Globalisation and digitalisation change the basic fundamentals for many companies to operate and compete successfully. The demands for corporate renewal and innovation at an increasing speed has increased dramatically. One of the biggest challenges for many companies’ long-term survival is the ability to continuously renew itself.
The Boards role in this process are under increasing pressure and it is critical to understand how boards can best engage to ensure value creation in the digital age.
We are pursuing a two-year long academic research project together with Royal Institute of Technologies (KTH) in Stockholm and University of Wolverhampton (UW), supported by Sweden’s Innovation Agency Vinnova, to explore boards contribution to corporate renewal and innovation.
The project involving boards, innovation- and corporate governance experts includes interviews with active board members, leadership teams and relevant stakeholders in Sweden and internationally, literature studies and deep dive workshops for both exploration and best practice pursuits.
We are six months into the research project and interview with some intermediate findings was done by the Innovation Magazine, the link to the article and an English translated version can be found below.
As a professional board member on listed and private boards, Chair at Digoshen, Educator at the Chairman Program at Swedish Academy of Board Directors and Board member at INSEADs International Board Director Network, IDN, I am acutely aware of the need of increased insights into the changing best practices to be adopted by today’s boards. The insights are being anchored with academic research together with Professor Mats Magnusson and Adjunct Professor Magnus Karlsson at KTH and Principal Investigator/ Marie Sklodowska Curie Research Fellow Daniel Yar Hamidi at UW, and with further insights from academia in Sweden, Europe and internationally.
If you have interest in collaborating you are welcome to contact us.
Article below translated to English, originally published at Innovation Magazine by Vinnova, March 2018
New framework for boards to guide innovation & corporate renewal – Text by Karin Wandrell
Daring to think in new ways are important ingredients in driving innovation at the board. Strong anchor owners and good knowledge about the company are key drivers
The most common mistakes for boards today are too scarce and narrow insights of trends and their impact, not monitored with the needed speed, that you look too much backward instead of forward and that the board work is not adapted quickly enough. But creating an innovation-driven board is not really that difficult, but it does require new thinking, according to Liselotte Engstam, a board professional who participate in the project “Organising & Strategy for innovation – Framework for Innovation Governance by Boards”.
“It’s really about focusing on three things; to capture information from many different and diverse sources, to be involved in strategy and innovation and establish an engaging vision and to make decisions aligned to the company’s development phase.
One way to get broader perspectives, in addition to monitoring trends and market, is to increase the diversity of thoughts at the board. But it’s not enough. According to Liselotte Engstam, today’s business is changing so fast that even members of the board must continuously educate themselves and find ways to be engaged in new trends.
“Support for continuous board education isn’t that well managed in Sweden. For example, there is no budget allocated for this in the companies, as in some other countries. The boards must also be more involved in innovation opportunities and value creation.
An easy way to do this is to review the board agenda and meetings. For example, ensure that at least fifty percent of the meeting time should be dedicated to looking forward rather than backward.
“To become an innovative board, we also need to find other ways to act quickly between meetings. For example, in some of my boards we mix board meetings with several telephone meetings, says Liselotte Engstam. Committees and Advisory boards have also increased internationally in recent years, to keep up with the pace of change. I have myself worked on an Innovation Committee to assign focus and to revisit if we were putting enough efforts on the longer horizon.
Dare to experiment
The second area includes vision, cooperation, and culture. To draw up a five-year plan with the five most important strategies and expect it to be enough to make everyone move in the same direction is no longer viable.
“Instead, boards need to be better at developing a great vision that people want to be part of. There will still be strategies, but the organization must be able to adjust them. It means a culture where it is accepted to do experiments and to fail.
Liselotte Engstam asks at some of her boards, to have experiments presented at the board meetings. Pointing out that it is important that experiments are done, that learning goes on and not necessarily that all experiments go well.
“We must ask ourselves if we have a quick and flexible enough organization. Can we change ourselves if something happens? Do we have a culture that makes it possible? Do we need help from outside? Vision, culture, and cooperation are areas the board must be involved in and assess.
When it comes to creating value in a company, you must agree on how and where to create value and develop a model for this. The next question will then be to determine for whom the value is to be created. Owners or stakeholders? If the focus is only on the owners, it will often be too short-sighted, which is not good for the company in the long term.
“What we begin to see in our research and our interviews is that when boards have been active in reviewing and formulating models for creating value and communicating this, the board understands better and faster how they create value.
The idea is for companies to integrate their strategic considerations and corporate governance with reporting and the outlook.
Assign appropriate resources
The third and last area is about making decisions that are aligned with the company’s development phase. Here it becomes clear that those who have active and insightful owners achieve better value creation. In her research, Liselotte Engstam and her colleagues try to compare public companies and private equity companies to explore differences.
“What we can see so far, is that it’s good to have anchor investors who care for the company over the long run. If they are not present, the board must have a proactive ownership dialogue and be able to explain why some things need to be done.
Boards must also be better at supporting the allocation of resources to innovation, digitization, and corporate renewal. But it’s about fencing the financial resources, otherwise, basically everything goes to short-term improvements.
– There are few who are aware of this on boards. Many believe that the task is to only control strategy, but we also have a responsibility to control resource allocation. There should be guidance policies. In a risk assessment, it is important to consider whether you only look at known risks and forget about the unknown ones. Strongly committed owners who take the time to analyse how the company will need to change and push for this to be done will result in more innovative companies.
The project includes a couple of boards, but the research is still interviewing for best practice, for example, a process, an agreement, a routine or an approach.
“Each company is unique so we try to find areas where we can work with boards both individually and in context, where they can choose from the best practices to identify which ones give the best effect in their particular situation. We will then encourage implementation of the insights found as quickly as possible.”
FRAMEWORK FOR BOARDS WORK WITH INNOVATION
Purpose: To develop research-based knowledge related to innovation skills and innovation management at boards, to meet the specific development needs of at least two companies and to develop a framework for organizational and strategy for innovation.
Financing: Vinnova, Swedish Innovation Agency, contributes to financing with SEK 2m