Businesses need to tap into the expertise of their board members to get innovative ideas for their company.VOLODYMYR GRINKO
KARL MOORE – This is Karl Moore of the Desautels Faculty of Management at McGill University with Talking Management for The Globe and Mail. Today I am delighted to speak to Michael Useem [a management professor] from the Wharton Business School.
So Mike, you do a lot of research on boards, how can boards help with innovation?
MICHAEL USEEM – With boards becoming more ready to engage in active dialogue with top management, with boards more able to do so – they are more independent, have stronger people on it and they are expected by investors these days to not be quiet in the board room – board members often come with great ideas. So, why not let the board help with your innovation process? You don't want them to micromanage, that's not the deal, but to help with it.
So, a couple examples come to mind in the pharmaceutical industry. Many of the big pharma's these days – GlaxoSmithKline, Johnson & Johnson, Pfizer, Novartis – have created at the board level either a research committee, where several of the members of the board who have a scientific, research or a medical background, often now work actively with the research and development people. Not to pick products, not to understand the molecular structure of a particular therapeutic product, but to bring in big ideas about new areas for discovery and new lines of research.
Another example though, just to drive the point home, is from Diebold which makes a lot of hardware for the financial services industry, [such as] ATMs, among other products they make, and the chief executive who came in there a couple years ago said, 'We have been around for 100 years, the products we make now have no resemblance even to what we made 100 years ago, that's because we have to innovate.'
You can imagine the hardware for the financial services industry is constantly morphing and evolving. He said, 'Look we have got a pretty good board – smart people, they know financial services – I am going to sit down with two or three people on the board,' and in fact they made a committee of three to talk about innovations that could be disruptive before they are disruptive. Like what kind of new ATM schemes are going to be out there, or what about paperless money, and all the kinds of things we think about and ordinarily the research director for a company like Diebold would be primarily responsible for, ... and in this case, the board has been drawn into the process and the payoff has been big, according to the people we spent time with at Diebold.
The quick summary is, if you have got a board with strong people, independent, they know what they're doing, they understand the industry, it is great to say, 'Ok guys, do you have any great ideas about what we ought to be doing before somebody else does it and we ought to be doing it?'