Innovation and transformation at the board level is a central theme of my work. In order for organisations to adapt and succeed in a rapidly changing world, their boards need to truly understand the nature of innovation and to enable rather than stifle value-creating change.
In a broader sense, what I call governance for transformation has been a key aspect of my work for some years. Governance is essential in uncertain and uncharted spaces, yet if that governance doesn’t enable organisational transformation, it is fundamentally broken and value-destroying.
In a more specific way, innovation governance is critical to enable any innovation initiatives.
Below is a simplified framework of the key elements of innovation governance. Below I will provide some brief notes. I will develop these ideas in future posts.
The six key elements of innovation governance are:
At the center of innovation governance is clarity on the role of innovation in the organisation’s future success, including prioritised objectives for innovation.
Since innovation necessarily requires risk, the starting point must be discussion and clarification of organisational risk tolerance relative to potential rewards. This must be commensurate with the company’s ambition, and assess the risk of not innovating on a par to the risk of innovating.
Given that innovation capabilities will be central to all organisations’ future success, developing these capabilities must be an ongoing strategic priority for the board and executive team. This impacts who should be on the executive team, talent strategy, technology architecture, and many other critical issues.
Effective innovation requires resources, yet traditional financial measures are largely inappropriate for assessing truly innovative initiatives. Portfolio management is a central innovation capability, in managing diversity of initiatives’ domain, size, timeframe, and scope. Boards will only be formally involved in specific large-scale investment decisions, yet they can set useful frames for decision-making across the innovation space.
Innovation structures and processes include specific issues such as platforms and processes. However they can also include macro-level organisational structure issues, including function definition, decentralisation, the formalisation of innovation functions, and the nature of value-creation in external relationships.
Innovation governance has value largely in how well it is communicated to involved parties. High-level innovation governance frameworks must be communicated to everyone in the organisation so they can readily understand the overall vision and in particular risk tolerance, which should inform day-by-day behaviours. Effective innovation governance will also mandate broad transparency and communication about innovation initiatives.
More on this later. I’d love to hear any lessons learned from effective (or ineffective) innovation governance in organizations that you have worked in or seen.