Page 76 - Harvard Business Review (November-December, 2017)

improving customer- intimacy and -centricity to ad- easy to focus only on the core business when it’s go-
dress rising customer expectations, and responding ing great, but you have to find board time to focus
to new regulatory regimes and cybersecurity threats. on growth and disruptive activities.” Directors we
At the same time, these board members realize spoke with understood the need to invest in strategic
that doing the same things better, faster, and more discussion and debate about innovation—as another
cheaply is not enough. It is not enough, for instance, CEO put it, “To think you can sit in the boardroom
to make improvements that reduce costs in the sup- and talk strategy once a year means you’re out of the
ply chain. Companies are now trying to deploy digital game and out to lunch”—yet competing pressures
supply chains that will allow them to offer different on their attention made it hard to find the time for
value propositions to customers and even create new proper consideration.
business models. As one director put it, “Significant Lack of expertise. Many directors—particularly
disruption is taking place, and whatever company is CEOs—express frustration that their boards lack the
at the top today will not be at the top in 10 years. [We] level of industry expertise and innovation experience
must differentiate ourselves.” Another observed that necessary to make well-informed risk-reward assess-
his board’s “bias for short-term results” was stifling ments about proposals. One CEO we spoke with said
innovation; instead of pursuing breakthrough ini- he actually avoided innovation discussions with the
tiatives, the company was focused on evolutionary
ones. Many directors acknowledged that it was not
easy for CEOs to make the bold moves required to
keep their companies competitive—especially given
the growing demands of activist investors—and that ABOUT THE RESEARCH
boards were not doing enough to encourage man-
agement to pursue admittedly riskier initiatives that Our research into the governance of innovation focused on boards of public
could reinvent the business. companies in the United States. We interviewed 31 Fortune 500 CEOs and
Insufficient time. Making time for innovation independent directors and conducted a survey of Fortune 500 firms that yielded
as an ongoing topic of boardroom conversation is a 21 responses. In addition, we held dinners, hosted by Egon Zehnder, in four major
luxury few board members feel they have. Especially U.S. cities, at which 85 board members came together to discuss board trends and
in industries undergoing regulatory changes, such as the most-pressing challenges facing directors. For the vast majority, innovation
financial services, energy, and health care, directors made the list. Finally, we interviewed three CEOs of privately held companies and
reported feeling “overwhelmed” simply attending to their lead directors or chairpersons. The CEOs and board members with whom we
the basics of compliance and financial monitoring. spoke represented all major industries, with additional representation from the
Even companies that were performing well strug- academic, nonprofit, and consulting sectors. Although all the firms are based
gled to dedicate time to innovation activities. Hasbro in the United States, most (with a handful of notable exceptions) have significant
CEO Brian Goldner acknowledged the challenge: “It’s non-U.S. operations.

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