Out of the Box: Chief Innovation Officers Fill Multiple Board Skill Gaps

Reprint from NACD Directorship magazine (National Association of Corporate Directors)

A risk manager. An audit committee financial guru. A digital and tech expert. A human capital leader. An environmental, social, and governance (ESG) authority. A marketing master and social butterfly. A diverse candidate. How many new directors does it take to refresh and reinvigorate a board? 

Perhaps one: a chief innovation officer (CINO). 

The CINO—not to be confused with the chief technology officer or the chief digital officer—is rarely the top-of-mind C-suite title in board searches and suggestions. This may be linked to the fact that only 30 percent of 5,000 board members surveyed in a 2018 Harvard Business School study thought that innovation was a top-three concern for corporate boards. Yet 42 percent of respondents believed that boards were “above average” or “excellent” in the fields of innovation governance and support. 

There’s a clear disconnect between the board and reality and with current and ideal board composition. Why address the gap? A 2019 study by McKinsey & Co. that looked at innovation proficiency alongside proprietary economic-profit performance data found a positive correlation between a company’s ability to innovate and how it performs financially. 

Consider, for example, the payment company Square, whose very founding is based on innovation and whose stock price has quadrupled over the past couple of years. Fast Company has named Square to its Top 50 list of Most Innovative Companies five times. (As a side note, in 2019, Amy Brooks, the first CINO of the National Basketball Association [NBA], joined Square’s board. The NBA has also been named multiple times to Fast Company’s Most Innovative Companies list.) This success in mind, and reflecting on the skill gaps your boards face, consider the following roles that a CINO could fill. 

A risk manager. What is a board’s greatest risk? Failing to keep the company afloat. In the past 20 years, 52 percent of Fortune 500 companies went bankrupt, were acquired, or disappeared. The consulting firm Innosight predicted in 2017 that three-quarters of the S&P 500 would be replaced by 2027. 

While directors and executives identify the direction the ship should sail, an experienced CINO is additionally expert at predicting or spotting weather, currents, other boats, reefs and sandbars, whether the destination is sinking into the sea, and whether people will continue to care about ships at all. CINOs keep entities afloat and moving full speed ahead by determining waypoints along the route toward far-off future endpoints, while also foreseeing and navigating risks big and small. Isn’t that a key role for a board member? 

But finding a board-ready CINO focused on earnings before interest, taxes, depreciation, and amortization and with a consistent record of large-scale success can be tricky. A 2017 Egon Zehnder survey found that only 29 percent of the Fortune 500 had a CINO. Perhaps this explains why the majority of corporate innovations do not succeed, and why, according to Thirteeners author Daniel F. Prosser, only 13 percent of companies successfully execute their strategies. Boards should consider whether adding a CINO with industry experience could help ensure that the corporate vision comes to fruition and sets the business apart from its competitors.

A digital and tech expert. Will the digital transformers on the board deliver competitive advantage and growth? While some chief digital officers and chief technology officers are brilliant pioneers, having members with these titles on your board doesn’t necessarily fill the innovation skill gap. Digital technologies are enablers, channels, and methods—not outcomes themselves. Reducing the time it takes to fill out a credit card application by 20 seconds, for example, does not matter if the target audience has no desire for yet another credit card. Costly digital endeavors, such as increasing Internet shopping capabilities, can simply shift store purchases online without increasing sales revenue. Boards should ask,

What exactly are we digitally transforming, and why? And then call in the CINO. 

CINOs know how to justify investment in customers’ and clients’ lives and lifestyles by preparing business cases and profit-and-loss forecasts and by synthesizing market research, data, trends, competition, consumer behavior, unmet needs, and financials to determine what to build, how to build it, and the appropriate go-to-market strategy. They swap the long pipeline of table stakes and catch-up features that often appear on board innovation dashboards with big, leapfrog differentiators, leveraging a company’s existing assets, to be best in market. 

The ideal CINO has deep digital and technology expertise but, more importantly, is a holistic market and business strategy leader with financial and marketing experience well suited for board service. 

A diverse candidate. A diverse board produces stronger financial performance because it delivers diversity of thought. This is widely accepted knowledge and has been espoused in many a study. Diverse thinking is directly in the CINO’s job description. There’s also no better master collaborator than the CINO, who listens to and teams up with customers, clients, franchisees, retailers, distributors, vendors, and every department in an organization to innovate and get things done. 

Moreover, CINOs have been addressing ESG opportunities and integrating them into business models and strategies for decades. With stakeholder calls for corporate action on climate change to ramp up, a CINO on the board would be perfectly positioned to help a company, for example, innovate its model and strategy for a net-zero future. 

Recruiting more strategically oriented directors, such as CINOs, is a no-brainer for some. Board members consistently say that they’d like to spend more time on strategy, but board composition trends indicate that this is unlikely to happen. Only 45 percent of new directors and 65 percent of directors overall in the Russell 3000 have management and strategic vision skills, according to NACD’s 2020 Inside the Public Company Boardroom report. 

What boards prize in CEO-directors is their ability to see the big picture, prioritize, and drive exponential growth while managing risk and caring for people. But there’s another way to check lots of boxes in the skills matrix and avoid filling the boardroom with one-off specialists: trailblazing companies might consider recruiting a CINO.