Do Boards worry about innovation and technology?
Innovation is a generic term for all new business creation. Right now, the need for innovation is accelerated by the fastest technological development taking place in history. Artificial intelligence, other digitalization, alternative energy, material recycling and other trends are affecting all industries.
Innovation is often linked with growth-oriented SMEs, whose board and management may have more time for innovation. Often the existence of SMEs is based on creating something new. However, it is the innovativeness of large companies that really fuels the growth of the Finnish economy.
Nokia was the Finnish company that most extensively raised technology-based innovation as the basis for the entire organization’s management and value creation and showed the industry what can be achieved with such an approach. Nokia also taught what happens, if the board loses touch with innovation and its key people involved in innovation inside the organization.
In addition to Nokia, new Finnish success stories have emerged. The rising star of this decade is Neste with renewable fuels. Also at Neste, the role of the board in sparring and creating long-term management commitment has been central.
However, this decade has seen a decline in investments in innovation in Finland. Cuts in state funding for innovation have been claimed to be one of the reasons for the decline, but companies need to self-reflect as well. The field is very polarized: some companies have very ambitious innovation strategies, while others are missing them altogether.
Innovation portfolio as a strategic competitive advantage
Is innovation-related leadership part of board governance? It is the responsibility of the board to ensure the long-term competitiveness of the company and innovation is a key means to generate strategic renewal. First, the board should make sure that the strategy involves enough elements of innovation. Second, the board should ensure that there are appropriate capabilities to manage the implementation of required actions at the top management level. Innovation requires its own criteria in the management incentive plan.
According to board professionals, the biggest obstacle to discussing innovations in board meetings is time. Board agendas are often full and it is difficult to allocate time for innovation. Issues that need to be solved in the short-term quarterly economy often overrun topics that need a longer-term outlook.
Another key reason is competence: there is a lack of comprehensive understanding of the full consequences of the rapid technological development taking place. Today, innovations are built in collaboration through partnerships, which requires capabilities developed in ecosystems. This also requires new understanding.
Implementing the above-mentioned building blocks for innovation requires not only the right capabilities, but also the allocation of resources and clear performance criteria for the management. Strategic leadership requires setting the right management incentives and careful follow-up on the progress. Acquiring startups or arranging one-day hackathons will not lead to anything, unless the management is not committed to supporting innovation and nurturing a corporate culture that reinforces innovation.
The role of board in the renewal of technology companies
We are now investigating how Finnish boards tackle innovation through the Innovation Governance Survey. The survey is carried out by Spinverse for Technology Industries of Finland and will reach 1600 member companies of Technology Industries of Finland. The results of the survey are presented in the autumn. If you are a CEO or a member of the board of a technology company, please answer the survey here.
Chairman of Board, Spinverse Ltd.
Chairman, Technology Industries of Finland Innovation and Competitiveness Council