An Innovative Board: Setting Guidelines to Catalyze Innovation

Sharpening innovative “directorship” for getting digital ready is imperative for setting the top leadership tone to rejuvenate the culture of creativity.

Digital businesses encourage autonomy and innovation. The corporate board plays a critical role in making good policies and setting the right guidelines to catalyze innovation. Digital principles provide a more robust foundation that makes it possible to straightforwardly derive solution-level governance and ensure the effectiveness of innovation management practices. Sharpening innovative “directorship” for getting digital ready is imperative for setting the top leadership tone to rejuvenate the culture of creativity and run a highly innovative digital organization.

Take an oversight of the business’s innovation agenda: Innovation is about how to transform novel ideas to achieve their commercial value. The best point of business view is to see innovation as a system, capable of delivering the organization-wide capability. Innovation Management System includes policies, structure, and program that innovation managers can use to drive innovation.  Innovation is simply too important to delegate to the management without the board oversight. Because innovation is one of the crucial digital capabilities which are underpinned by varying business elements. The board can help to oversee innovation agenda by asking tough questions to evaluate innovation effectiveness: Has the company's definition of innovation been known and understood throughout the organization? Does the company dedicate sufficient human and financial resources to its innovation programs and structures? Do the company's innovators use the latest and best innovation tools and methods? Does the company have a balanced innovation portfolio with the right mix of incremental innovation and breakthrough innovation? Etc. An effective 'innovation system' is capable of supporting both widespread incremental innovations in products or services as well as the rarer 'step-change' innovations of working methodologies, business models and market positioning.

Setting remuneration policy and process to reflect the desire for the organization to be innovative: Creativity is a long-term endeavor. It must be cultivated. Culture must be fostered from the board of directors downwards; otherwise, no real sponsorship takes place. The three managerial tools for creating a culture of innovation are policies, programs, and structures. The spirit comes from the top. The senior leadership team such as the board can help to set the good policy for encouraging innovation and developing a culture of creativity. Cultural change in an organization begins with the involvement of the top management and their commitment to change. Tie innovations and the innovative culture to the organization's strategy. This ensures that innovations will be supported by management and by all stakeholders. Get these steps right, the board is doing fantastic work for developing a world-class organization with a strong culture of innovation. In addition, ensure there is a rewarding system in place for praising employees that have brought in new business or exceeded a quota. A recognition system and high visibility for all positive contributions to innovation will help in creating a culture of innovation.

Monitor Innovation Management Performance: The variety of innovation studies showed that the innovation success rate is not proportional to the amount of R&D investment, which means the more money or resource you pour into the innovation initiative does not guarantee the higher ROI from innovation effort. Therefore, monitoring innovation management perforce is critical to improving the innovation management success rate. The board should ask management insightful questions about Innovation Process Effectiveness such as: How will it increase speed in the innovation process? How will it decrease risk in the innovation process” How will it effectively leverage diversity to create meaningfully unique ideas? How will it effectively use the power of stimulus to create meaningfully unique ideas? How will it help to reduce fear in the organization? The board needs to review executive level innovation scoreboard with important KPIs, to keep track of innovation progress and provide invaluable feedback, to justify the initial investment in the program and the initial results (intangible and no concrete, of course) more than to measure financial results. Assuming an organization believes that metrics can lead to continuous improvement and improve innovation effectiveness, it won’t be just a matter of explicit communicating the intention behind metrics, but a matter of guiding the leadership team via an understanding of the purpose of doing that and engaging on that, with the goal to build innovation capacity.

Corporate governance is to challenge the management and make sure that management is doing its job properly. The commitment from the top is very important for any change or innovation to be successful. The BoDs should exemplify innovative leadership, set good guidance to improve the innovation success rate and lead the organization to achieve long-term business prosperity.

Posted in: Board Room,GRC,Innovation