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Boards Need an Innovation Strategy

Why Boards should see themselves as an integral part of Innovation Programs, and not just support them

Where once boards were the ultimate risk management gatekeepers, we now must embrace innovation and its inherent risk or potentially risk it all – irrelevance and ultimately, failure [1].

As board directors, we must actively promote innovative thinking within our organisations and foster an organisational culture that inspires people to freely explore new ideas.

But how do we promote, engage with, and govern a concept that many can’t effectively define as it relates to our organisations? 

While the terms innovation and innovative seem overused in business today, we mustn’t dismiss the concept. The words themselves may be used too frequently or even incorrectly, but that doesn’t mean that innovation shouldn’t be a central focus within our organisations. 

The terms innovative and innovation are used freely to sell something new, or to bring people in an organisation on board with a new process, product or system. However, as we’ll discuss, new doesn’t necessarily mean innovative. 

Innovation is essential because when implemented well, an innovation program can not only lead to long-term growth for an organisation, but it can be the difference between surviving a major market disruption, or not.

Blockbuster and Kodak were supposedly untouchable at their peak. They ceased to maintain their leadership positions because they didn’t see the opportunity innovation presented them. Or worse, they didn’t believe that their market would change so significantly that they would become irrelevant.

Here I will expand on 6 ideas on innovation as it relates to boards. More importantly, I hope to demonstrate that being curious and open-minded when it comes to innovation is key for boards if they’re to support the CEOs and executives in delivering successful innovation programs within their organisations. 

Defining Innovation

While there is no one clear, all-encompassing definition of innovation, there are several things we can safely say innovation is not. Innovation doesn’t simply mean new. Just because something is novel that doesn’t mean it’s innovative. Not all change is good but even positive change isn’t necessarily innovation. Innovation isn’t just about having great ideas or the ability to think creatively about problems. 

Innovation is the ability to apply creative solutions and execute on ideas, test them, seek feedback and refine those solutions until they’re delivering tangible value.

Great innovation solves real problems experienced by real people. Humans should be at the centre of any great innovation program and in-order to solve real problems, we need to truly understand and empathise with the problems people experience. Great innovation comes from identifying a need and framing the problem correctly before creating solutions – not launching into random brainstorming sessions about how to be more innovative.

Innovation is often glamorised, but innovation doesn’t necessarily mean big, expensive or exciting. Solving a boring problem faced by many people may not seem all that interesting but a creative, brilliantly executed solution to an everyday issue is a great example of innovation. 

Innovation therefore is a process that includes; understanding a real need or problem faced by people, stripping back the ‘that’s the way we’ve always done things here’ approach and removing all limitations at the beginning of the process, applying creative thinking and problem solving to create solutions and finally, testing, refining and executing the solution to deliver value to the customer in a way that’s sustainable for the organisation.

As board directors, we need to play an active role in encouraging innovation. It’s one thing to passively support innovation, but we should also give thought to how we can invite and encourage innovation. And be attentive and open to the opportunity to sponsor innovation programs within our organisations.

Embracing the uncertainty and risk involved with innovation may be a challenge for many boards and directors [1]. So, how do we start to challenge conventional thinking around the role of the board and create an environment where innovation can flourish, while still fulfilling our governance responsibilities?

Firstly, we must accept that we can no longer simply sponsor innovation programs when they’re presented to the boardroom as fully-formed programs. Directors need to take a proactive approach to innovation by engaging with executives in the early phases of a proposed new innovation program. 

What do I mean by engaging? Being curious and empathetic to the problems our management teams are trying to solve and being humble enough to admit when we don’t understand something. If we can embrace an open sense of curiosity that gives us the courage to ask “why?” or say “I don’t understand, but please tell me more”, or even “perhaps we need to bring in an expert on this particular topic?”, we can create an environment where ideas can be shared without judgement.

Only once we fully understand the problem or problems that our organisations are trying to solve and the possible solutions the innovation teams are exploring, only then can we create appropriate success metrics, KPIs and reporting structures to fulfil our governance duties.

Keep it Simple

While the problems we’re trying to solve with innovation might be complex, our innovation programs and strategies should be simple. At the most fundamental level, an innovation strategy needs to only answer five questions [2]:

·      What is the problem we are trying to solve?

·      Why is this important?

·      Where are we now?

·      Where do we want to go?

·       How are we going to get there?

The key to success with an innovation program is ensuring that everyone understands their role as part of the broader program – stakeholder buy-in is key. The best way to ensure that everyone understands the innovation program and their role in its delivery is by writing a clear, straightforward plan that outlines; the project mission, key activities, milestones, reporting metrics and responsibilities.

