Page 77 - Harvard Business Review (November-December, 2017)

FEATURE THE BOARD’S NEW INNOVATION IMPERATIVE
ASKING THE
THORNY
QUESTIONS
Today’s boards need to rigorously challenge
management if they want to ensure that
their companies are thinking boldly enough
about innovation. Here are some questions
that we recommend boards ask themselves:
• Are we devoting enough time to innovation in our
board meetings?
• What is our risk appetite? Is it aligned with that of
management? What message do our leadership and
culture send to the rest of the organization about risk
and innovation?
• Have we agreed on metrics to evaluate innovation
efforts?
• What is our response when an innovation initiative
fails? Are we encouraging or discouraging
management to experiment?
• Does our board have the diversity of talent,
perspective, and style to make tough choices on
innovation? Are we hearing from everybody?
• What are we doing to ensure that we are aware of the
cutting edge in our industry and in adjacent ones? Is it
time to create some advisory committees to support
the board?
• Are our board meetings about innovation truly a
dialogue, or more of a presentation?
• Would senior leaders describe their relationship with
us as a partnership? Would management describe us
as supportive of its efforts to innovate?
• Are we sending a clear message to management
about the need to be bold, not only to protect the
core business but also to reimagine the business and
move us to a new future?
106 HARVARD BUSINESS REVIEW NOVEMBER–DECEMBER 2017
board because he believed that the directors “were too
far from the market” to assess the true expected value
of a particular innovation project.
Unproductive interactions between the board
and management. Historically, companies have
maintained a bright line between the board of direc-
tors and senior management. Under this governance
model, management’s role evolved into “telling and
selling” strategy and the board’s role became to rat-
ify the senior team’s vision. Many of the directors we
spoke with consider these practices to be outdated;
however, navigating new roles for the board and man-
agement 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. Meanwhile, several
CEOs told us that their boards’ arm’s-length behavior
inhibited the understanding and support required to
forge ahead and innovate. When boards do dig into
the details of management’s innovation proposals,
their tough questioning can sometimes be perceived
as hostile. Several CEOs experienced such interactions
as evaluative of their own performance rather than of
the quality of the ideas under discussion, and many
complained that the board’s responses can be “harsh”
or “unfair.” In some of our interviews, we could see
the emotional toll of these often-heated interactions
on the faces of board members and CEOs.
(RE)BUILDING THE BOARD FOR INNOVATION
The research is clear: Innovation requires passionate
discussion, debate, and even conflict—most often
among individuals with diverse perspectives. To find
better ways of governing innovation, more boards are
revisiting both their board composition and the way in
which they interact. However, directors are often re-
luctant to speak publicly—including to us—about how
their boards operate, making it hard for boards to share
best practices. This is especially problematic when it
comes to innovation—an area where directors often
feel there is work to be done. Our research revealed
four key areas for improvement:
Diversity and collective literacy. When adding or
replacing members, boards should take a disciplined
approach, seeking members whose expertise comple-
ments that of the existing board and, more important,
that of management. For example, a director of a tradi-
tional operations-focused company reported seeking
board members with experience leading exceptional
customer-service-oriented companies. Tom Wilson,