In the pre-digital era C-Suite growth and risk priorities were treated as distinct agenda items for the board. Executives controlled the growth levers and could manage them through what now look like stable and predictable circumstances, reporting progress every quarter along with plans to deliver into the future. Looking back through the rear view mirror helped guide next steps. Boards focused largely on protecting the enterprise from risk.
How times have changed. Boards are being pushed to pivot and adapt. Sustainable, healthy growth requires transformation of a brand’s products and services, a deeper understanding of whom they serve and how they deliver. The risk of failing to innovate is real. Innovation is a performance requirement, not an abstraction. Boards are vital to meeting this requirement, but can only do so with the right mindset, role, and manner of engagement on the innovation agenda.
Consider these eight focus areas for 2019:
1. Defining “innovation.” Innovation can be polarizing. It conjures up coolness and threat, inevitability and unpredictability, attraction and avoidance. A proposed definition: Innovation is the development of viable new marketplace opportunities. “Viable” means operationally and economically feasible, scalable, compliant, and able to be delivered to target customers. “New” may be new to the company, sector, customer segments, geography, or even the world. “Opportunities” suggests ways to grow and strengthen the business, remain competitive, take advantage of where trends are heading, and establishing new points of arrival.
2. Reframing failure as an essential. Address the biggest blocker inhibiting executives: expecting and accepting failure. In the early stages of developing a new concept, don’t let the risks of what can go wrong overshadow potential that may not be quantifiable or even imaginable. Only the board can empower and hold the CEO accountable for innovation results, including creating the psychological safety net allowing for failure to occur as a natural part of success.
3. Aligning to brand purpose and business strategy. The annual strategy offsite is a great place to start, but being part of the conversation about these innovation prerequisites should not be just a once-a-year event. Innovation does not happen on a fiscal year cycle. Innovation is not a technology problem. Innovation performance starts with a clear brand purpose, a business strategy fixated on serving target customers, and a business system aligned for execution and stakeholder impact.
4. Developing the right metrics. One of the fastest ways to sink a great innovation is to assess its potential using legacy metrics that are unrealistically precise for an immature concept, and that miss the drivers of a new business model. For the moment, set aside financial statement outcomes normally attached to mature, scale businesses. Instead, expect to see testing data revealing insight about the customer behaviors that define and drive the line items in the financial statements.
5. Weighing in on organization structure. Having twice been a chief innovation officer I’m often asked if that role makes sense. The positive: an executive who won’t be distracted by short-term goals is held accountable for moving the innovation agenda forward. Their focus is singularly on innovation. This sends a powerful signal to the rest of the organization, reflecting the CEOs commitment to innovation as a priority. But there is a downside, too, as others may perceive that innovation has been assigned to a silo. They may feel as a result that they don’t need to engage – someone else has the issue covered. Reality is if the business strategy is to grow the existing brand, then by definition teams across the organization will need to sign up, provide support, collaborate, and get involved.
6. Requiring governance within the organization that drives accountability across the c-suite. Whether they select a head of innovation or marketing, a business manager or head of digital, a CEO who is serious about innovation will designate a direct report to take the lead. But absent governance that creates skin in the game for the whole executive team, that person’s ability to succeed will be jeopardized as soon as short-term issues arise, or a new concept test fails. Middle managers working to deliver innovation projects will face all kinds of obstacles as they seek help from colleagues who lack authority to override policies or work around processes designed for predictability and scale. Good governance moves strategic decisions to the top of the organization, speeding progress, reducing frustration, and allowing new concepts the chance to advance. Moving too slowly and getting caught in processes not built for innovation causes innovations to die – they run out of air like slowly deflating balloons.
7. Expecting culture change. Reviewing the annual employee survey is already on the board’s agenda. Here’s the question to ask now: Is the organization’s methodology to assess satisfaction capturing the degree to which employees support and contribute to a culture of innovation? Such cultures are collaborative, intellectually curious, accountable, and fast. They are client-focused and solution oriented. They create environments where employees find meaning in their work, believe they create impact, and see that risk-taking is safe.
8. Attracting talent. Solving innovation challenges requires a diverse team made up of people who bring different skills and experiences, and who also can thrive in your culture. This can be a bit of a high-wire act. The right people, irrespective of technical or functional skills, must have a mindset of understanding customers and wanting to serve their needs, see collaboration as the way to succeed, have vision, courage and empathy, and be intensely intellectually curious. These are can-do people who see failure as learning. They want to accomplish results that matter in a big way – they are visionary, but they are certainly not blue-sky dreamers. They must have sponsorship from the c-suite.
The board’s active engagement in the innovation agenda is essential to achieving business impact from growth investments. This role continues the board’s historical risk management role, and addresses today’s need for deeper and more active participation in the business’ growth strategy to under complex, uncertain, ambiguous and unpredictable conditions.