Session 2: Governance in Family Businesses: The Innovative

Session 2: Governance in Family Businesses: The Innovative Role of the Board of Directors

Mr

.

Akram

Okeili

Founder

Okeili

& Co.

DEC 2014

This document contains confidential and proprietary

information

belonging to Okeili & Co only which information may be used only in connection with the business of Okeili & Co.

DRIVING INNOVATION IN FAMILY BUSINESSES

The

Innovative Role of the Board of Directors

EXCLUSIVE FOR WORKSHOP AUDIENCE

WHAT IS ORGANIZATIONAL INNOVATION?

? ? ?

WHAT IS ORGANIZATIONAL INNOVATION?

“

INTRODUCING A NEW PIECE OF TECHNOLOGY

“

RESPONSE FROM MANAGEMENT

WHAT IS ORGANIZATIONAL INNOVATION?

“

INTRODUCING A NEW PIECE OF TECHNOLOGY

“

“INTRODUCING A NEW PRODUCT“

RESPONSE FROM MANAGEMENT

WHAT IS ORGANIZATIONAL INNOVATION?

“

INTRODUCING A NEW PIECE OF TECHNOLOGY

“

“INTRODUCING A NEW PRODUCT“

“MAKING USE OF SOCIAL NETWORKS “

RESPONSE FROM MANAGEMENT

WHAT IS ORGANIZATIONAL INNOVATION?

“

INTRODUCING A NEW PIECE OF TECHNOLOGY

“

“MAKING USE OF SOCIAL NETWORKS “

“CARVING OUT A NICHE IN THE MARKET “

“INTRODUCING A NEW PRODUCT“

RESPONSE FROM MANAGEMENT

WHAT IS ORGANIZATIONAL INNOVATION?

“

INTRODUCING A NEW PIECE OF TECHNOLOGY

“

“MAKING USE OF SOCIAL NETWORKS “

“CARVING OUT A NICHE IN THE MARKET “

“GOING MOBILE “

“INTRODUCING A NEW PRODUCT“

RESPONSE FROM MANAGEMENT

ORGANIZATIONAL INNOVATION INVOLVES TWO (2) DIMENSIONS

INNOVATION IN PERSPECTIVE

“

REVIEWING IDEAS IN THE RIGHT MANNER “

2

“COMING UP WITH CREATIVE IDEAS“

1

ORGANIZATIONAL INNOVATION HAS TWO (2) DIMENSIONS

INNOVATION IN PERSPECTIVE

“

REVIEWING IDEAS IN THE RIGHT MANNER

“

2

SOMEHOW COMMON IN FAMILY BUSINESSES

LESS COMMON

“COMING UP WITH CREATIVE IDEAS“

1

CRITICISM / SHYNESS / AWARENESS

THE ABSENCE OF THE RIGHT CULTURE, BREAKS THE INNOVATION BRIDGE

INNOVATION BRIDGE

“

REVIEWING IDEAS IN THE RIGHT MANNER

“

2

“COMING UP WITH CREATIVE IDEAS“

1

KEY MANDATES ON FIVE (5) DIMENSIONS

CAPABILITY & INVOLVEMENT

STRATEGY & PROCESS

CULTURE

BOUNDARIES

DILIGENCE

1

2

3

4

5

SO, WHAT IS THE ROLE OF THE BOARD IN ENSURING A ROBUST INNOVATION BRIDGE?

CAPABILITY & INVOLVEMENT

STRATEGY & PROCESS

CULTURE

BOUNDARIES

DILIGENCE

IN THEORY, THE BOARD SHOULD:

Have

the capabilities and competencies to understand, advise and vote on any material

innovationIN PRACTICE, THE BOARD SHOULD:Pursue independent directors who experienced the innovation journey on other boardsTake the extra mile and act as change agents – lead in suggesting areas of innovation and value creation Receive the right training on research and innovation capabilities

1

2

3

4

5

THE FIVE (5) KEY MANDATES OF FAMILY BUSINESS BOARDS

CAPABILITY & INVOLVEMENT

STRATEGY &

PROCESS

IN THEORY, THE BOARD SHOULD:Embed innovation in the company strategy and planningFormalize the process of generation and capturing of ideas to facilitate their crystallization into viable projectsIN PRACTICE, THE BOARD SHOULD:Consider three tiers of planning and ask management to submit their plans in line with the:short term focused on managing today’s business profitablymedium term on how to grow the core business within a 3-5 year timelineexplore innovation and opportunities for transformation for the long-term viability of the businessPut in place “Employee Idea Systems” that can permit employees voice new ideasEstablish “Ideas Review Committee” & “Evaluation Frameworks” to assess ideas that made the pipelineEnsure the process seek third party experts’ opinion on technical matters“Think Big but Start Small” - Dedicate some time, resources and place to pilot ideas that make sense

