Environment is Everything

Innovation is not often thought of as a boardroom preoccupation. But conduct even a cursory review of companies where innovation success is sustained and what you find is a veritable culture of innovation that is integrally bound to the boardroom. So how can directors assure that the companies on whose boards they serve are innovative? Is there a way to quantify innovation? How can a director motivate management to be innovative? And how then does management spur innovation through its ranks?

Leading the Directorship Roundtable titled “Driving Enterprise Innovation & Growth” at New York’s Lotos Club in December was Gap International Vice President Dr. Eric Jackson. On a personal level, Jackson is the quintessential innovator. Prior to joining Gap International as a consultant specializing in enterprise performance management, he worked as both a psychologist and a dentist, and at one time was an international award-winning choral director. This unusual blend of skills and experience made him a perfect match for Gap International, which has a 30-year history of partnering with boards and chief executives to help them develop more effective ways to grow their enterprises.

Gap International makes a distinction between innovative ideas, which must be collected and harvested, and the environment or culture in which the innovative ideas either languish or flourish. “Does the CEO create an environment in which innovative seeds, or ideas, are being planted and nurtured? That is the most important role the board can play with regard to driving innovation,” Jackson said. “The innovative seed occurs at a very early stage of the thought process, which is at once both a very vulnerable and very critical element of innovation success. What distinguishes highly innovative companies is how nurturing their environments are to innovative thinking. Directors should consider this characteristic a vital precondition for having an innovative organization.

“To be innovative,” Jackson continued, “is to execute. The most important question for the board is, ‘Are the conditions right for high-level, rapid execution of innovative ideas?’”

That comment spurred Kay Koplovitz, the founder and former chairman and CEO of USA Networks, to recall the early days of the cable network formed in 1977 under the auspices of Madison Square Garden Sports. “Even though it was a private company, every person there felt that they owned it and the team felt it was important to deliver results…Risk was something we were all born to, and if you didn’t take a risk, you weren’t being aggressive enough.”

In publicly traded companies, however, risk in the context of innovation is likely to be influenced by short-termism, or the desire to keep investors happy by delivering results. How can boards best help a CEO to innovate?

William Roskin, now a senior adviser to Viacom and director of ION Media Networks, said the board’s role is to make sure the company has the right CEO and then let them do their job. He has worked for both Sumner Redstone, the legendary founder and chief executive of Viacom, and the late Steven J. Ross, the creator of Time Warner and the catalyst in the launch of MTV and Nickelodeon.

“Going back to 1981, Steve Ross had a way of hiring people who were on the payroll but who were freelance thinkers,” Roskin said. “Did Steve have a vision to create what became MTV? No, but he supported it, and he lent his support…He believed in cable. And his boards had to be supportive.”

“That’s a different task in a large corporation where people are territorial,” Koplovitz replied. “How do you break down those barriers so that people can innovate?” She cited the failed merger at Paramount and Universal Studios as an example. Roskin, who was a senior executive at Time Warner when it joined forces with Viacom, recalled that “what started as two warring companies were brought together because the CEOs of both those businesses worked together.”

Noting that “tone” and “sponsorship” must start at the top, Laurence Charney, a director of Marvel Entertainment, believes in the power of creative tension. “I recall working with a young, bright colleague who challenged everything I said. I learned that both of his parents were professors who believed in creative tension. I believe that creative tension builds the best products and that you have to build a culture from the top down that allows people to make mistakes.”