoming more competitive and productive helps the board see the need to invest in AI, which can lead to confidence in an AI-backed innovation.
6. Anticipate Board Objections
Boards of directors often share similar concerns across industries. CFOs who are prepared to address questions may find their ideas are more readily received and experience less resistance. Board members might express things like:
- Why don’t we just focus on safer, more conservative projects?
- We’re wasting money on ideas that competitors will likely steal.
- How do we know this won’t be a complete waste of time and money?
Innovation experts say the secret to overcoming these objections is to demonstrate how the innovation’s results will benefit the entire organisation, rather than acting as an isolated pilot. Risk avoidance is the real problem and can be just as costly. Lux Research advises that breakthrough innovation requires institutional courage, and if companies fail to leap, they will stagnate.
7. Support the Proposal With External Benchmarks
Multiple presentations work best when demonstrating an innovation’s ROI. An ongoing dialogue with the board builds transparency, consistency and faith in the numbers. When CFOs weave metrics into the fabric of their regular reports, rather than doing one-off assessments, they normalise innovation as a core business activity and make it harder for anyone to question its value.
Over time, this reduces resistance and turns board discussions from defensive to focused on improvement. It is not about eliminating uncertainty, but about demonstrating a disciplined, logical decision-making process.
Transforming Innovation ROI into Confident Board-Level Decisions
Many organisations face reduced budgets, shorter timelines and less patience for ambiguity in a tight economy. Metrics are necessary but insufficient to paint a complete picture for an organisation’s board of directors. Many CFOs know that long-term innovation is what drives growth and differentiation. Stating the facts in a way the board understands and can get behind delivers a lasting strategic advantage. CFOs who need to demonstrate the ROI of corporate innovation to their boards can succeed by combining financial accuracy with strategic vision.