Overly complex, long and unclear innovation strategy documents will undoubtedly lead to confusion, disengagement or worse, failure.

Improve your Innovation Program

Many organisations claim to be innovative or to be investing in innovation. But the key difference between ‘‘innovation’ ideology and implementing a successful innovation program is having a clearly defined process.

Here I’ve outlined 12 steps to improve your Innovation Program:

1. It starts with a creative process that needs some overall statement of an unmet need.

2. Unpack the problem you are trying to solve.

3. Park that detailed predetermined vision.

4. Don’t try to launch innovation through a single company-wide grand program.

5. Start in a small way around ‘ripe issues’ that have large consequences.

6. Uncover the hot spots of the wider issue you are trying to solve, and which hold energy for change.

7. Work step by step. Use trials and proof-of-principle, and adjust as you go.

8. When you lead change through urgency, you give up any notion of a fixed medium-to-long-term plan.

9. Build skills in changing the here-and-now moment. You can only change the present, not the past, or the future.

10. Use informal networks and volunteers.

11. Create community and ask for advocacy through common interest groups.

12. Cultivate connectivity, diversity and rapid feedback loops.

Diversity, the Board and Innovation

This is a topic that deserves its own thought piece but it’s essential for boards to understand and represent stakeholders for innovation program success. While there is no one answer to suit all organisations, one thing is certain – the greater the diversity of voices at the table, the more innovative our thinking, strategies and programs will be. 

Here are some questions we should be asking ourselves as directors and as boards when it comes to diversity: Are we measuring experience in our board in terms of years or specific expertise [3]? Do we have experience in areas that are relevant to our organisation now and into the future? Do we have the appropriate education to make informed decisions on this topic? What voices are missing from this conversation? Do we have voices that represent the people we are solving problems for? What specialists could we consult on this issue?

The composition of boards and the way they interact with each other, executives, senior management and stakeholders more broadly must be examined and adjusted if we want to implement successful innovation programs. Robust debate, open discussion and not just valuing but seeking different viewpoints are all essential steps for creating meaningful change and driving successful innovation programs.

Innovation and Line of Sight

When it comes to innovation within an organisation, a clear line of sight is essential. All stakeholders, executives, management teams and employees must understand how their role contributes to the organisation’s goals, targets and overarching vision.

Without that clarity and understanding, it’s likely some executives and employees may ‘switch off’ when it comes to innovation, becoming cynical, frustrated or even demotivated about their work. Creating a clear innovation strategy is one way to ensure everyone understands the organisation’s priorities, their individual priorities and what success looks like – both in their roles and for the organisation as a whole.

But there is another important consideration for us as directors when it comes to innovation programs and line of sight. Innovation is about designing valuable and viable solutions to real problems, so understanding the way people experience problems firsthand is key. And who has the most contact and understanding of our end-users and customers? Our frontline employees, customer service reps, designers and engineers are the people who are talking to the customers using our products and services, or conducting research. They hear firsthand how well something does or doesn’t work, and they’re often on the receiving end of direct feedback, both good and bad. 

Innovation, whether an internal process or a disruptive innovation strategy, is ultimately about people creating better things for other people. As directors, we should give time and effort to understanding the issues and possible solutions from a human perspective, not just in terms of metrics, KPIs reports and presentations. And unpack how can we invite feedback and conversation into the boardroom from different voices across our organisations?

The benefit of finding a suitable way to do this in our organisations will be twofold. Not only will it enable us to better understand the problems faced by our customers and the market more generally, but it will also help to motivate, engage and inspire our frontline innovators [4] who often feel disengaged from the decision making taking place in the boardroom. 

References:

[1] L. Hill, G. Davis: The Board’s New Innovation Imperative. Harvard Business Review, Nov-Dec 2017

[2] Board of Innovation: Innovation Strategy Examples: How leading organisations arrange their innovation portfolios to achieve the corporate vision [https://www.boardofinnovation.com/guides/innovation-strategy-examples/]

[3] E. Essenmacher: Future Directors Podcast, Episode 59, 18 March 2021

[4]  JP. Deschamps: Innovation Governance: How Proactive is your Board?, IMD Global Board Centre, October 2015

Acknowledgement

I would like to thank Prof Dian Tjondronegoro and Dr Peter Kambouris for their input and valued feedback. 

Gary Morgan is an experienced board director, chief executive, consultant and advisor. He is a fellow of the Governance Institute of Australia, adjunct industry fellow at Griffith University, and innovator in residence at the University of New England. Gary has co-authored papers and reports that have been published in leading entrepreneurship and medical journals and presented at international conferences.

Gary Morgan is speaking at the Governance and Risk Management Forum 2021, 5-6 May 2021 in Brisbane, Australia.