Uncharted Waters Disrupting the Corporate Boardrooms

The storm clouds of Radical InnovationWhen you read a report that has within its executive summary this: “In combination the boards stand unarmed to enter the battlefield of future business creation in a disrupted world it makes you want to read on.

In a recent report called Radical Innovation and Growth: Global Board Survey 2016 (link opens the pdf) we have results from a survey jointly conducted by Deloitte Denmark and Board Network – The Danish Professional Directors Association, that opens up much that can concern us about the current boardroom and its great difficulty with managing more radical innovation.

It seems within our boardrooms they are ill-equipped to managing in today’s world, grappling with the past, holding on, perhaps too tightly, to the present and certainly being unsure of the future. It is struggling to adjust to all that is entering their world.

In this report, they surveyed 614 global board professionals from a total of 50 countries during the period covered from November 2015 through to February 2016 and then published in February 2016.

I quote extensively from the Executive Summary and Introduction and urge you, the reader, to delve into the report which I found an easy read to understand and grasp the magnitude of this present boardroom discomfort.

It comes as no surprise to me, or many out there working to disrupt the incumbent but it makes for difficult reading that this is not addressed far more head on. This is a more than timely report in my view.

Corporations are under increasing attack and are really struggling to become more radical in how they can defend, secure and achieve growth. A lack of understanding innovation in all its forms is coming back to haunt them. They can’t seemingly handle radical innovation and there is even more of an imperative to learn.

The Survey wanted to understand the current mood within the boardroom

The survey set about understanding the current boardroom thinking about how to address  the exponential technology is affecting growth (and indirectly competitiveness) in international companies and organizations, they have gathered insight on how global corporate boards address and work with radical innovation and to what extent they see growth stemming from their efforts. Radical innovation is defined here as:

Radical innovation definition

The report dug into the boards’ appetite for growth; how high is the bar? It looked at their risk profile and tolerance of failure. It examined the role of innovation in company strategy and its strategic importance on the board’s agenda. Is radical innovation a bulleted point at board meetings?

It questioned whether there is a clear alignment of innovation and growth goals. Do boards spend enough in terms of man hours, consultants or other expenditures on new initiatives? It asked if companies actually own a Division-X and if yes, to what extent they are successful.

It wanted to address the skill-set at board level to handle digital disruption and the urgency to act proactively. It set about the identifying of board barriers to handle radical innovation and finished with a set of recommendations based on their quantitative findings topped with first-hand experience and opinions from a number of selected global board chairs.

The respondents describe that competition and technology are among the four most important external challenges their companies are facing now. The issue was on how are the boards taking on the challenging responsibility of overseeing their companies’ radical innovation efforts?

It concludes: “At board level, what we are seeing is the beginning of a shift among board professionals’ responsibility. As if oversight of company strategy, risk management, succession planning, budgeting and forecasting, sales and marketing, operations, auditing, IT, remuneration and tax was not already a fight.

Now corporate governance includes overseeing new business development with its itchy elements of experimentation, demand for scalability, risk of failure and navigation in a fully digitized and unpredictable new business world. On top of this new business today is developed at a pace that leaves little time for thorough analysis and precise risk mitigation”

 The Common trends they found were:

  • The two dominant barriers for boards working with radical innovation are lack of insight (47%) and lack of organizational design to handle radical innovation (46%).
  • 40% of respondents have no director with sufficient knowledge about digital disruption and 43% feel their management invests too little to achieve their long-term growth goals.
  • The boards’ failure tolerance is low as seen 18% try to avoid failure in all their dealings.
  • The financial risk scenario is also conservative, 34% of respondents characterize their board’s risk appetite as one where they try to avoid big financial risk.
  • There is a clear tendency towards expecting radical change coming later (in five years) rather than sooner (this quarter).
  • A staggering 75% of companies with the highest growth expectations for the coming 24 months (above 10%) also own an actual Division-X (or equivalent). We see this result as a clear indication of Division-X actually driving growth. (Note: only 22% have a so called Division- X, with 58% of these starting this in the last two years)
  • Radical innovation is still a new idiom at board level with 65% not having it as a formalized item for discussion or action at the board meetings. (Note: Understandable but not forgivable in this disrupting world)

Welcome to the era of disruption, it is a tsunami of issues being grappled with.

The report suggests that while global boards are taking action now, there is room for improvement. Especially when it comes to the need for greater insight into the area of innovative initiatives, grappling with organizational design, dealing with risk and failure, and sheer experience in working in the huge discomfort zone driven by accelerating technology.

“If work has become steadily more demanding for the global board member recently, at least there was a predictability associated with that work but it is all about to change.

Now, in light of massive technological disruption, the new workload for a board professional revolves around a risky, failure prone and unknown innovation territory as they can start seeing themselves as largely inexperienced new business development leaders”

I do recommend reading this report.

I certainly do recommend this report, it confirms much, it conveys much, it certainly helps to frame many of the issues the boards are less than certain about; of the uncertainties they are facing, of where their business will come from in the future.

Indeed how they are presently ill-equipped to fight on these new battlefields of future business creation in this disrupting world, as these are “largely inexperienced new business development leaders,” in a radically changing world of radical innovation.  With lots of uncharted waters entering the boardroom they need to become far more radical within themselves or will be drowned from not navigating this at all well, the worry is who and what else sinks with them?

It does seem the board members need a lot of help and it needs to come from well beyond the usual advisors but are they prepared to take different advice? It does not auger well as there does seem a real stubbornness to make real change and perhaps a belief that these disruptive forces are not knocking on their boardroom door. How wrong they so are!

Profound change, linear thinking Klaus Schwab

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6 thoughts on “Uncharted Waters Disrupting the Corporate Boardrooms

  1. Paul, I can’t agree with you more!
    The ability to innovate and thereby sustainably create value for the business is becoming the defining competitive advantage for companies which want to thrive in a globalized economy. Therefore I think that the Board can and should play a pivotal role in innovation. Innovation has many facets and involves all parts of the company in one way or another. So it is in the realm of the Board.
    Typically, innovation has several faces: an operational one (how to run the innovation processes), a strategic one (where to innovate and versus what business objective), an organizational one (how to structure the organization and how to resource innovation activities) and a cultural one (does the company culture encourage innovation). In order to optimally manage all these often competing vectors the Board and the C-Suite need to work in tandem. Their different strengths profiles and priorities provide the broad managerial competence needed to master the complex innovation challenge. In particular the outside perspective non-executive, external directors bring to the Board together with its longer term time horizon complement in an ideal way the shorter term, internal operations focus of the C-Suite.
    This competence is often called organizational ambidexterity – a company’s ability to run successfully today’s business while developing tomorrow’s opportunities. A Board working in such a synergy with the C-Suite on innovation will ensure a bright future for their company.

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    • Hello Joachim,

      I like your several faces to manage, also the absolute need (my reaffirming) that outside perspectives within board rooms needs shaking up to provide this help in addressing the balance on time horizons, types of innovation, risk adoption etc.

      You suggest organizational ambidexterity, a tough one to enact well. Do you follow Ralph Christian-Ohr’s work on this. For instance his recent post gives a solid rounding to his thinking this through as a work-in-progress- “A model for integrative innovation management”.
      http://integrative-innovation.net/?p=1157

      This dual thinking, managing, approaching innovation or even organizational design is high in my mind constantly but I’ve yet to fully nail it down as it does seem to hold (part of) the promise to break out of the present constraints holding innovation and the thinking and management of our growth back.

      Cheers Paul

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