Innovation is not often thought of as a boardroompreoccupation. But conduct even a cursory review ofcompanies where innovation success is sustainedand what you find is a veritable culture of innovationthat is integrally bound to the boardroom. So howcan directors assure that the companies on whoseboards they serve are innovative? Is there a way toquantify innovation? How can a director motivatemanagement to be innovative?And how then doesmanagement spur innovationthrough its ranks?
Leading the DirectorshipRoundtable titled “DrivingEnterprise Innovation &Growth” at New York’sLotos Club in Decemberwas Gap International VicePresident Dr. Eric Jackson.On a personal level, Jacksonis the quintessential innovator.Prior to joining GapInternational as a consultantspecializing in enterpriseperformance management,he worked as both a psychologistand a dentist, and at one time was an internationalaward-winning choral director. This unusualblend of skills and experience made him a perfectmatch for Gap International, which has a 30-yearhistory of partnering with boards and chief executivesto help them develop more effective ways to growtheir enterprises.
Gap International makes a distinction betweeninnovative ideas, which must be collected and harvested,and the environment or culture in which theinnovative ideas either languish or flourish. “Doesthe CEO create an environment in which innovativeseeds, or ideas, are being planted and nurtured?That is the most important role the board can playwith regard to driving innovation,” Jackson said.“The innovative seed occurs at a very early stage ofthe thought process, which is at once both a very vulnerableand very critical element of innovation success.What distinguishes highly innovative companiesis how nurturing their environments are to innovativethinking. Directors should consider this characteristica vital precondition for having an innovativeorganization.
“To be innovative,” Jackson continued, “is to execute.The most important question for the board is,‘Are the conditions right for high-level, rapid executionof innovative ideas?’”
That comment spurred KayKoplovitz, the founder and formerchairman and CEO ofUSA Networks, to recall theearly days of the cable networkformed in 1977 under the auspicesof Madison Square GardenSports. “Even though itwas a private company, everyperson there felt that theyowned it and the team felt itwas important to deliverresults…Risk was somethingwe were all born to, and if youdidn’t take a risk, you weren’tbeing aggressive enough.”
In publicly traded companies,however, risk in the context of innovation islikely to be influenced by short-termism, or thedesire to keep investors happy by delivering results.How can boards best help a CEO to innovate?
William Roskin, now a senior adviser to Viacomand director of ION Media Networks, said theboard’s role is to make sure the company has theright CEO and then let them do their job. He hasworked for both Sumner Redstone, the legendaryfounder and chief executive of Viacom, and the lateSteven J. Ross, the creator of Time Warner and thecatalyst in the launch of MTV and Nickelodeon.
“Going back to 1981, Steve Ross had a way of hiringpeople who were on the payroll but who were freelancethinkers,” Roskin said. “Did Steve have avision to create what became MTV? No, but he supportedit, and he lent his support…He believed incable. And his boards had to be supportive.”
“That’s a different task in a large corporationwhere people are territorial,” Koplovitz replied.“How do you break down those barriers so thatpeople can innovate?” She cited the failed merger atParamount and Universal Studios as an example.Roskin, who was a senior executive at Time Warnerwhen it joined forces with Viacom, recalled that“what started as two warring companies werebrought together because the CEOs of both thosebusinesses worked together.”
Noting that “tone” and “sponsorship” must start atthe top, Laurence Charney, a director of MarvelEntertainment, believes in the power of creative tension.“I recall working with a young, bright colleaguewho challenged everything I said. I learnedthat both of his parents were professors who believedin creative tension. I believe that creative tensionbuilds the best products and that you have to build aculture from the top down that allows people tomake mistakes.”
At least one participant recounted how compensationplans mitigated a company’s ability to take risk.“I also tried to drive down P&L ownership for thesame reason,” said Richard Daly, CEO of BroadridgeFinancial Solutions. “I want to know who goesto bed at night and gets up in the morning thinkingabout the company. You have to be in a position tocreate a financial environment that will support thatmindset.”
Gap International has researched critical factorsthat create an environment for sustainable innovation.The company advises directors and officers tofocus on the following five factors:
Purpose—which drives energy and focus. Doesthe executive team have a clearly defined strategyand are the people in the organization connected tothe company’s purpose?
Ownership—which predicts reliability for producingresults. Is the executive team committed toand holding themselves personally responsible forachieving the company’s overall goals in addition totheir own functional/business goals?
Interdependence—which drives the quality ofexecution. Do the top leaders work collaborativelyand contribute to one another throughout the variousstages of their work?
Affinity—which impacts the speed of execution.Is the executive team connected to one another andto the CEO? Are the channels of communicationopen and is there a sense of ease and freedom intheir relationships?
Risk—which unleashes creativity. Are leaders freeto think and speak in unconventional ways? Is managementwilling to take chances and allow for failure?
“As we study innovation, it is the company’s cultureand the environment it creates that ultimatelybecome the paramount factors in running and growinga successful business,” concluded Jackson.