Boards: Innovation Is Your Responsibility Too

Linda A. Hill

George Davis

The challenge of leading innovation is bringing about a sea change in corporate governance. Boards, once the dependably cautious voices urging management to mitigate risk, are increasingly calling for breakthrough innovation in the scramble for competitive advantage. We see this shift playing out across industries—notably at such companies as Ford, Coca-Cola, Nestlé, and Unilever, which are all struggling to address slowing sales in their core businesses.

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As firms scramble for competitive advantage, boards&#8212;once the cautious voices urging management to mitigate risk&#8212;are now calling for breakthrough innovation. Indeed, avoiding risk is now seen as the riskiest proposition of all.
In speaking with CEOs and board members from a range of industries, the authors identified four common obstacles most boards face in governing innovation: an outdated risk agenda, insufficient time, lack of expertise, and a relationship with management that needs retuning.
Embracing innovation and its inherent risks requires that boards and senior management develop new ways of working together. To bolster out-of-the-box thinking at their companies, boards should promote diversity among members. They should foster &#8220;creative abrasion&#8221; to keep ideas flowing and rethink traditional methods of governing. And they must learn to embrace and encourage risk.

The Board&rsquo;s New Innovation Imperative

As firms scramble for competitive advantage, boards—once the cautious voices urging management to mitigate risk—are now calling for breakthrough innovation. Indeed, avoiding risk is now seen as the riskiest proposition of all. In speaking with CEOs and board members from a range of industries, the authors identified four common obstacles most boards face in governing innovation: an outdated risk agenda, insufficient time, lack of expertise, and a relationship with management that needs retuning. Embracing innovation and its inherent risks requires that boards and senior management develop new ways of working together. To bolster out-of-the-box thinking at their companies, boards should promote diversity among members. They should foster “creative abrasion” to keep ideas flowing and rethink traditional methods of governing. And they must learn to embrace and encourage risk.

The Board’s New Innovation Imperative

Summary.

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