Innovating is essential to staying competitive in the modern business environment, and leaders of U.S. based private, and newly public companies largely consider their organizations to be industry innovators.
Recent KPMG research found that over half (53%) of U.S. business leaders surveyed see their companies as “strong disruptors” or “game changers,” for example — agreeing that their organizations are either known leaders in innovation or are “completely redefining” their sectors. In fact, all but 11% of business leaders surveyed consider themselves at least moderate disruptors that have introduced innovations making them unique in their markets.
In an environment where staying competitive requires out-innovating industry peers, CFOs play a crucial role in ensuring their companies aren’t part of any innovation slowdown — especially as the same CFOs navigate uncertainties in their markets and address other, equally pressing priorities (like cost-cutting).
“CFOs are adapting fairly quickly to disruption, and they are one of the key stakeholders aligning investors and outside constituents so they can execute a very disciplined financial strategy that will allow their company to be best positioned for success,” says Tarek Ebeid, KPMG Private Leader and Partner in Charge – Northern California Audit Practice at KPMG U.S.
Adapting in an era of AI and building investor confidence
Business leaders’ perception of their companies as leaders in innovation is likely fueled in part by their recent efforts to put technologies like artificial intelligence (AI), agents, machine learning, and robotics to use. Nearly half of U.S. finance leaders surveyed rank AI as one of the top three technologies for enabling business growth and investment in their sector, putting it ahead of technologies like 5G/Internet of Things (IoT) (37%) and cloud computing (35%).
Business leaders’ views on AI’s disruptive potential are divided, however — with 47% of those surveyed saying AI is leveling the playing field, and 53% saying it is a “game changer” that provides early adopting innovators and disruptors with a significant competitive advantage.
Despite this division, investors and boards are asking management teams to find use cases for AI and other disruptive technologies to drive tangible benefits.
“Every C-level executive I talk to, every board member, is asking their management, ‘What are we going to do with generative AI? How are we going to use disruptive technology to improve productivity and help us move faster in accelerating growth and transforming our ecosystem to make it more agile and flexible?’” says Ebeid.
Responding to those questions with the right solutions can fuel positive outcomes on both sides of the balance sheet.
Becoming more agile and flexible using AI and automation can enable companies to move faster on their growth initiatives, for example — which is beneficial from a top line revenue perspective — while the productivity and efficiency gains from using AI can flow to the bottom line.
Having that kind of dual focus is important since many investors, in the current environment, are focused not only on companies’ top line growth but also on their profitability and cash flow.
“The ‘growth at all costs’ days are absolutely over. Showing profitability or a path to profitability is critical,” says Salvatore Melilli, KPMG Private Audit Sector Leader at KPMG U.S. “We’re also seeing a higher premium put on a company’s ability to forecast. Especially for companies looking to do an IPO in 2025 or 2026, investors will want to see that a company is able to show consecutive quarters of being able to forecast all types of metrics. Showing that gives investors confidence.”
Better budgeting and forecasting capabilities start with a foundation of sound and robust financial reporting. Especially for early-stage companies, robust reporting “provides transparency that helps investors distinguish between companies that are developing themselves to be one-hit wonders with a product and companies that are truly building out the right financial reporting systems and the right governance to stand themselves up as a company,” says Melilli.
Meeting expectations for growth
Robust reporting can also help CFOs better track the outcomes of investments — in disruptive technologies, among other priorities — over time. Tracking outcomes will be especially crucial as AI takes its time delivering on impact. (While just over half of survey respondents (55%) see AI as relevant in the next 18 months, three quarters (75%) report it will be relevant in 18 months to 3 years).
Over the short, medium, and long-term futures of their businesses, however, building disruption from within the company requires more than making and tracking the impact of technology investments. It requires using new technologies in differentiated, innovative ways that help companies continue to set themselves apart from the competition.
“Investors’ expectations are for companies to continue to accelerate growth,” says Ebeid. “They expect CFOs to continue working with the CEO and the rest of the C-suite and the board to deliver on the business strategies while also helping their companies lean into disruptive technologies — both to try to optimize their back office, and to [determine] how such technologies can be a differentiator and disruptor going forward in their value proposition to customers.”
For more information and research into U.S. business leaders’ perspectives on growth, AI, and reporting, download KPMG’s Disruption Decoded report.
