Driving ROI from R&D: The CFO’s Strategic Role
Anders Liu-Lindberg
Leading advisor to senior Finance and FP&A leaders on creating impact through business partnering | Interim | VP Finance | Business Finance
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Research and development (R&D) is often seen as the domain of innovation teams and engineers, while CFOs historically focus on immediate financial performance. However, in an era of rapid technological advancement and competitive disruption, R&D investment has become a strategic imperative. This is highlighted by the current arms race with AI, in which hundreds of billions of dollars are invested. Another example is the obesity market within pharmaceuticals. Both have catapulted winning companies into some extremely high valuations. The challenge for CFOs is ensuring that these investments drive measurable returns and align with long-term business objectives.
CFOs are uniquely positioned to bridge the gap between financial discipline and innovation. By applying rigorous financial frameworks and strategic foresight, they can enhance the ROI from R&D investments while fostering a culture of sustainable growth. Here’s how CFOs can take a more active role in managing R&D investments for maximum impact.
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Aligning R&D with Business Strategy
Too often, R&D investments are made based on technological potential rather than strategic alignment. CFOs must play a key role in ensuring that R&D efforts are closely tied to business goals. This involves defining ROI expectations, setting clear investment criteria, and establishing a portfolio approach where projects are evaluated based on their strategic fit, expected financial returns, and market potential. Leveraging portfolio scoring and zero-based budgeting further ensures that every investment is aligned with corporate objectives.
Additionally, CFOs must foster collaboration between finance and innovation teams to ensure resource allocation is based on business needs rather than speculative trends. They should also advocate for cross-functional teams to integrate financial planning with R&D roadmaps, providing a balanced approach to risk and opportunity.
By implementing these measures, CFOs can shift R&D from a speculative cost center to a well-integrated engine for value creation. Successful R&D investments should contribute directly to the company’s long-term strategy while being accountable to financial performance metrics. To put these strategies into practice, CFOs should:
These actions help ensure that R&D investments are well-funded and strategically positioned to generate real business impact. A clear investment framework combined with financial discipline allows CFOs to reduce the risk of wasted resources while maximizing the potential for breakthrough innovations that can shape the company’s competitive edge.
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Enhancing R&D Efficiency and Measuring ROI
CFOs must also drive operational improvements within R&D to increase efficiency and reduce waste. Agile methodologies can shorten development cycles and minimize sunk costs, while regular project reviews help eliminate underperforming initiatives early. Cost-sharing with external partners, such as universities and startups, can further de-risk high-potential projects and spread financial burdens.
Another crucial factor is talent development. CFOs should support upskilling initiatives to ensure that R&D teams remain equipped with expertise in AI, machine learning, and advanced materials. These steps enhance innovation capabilities and ensure that internal resources are fully utilized for strategic advancements.
Moreover, CFOs should ensure that R&D investments balance short-term incremental improvements and long-term disruptive innovation. This requires a structured approach to capital allocation, ensuring that high-risk, high-reward projects receive the necessary support while maintaining financial discipline.
Traditional financial metrics such as net present value (NPV) and internal rate of return (IRR) do not always capture the full value of R&D investments. CFOs must develop a more nuanced approach to measuring ROI in innovation-driven initiatives. This includes:
Beyond financial metrics, CFOs should incorporate qualitative assessments such as strategic fit, market positioning, and competitive differentiation. Establishing regular review cycles for R&D projects ensures continuous alignment with corporate strategy and maximizes return on innovation investment.
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CFOs as Catalysts for Strategic R&D Investments
The role of the CFO in R&D investment is evolving from oversight to active partnership. By ensuring alignment with business strategy, improving efficiency, and implementing robust measurement frameworks, CFOs can significantly enhance the value generated from R&D spending. Rather than viewing R&D as a cost, forward-thinking CFOs recognize it as a strategic lever for long-term growth and competitive differentiation.
By embracing these actions, CFOs can turn R&D investments into a true competitive advantage and ensure that innovation efforts contribute meaningfully to shareholder value. How are you driving ROI from R&D in your company?
This was the fourth article in our new series, "The CFO Perspective." Here, we dive deep into the levers of strategic value creation that CFOs should work on in 2025. The previous articles in the series are featured below. Remember to subscribe to be notified when we publish future articles.
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Anders Liu-Lindberg is the co-founder and a partner at Business Partnering Institute and the owner of the largest group dedicated to Finance Business Partnering on LinkedIn, which has more than 12,000 members. I have ten years of experience as a business partner at the global transport and logistics company Maersk. I am the co-author of the book “Create Value as a Finance Business Partner,” a long-time Finance Blogger, a LinkedIn Learning instructor, and a Top Voice on LinkedIn with 400,000+ followers.
Fractional CFO | CPA, CA | Gold Medallist ?? | Finance Coach for Non-Finance CEOs ?? | Ex-Tata / PepsiCo | Business Mentor | Daily Posts on Finance for Business Owners ????
6 天前I had shared an Article earlier during the day The CFO Role is Evolving – Are You Keeping Up? Gone are the days when CFOs were just number crunchers. AI, automation, and shifting business priorities are reshaping finance. Today’s CFOs must be strategists, storytellers, and value creators. ?? Here’s how the role is transforming: ? From finance specialists to business generalists—connecting the dots across Sales, Supply Chain, HR, IT & Sustainability. ? From number crunchers to storytellers—turning data into insights that drive decisions. ? From custodians of assets to value creators—maximizing returns on financial & operational resources. ? From cost centres to profit centres—reducing borrowing costs, eliminating waste, and driving efficiencies. ? From fraud detectors to fraud preventers—leveraging AI and IT for stronger internal controls. ? From lag indicators to lead indicators—using predictive insights instead of just looking at past performance. ? From loyal to management to the North Star—ensuring accountability, ethics, and financial sustainability. ?? The role of Finance is no longer just about keeping score—it’s about leading the game.
OK Bo?tjan Dolin?ek
Founder and CEO: Analytics-Based Performance Management LLC; Expert in ABC, EPM/CPM, Profit Analysis, Budget, Analytics
3 周Thank you Anders for your LinkedIn post above. Very informative and engaging. Well written.
CFO Pro+Analytics | Top Fractional CFO Services | Growth Strategy | Modeling, Analytics, Transformation | 12 M&A & Exit Deals | $500M+ Capital Raised | 10 Yrs CFO | 15 Yrs VC & PE | Wharton MBA | New York & Remote
3 周Anders Liu-Lindberg, strategic R&D investments require both innovation mindset and financial discipline to succeed.
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4 周Anders Liu-Lindberg Please how do I register?