Driving Innovation and the Role of the Board of Directors
Boards of Directors, and the shareholders they represent, always want more innovation from their management teams and the company. But what can they do about it? Boards spend more and more of their time on governance, risk management, compliance, compensation, and other factors, many of which have little to do with innovation. There certainly isn’t a recipe, but here are a few ideas. Some of these thoughts are building upon the article The Board’s New Innovation Imperative by Linda Hill and George Davis in Harvard Business Review
1. Don’t just focus on executing the current strategy
Much of innovation is teased out from the strategy but is also making changes or adjustments to the strategy. What is now suddenly possible? How can a new value proposition be enabled? Is there a new customer segment that would benefit from a small change?
Innovation comes in three forms: product (what most people think of), process (or doing the work differently), or the business model (putting the pieces together in different ways). These dynamics require that you are always examining it from multiple perspectives and angles.
The board then needs to be involved in the creation of the strategy, not just reviewing the execution and knowing whether the management team is on track. It’s important not to go too far and circumvent management’s ownership of the strategy. As the article notes, “navigating new roles for the board and management in setting innovation strategy is proving to be the toughest challenge of all. Many board members reported a reluctance to ask their most-pressing questions, because they don’t want to be perceived as “micromanaging” or “second-guessing management” or as criticizing the CEO in front of his or her team.”
That’s a fair concern, and must be monitored. A lot of that is about expectations and about style, and on the latter, it is about individual behavior, as any one board member can go too far. The lead outside director must be providing guidance and feedback to other board members about how to toe that line.
But without engaging, you cannot understand the assumptions and thinking that fuels the strategy, which makes it very difficult to spot when the assumptions change or where there is opportunity to build on it. The article goes on…” Meanwhile, several CEOs told us that their boards’ arm’s-length behavior inhibited the understanding and support required to forge ahead and innovate.” And right there is what makes walking that tightrope worth it.
2. Invite productive conflict into the board discussion
That tightrope involves how you engage, and it’s not just a passive review. You must invite conflict into the discussion, explore alternative viewpoints, and debate if you are going to use the board to advance the discussion rather than just review and approve it.
Hill and Davis state “The dynamics of creative abrasion are so tough to manage. The default for many board members is to avoid conflict and become ‘too polite.’”
One method to help manage the conflict without it derailing you is to allow for some of the work to be done “out of the room.” This is consistent with the rule of thumb that no important decisions be made in a single meeting. From the article: “Allstate CEO Tom Wilson told us that unlike most boards, which meet to discuss strategy once a year, his board holds two separate strategy meetings. One is a dialogue about the company’s capabilities and market position and is focused on learning; the other is for decision making.”
In other words, the first meeting is where you want to invite in divergent thinking, where the second meeting you are seeking convergent thinking and alignment. That first meeting is where you invite in conflict, diversity of thought, and new disruptive ideas. While many boards are focused on building diversity on the board, the best are ensuring that they are getting diversity of thought and not just appearance. Welcoming in diversity of thought is where most inclusion begins with, and is great for your DEI efforts, but perhaps more importantly, it makes your strategic and innovative thinking stronger.
3. Put questions, not reports, on the board agenda
Former MasterCard CEO Bob Selander said “Some people like to think that one big idea will lead to massive change, yet great boards recognize that it takes ongoing discussions about lots of ideas – the good and the bad – to provide breakthrough results.” Another CEO said “We had to be explicit about saying [to the board], ‘We are not asking for your approval, we are still trying to figure this out.”
What does this mean? That you keep open conversations to explore ideas within the board, not just approve them. Innovation does not take shape through board votes, oversight, or governance. It comes through acting as advisors, thought-provokes, and thought-partners.
So the agenda is a question, and an unanswered question. This helps frame, for the board, what you most want to hear input for and avoids reviewing every single aspect like it’s an open question. Essentially, guide the board to where they can most productively help you explore.
Innovation is too important for the board to just hope the management team gets right, and too hard not to leverage the talents that the board of directors can bring to the process. Find the right way to engage the board in innovation and your organization, and your board dynamic, will be better as a result.