Creating a work environment that encourages creativity and innovation is paramount to a company’s agility and longevity. A crisis such as the COVID-19 pandemic is a time when these attributes, latent or not, are put to the test.
A facilitated discussion with active directors at a recent National Association of Corporate Directors event in the United States focused on the significance of agility as an important driver of success in a mercurial environment — and how, for many companies, digital maturity and future readiness correlate with the ability to innovate. The following key takeaways arose from the event:
A crisis can be the ultimate determinant of who is resilient — and who isn’t.
In many industries, the pandemic turned the fundamentals upside down. But future-ready companies with digitally enabled capabilities and tools for innovating processes, products and services were prepared. However, these aren’t new concepts or bleeding-edge technologies. “Born digital” companies have been doing all these things for many years. Now, amid a pandemic, the value of these digitally enabled ways of doing business have been highlighted and, as a result, they’re being deployed more broadly.
The COVID-19 crisis has spawned an openness to new ideas and approaches and a willingness to fail.
In many industries, the pandemic introduced a window to innovate more. The crisis has accelerated the use of technology by companies to do things they never considered before. A key element of innovation is having the latitude to fail. During the crisis, companies had no choice but to take risks to survive and thrive. In effect, they adopted a startup mentality — a mindset organizations typically embrace when they’re at their most disruptive. There’s a willingness to fail, largely because there isn’t much to lose. The pandemic forced many companies to rethink, even reinvent, how they do business.
A crisis spotlights innovation, but innovation should also shine in less turbulent times.
When a business struggles, it is easier to push through change, yet change is often harder for companies in good times. Boards should not allow the reluctance to pursue change to stifle innovation during the good times. In a rapidly changing environment, the organization should think big and set bold, audacious, innovative goals. Boards need the right skillset and experience to have a strong focus on innovation in the wake of game-changing inflection points.
“You can’t fight gravity.”
This is new Amazon CEO Andy Jassy’s metaphor conveying that companies remain so beholden to their business models that they resist indisputable megatrends that are creating an inflection point for the industry. Boards should be mindful of this trap. Jassy gives an example of a decision Amazon made two decades ago that today accounts for roughly half of its retail business.
If everyone is thinking alike, then someone is not thinking.
In a dynamic world, it’s essential to challenge the status quo continuously and think outside of the box on everything the company and its competitors do. The point is that companies should strive to rethink industry business models and not merely copy their competitors. The board should encourage management to empower talented people throughout the company to ask the tough questions and constantly seek and achieve better outcomes. Continuous improvement and innovation are a mindset.
A strong customer focus is where it starts.
Innovation stems from thinking about how to change the customer experience. This is about more than just monitoring the data and analytics around evolving customer preferences, needs and wants. It is also about recognizing that technological advancement is the primary driver of the rapid pace of change in today’s marketplace. In essence, innovation is about preparing the organization to be part of the digital age. If the company doesn’t advance its processes, products and services, its competitors will. Worse, if companies have digital-skeptic tendencies and do “digital things” because they think they need to — and not because they want to differentiate their products and services — they’re not likely to be successful.
An innovative culture is more likely to complete the cycle and get results.
The process of coming up with ideas is relatively easy for many organizations. The hard part is nurturing those ideas beyond the prototype stage to the ultimate business reality. The board has an important role to play in strengthening and nurturing the organizational culture and mindset that ensures skills are continuously refreshed to sustain transformative innovation and reinvention as the world and technology continue to change.
The board’s role is to push for a sustainable, innovative culture that’s aligned with the strategy.
Boards should encourage the organization’s innovation mindset and approach. Directors should inquire about the organization’s incentive structure. Does it reward innovation? Does it accept failure? Or does it reward people for focusing on what they’re doing today? Who is being rewarded and promoted — the people driving the business forward and creating the future, or those riding the wave created by someone else?
Board members should understand the company’s innovation plans and road map for the business and whether those plans consider how customer preferences and pain points may shift in the foreseeable future. Dashboard reports linked to those plans should inform the board periodically as to progress. Understanding the digital economy, emerging technologies, and relevant megatrends affecting the industry — and the ability to relate this understanding to the business and its strategy — are now critical boardroom skills.
Read the full article here. For a more complete discussion on this topic, including examples, read the companion white paper.
(Board Perspectives — Issue 141)