Taking an insular approach to innovation also shields the company from out-of-the-box ideas and diverse perspectives. This approach prevents the board from establishing a holistic picture of the trend landscape. Instead, boards should solicit industry data and trends from third-party experts, while also keeping a pulse on venture capital activity in the industry. Startup growth can indicate potential disruptions on the horizon and help identify opportunities for revenue growth within the company.
Challenges and Risks Associated with Innovation
While an overwhelming 83% of directors would support their management teams undertaking potentially disruptive innovation projects to build long-term value, only 52% believe their team has the resources to adopt emerging technologies. The biggest challenges to tackling innovation projects are the integration of new technologies (27% of those surveyed) and hiring and re-skilling talent (18% of those surveyed). To mitigate these obstacles, boards should adopt a renewed focus on retraining employees on emerging technologies and implement management strategies, and potentially hiring new employees with strong technical skill sets.
To better address challenges at a high level, boards can incorporate disruptions and innovation into each board agenda. Currently, only 29% of boards are addressing these topics at each meeting. Discussing the challenges ensures that the issue stays top-of-mind, and each member of the board is committed to learning and addressing obstacles that deal with innovation. Most directors (54%) agree that board education on emerging technology is essential, while 50% agree that technology innovation should integrate into strategy and risk discussions. Including disruptions and innovation in the enterprise risk management process is vital, as adopting new technology can be expensive and time-consuming. Establishing an enterprise risk management framework, or revising the existing one, will allow for thorough internal audits of the risks and costs associated with proposed innovation projects.
Innovation Action Items for Boards
There are four key steps boards can take to set their company’s approach to innovation on the right track:
- Solicit external data on industry trends and disruptions to identify opportunities for innovation better while also monitoring industry VC activities.
- Retrain existing employees on emerging technologies and implementation management, which results in a highly trained team with the capabilities to adopt new technology.
- Incorporate disruptions and innovation into each board meeting agenda and establish a plan for board member training on emerging technologies, potentially via a third-party expert.
- Integrate emerging technology and innovation into strategy and risk discussions, as well as the company’s enterprise risk management process, to establish a stable, all-hands-on-deck approach to risk management.
Planning for innovation does not always have to be complicated. With a well-thought-out plan and team behind you, it can be made simple.