Successful companies know they need to innovate to survive and grow, even as the world is in crisis. Driving innovation in a challenging economy is critical, according to Grant Thornton professionals Nichole Jordan and Chris Smith.
Jordan, regional managing partner of the Central Region, and Smith, national leader of Strategy & Transformation, shared their insights at a roundtable in partnership with the National Association of Corporate Directors (NACD), a recognized authority on boardroom practices.
“In light of everything else going on with COVID, shifting resources to focus on innovation has never been more important,” said Jordan during the “Driving Successful Innovation in a Challenging Economic Environment” discussion.
Innovation must be considered along with all the other issues being addressed by a business. “Innovation should be in the audit conversation,” Smith said. “Innovation is absolutely a risk topic. And innovation is in both finance and HR. It truly is an enterprise wide imperative.”
For more on leadership role changes made necessary in the COVID-19 environment, see CFOs power into new normal.
Jordan, Smith and director attendees discussed three key questions:
Be informed about innovation
- What are high-performing boards doing to stay informed and knowledgeable around new business models and emerging technology?
- What should boards consider when balancing governance and oversight with the need for speed and agility?
- How can an organization accelerate innovation in a tough economy?
Corporate boards must be knowledgeable about new and innovative business models and emerging technologies that drive innovation. Director participants had ideas on how boards stay informed:
“From a customer service standpoint, MetLife has commented publicly about their voice recognition approach in call centers. In the tone of the communication with customers, their call center employees are able to recognize red flags, the energy level and signs of stress. That’s really important in customer service.”
- Consulting and research. Using consultants and research centers, and studying business models, companies can learn about innovating at other organizations and see how technology helps accelerate innovation.
- Director education. Corporations should make an investment in director education, helping them better understand emerging technology and business models.
- Recruiting expertise. Educating board directors is important, but it is key to hire directors who are experts in technology, data, artificial intelligence and other cutting-edge areas.
- Assessing the competition. Boards must learn what worked — and what didn’t — in the competition’s innovation efforts.
– Nichole Jordan
Grant Thornton Regional Managing Partner
One NACD member, a director on a major research center’s board, described the importance of using research in helping boards better understand technology and changing business models: “By leveraging some of this research, we are actually seeing case studies of both the successes and failures of not only the deployment of the technology, but how they fit into the evolution, or in some cases, revolution, of the business models,” the director said. Investing in director education is also important, he said. “There must be a mandatory investment in director education. We are providing a set of resources for those directors to pursue, finding the information that they need because not everybody sitting around the table is at the same level of understanding of the technology and technology landscape.”
Smith agreed that a more informed board can assist management in developing new business models and assessing the technology needed to meet new challenges: “We hear words like ‘incremental innovation,’ ‘disruptive innovation’ or ‘radical innovation,’ yet we need to think about how it applies to your customer priorities, your employees and your internal operational-focused priorities.”
Board directors must understand how technology spurs innovation, he said. “Machine learning, AI and quantum computing are starting to change how we operate and the true potential we should be setting our goals against. High-performing boards should be knowledgeable on these technologies or how else can we properly govern.”
Balance governance and agility
Corporate boards play a critical role in providing governance and oversight. But boards must be careful to provide governance that does not unduly restrain an organization’s efforts. There must be room for management creativity and new ideas — “the freedom to move with speed and agility,” Smith said.
A director pointed to the importance of balancing sound governance with encouraging their companies need to innovate. “Learning fast and failing fast, and learning from that. Failure is not an impediment. It has to be part of the cultural acceptance for innovation to occur,” she said.
Boards also need to consider the collective knowledge of the entire organization, Jordan said. “There is a lot being discussed about management using an innovation management platform to engage the entire workforce,” Jordan said. “With COVID and virtual work, there is a difference in experience for a management team and an employee with a few years of experience. Trying to bring all of that together in these innovation management platforms is a way to keep employees engaged.”
The board also should encourage management to gain validation of an idea from the customer.
“A critical point today is reconnecting with the customer
to understand what’s important to them in light of today’s environment,” Jordan said. “The board needs to understand where management is trying to take the innovation portfolio and strategy, with the validation by the customers.”
Finally, board directors should understand the technology and ask management how it’s being used to speed ideas to market, Jordan said.
“Using technology will increase your speed, your agility, your accuracy. The question is ‘How do you engage with management around how they are leveraging technology — AI and ML, specifically — in top-line revenue growth?’” Jordan said.
Innovate even in a constrained environment
The pandemic, working from home and an anemic economy make it challenging for an organization to foster innovation. You could begin by shaping the corporate culture. Innovation should not be viewed as a random jolt of inspiration but rather as a regular discipline within an organization, Smith said. “Companies that have made innovation a discipline understand that you can hit a lot of singles before you hit a home run,” he said. “The board’s role is to make sure management is treating innovation as a discipline and not just a buzzword.”
“The board’s role is to make sure management is treating innovation as a discipline and not just a buzzword.”
– Chris Smith
Grant Thornton National Leader
Strategy & Transformation
An NACD member/director agreed. “A lot of time, innovation is considered a creative soft option. I like the word ‘discipline’ because it is one of the muscles for success,” she said. “Foster that muscle across the organization. Allow the culture to fail and learn fast. Make strategic investments and pull back fast enough. It’s a changed way of thinking for long-term survival.”
As part of the discipline, Smith said, the board should discuss innovation regularly, not periodically. “If innovation is on every agenda, it’s talked about and gets more integrated. It needs to be part of the daily conversation.”
Board directors can also make sure management understands the principles of innovation. “What is the risk appetite right now? What is the size of the prize with innovation?” Smith said.
Benchmarking and measurement are important tools. “A board should see what ideas are going into the funnel, how many are failing fast,” he added. “It will allow you to ask the critical questions and discover what’s working.”
Invest in ideas and innovation
Corporations have spent months trying to manage the seemingly constant changes brought by COVID-19. Addressing the most urgent needs has been the priority. But smart companies know they must also invest time in ideas and innovation to plot a path to the future.
Corporate boards play a crucial role in helping companies plot that path. Directors who understand the opportunities and the obstacles can help a company succeed.
“We’ve been focused on helping clients in mission-critical areas — scenario planning, modeling, assumptions, cash management and liquidity,” Jordan said. “But innovation has never been as important as it is right now. You have this opportunity to not only look for new ways of doing things, but also be a first mover. There are pockets of growth. Studying them and matching them with innovation strategy is a great opportunity for businesses.”
Regional Managing Partner, Central Region
+1 212 624 5310
National Leader, Strategy & Transformation
+1 425 214 9820