1

2

CULTURE

BOUNDARIES

DILIGENCE

3

4

5

THE FIVE (5) KEY MANDATES OF FAMILY BUSINESS BOARDS

CAPABILITY & INVOLVEMENT

STRATEGY &

PROCESS

IN THEORY, THE BOARD SHOULD:Embed innovation in the company strategy and planningFormalize the process of generation and capturing of ideas to facilitate their maturation and to turn them into viable projects just like any other business processIN PRACTICE, THE BOARD SHOULD:Consider three tiers of planning and ask management to submit their plans in line with the:short term focused on managing today’s business profitablymedium term evaluating how to extend or grow the core business within a 3-5 year timelineexplore innovation and opportunities for transformation for the long-term viability of the businessPut in place “Employee Idea Systems” that can permit employees voice new ideasEstablish “Ideas Review Committee” & “Evaluation Frameworks” to assess ideas that made the pipelineEnsure the process seek third party experts’ opinion on technical matters“Think Big but Start Small” - Dedicate some time, resources and place to pilot ideas that make sense

1

2

CULTURE

BOUNDARIES

DILIGENCE

3

4

5

THE FIVE (5) KEY MANDATES OF FAMILY BUSINESS BOARDS

“Google Micro Kitchens” - Ad word..

“Apple Labs” - Apple Watch..

BOUNDARIES

3

IN THEORY, THE BOARD SHOULD:

Understand that innovation

has risks

and

unsure

outcomes

Set the boundaries or what is known as risk appetite / risk toleranceIN PRACTICE, THE BOARD SHOULD:Ask management to develop 3-years projections illustrating potential performance of innovation programsAssess the risk factors, set their boundaries and carry out a sensitivity analysis to see the variations of performance beyond those boundaries

CAPABILITY & INVOLVEMENT

1

CULTURE

DILIGENCE

4

5

STRATEGY & PROCESS

2

THE FIVE (5) KEY MANDATES OF FAMILY BUSINESS BOARDS

CULTURE

4

DILIGENCE

5

STRATEGY & PROCESS

BOUNDARIES

2

3

CAPABILITY & INVOLVEMENT

1

IN THEORY, THE

BOARD SHOULD:

U

nderstand and act upon the fact that

innovation is not driven by one individual but

is rather by a clan

Implement and incentivize cultures that promote sustainable and compliant innovationIN PRACTICE, THE BOARD SHOULD:Choose a CEO with drive for innovation, preferably who worked in companies that care about innovationDevelop recognition programs for innovation “ The innovation champion of the year”Link innovation to Total Reward (“bonuses for innovative ideas, annual prizes with in-kind incentives”)Share and celebrate innovation stories to encourage the discussion, exchange and refinement of ideas

THE FIVE (5) KEY MANDATES OF FAMILY BUSINESS BOARDS

ON STORIES, 3M HAS A DEDICATED WEBSITE FOR INNOVATION

DILIGENCE

5

STRATEGY & PROCESS

BOUNDARIES

2

3

CAPABILITY & INVOLVEMENT

1

CULTURE

4

THE FIVE (5) KEY MANDATES OF FAMILY BUSINESS BOARDS

IN THEORY, THE

BOARD SHOULD:

Track innovation program

results

to

understand what works, what did not and

why

Learn and transform failures into opportunities

IN

PRACTICE, THE

BOARD SHOULD:

Establish, collect data, monitor and track key performance measures that drive innovation – the sorts of:

Idea

Yield

: The

percent

of ideas accepted into concept

development

Ideas to Reality:

The percent of ideas that materialized

into viable projects

Innovation Investment Ratio:

T

he percent of investments devoted to new ideas, products, process, etc

Innovation Value

: The total $ amount of economic value saved or generated from new ideas

About Okeili & Co.

Okeili & Co. is a boutique management consulting firm and the region's leading advisor on Family Business. The firm focuses on three practices mainly Family Firm Governance, Strategy & Planning and Mergers & Acquisitions. Our Family Firm Governance involves Succession Planning, Family Governance and Corporate Governance. Our Strategy & Planning practice includes Strategic, Business & Operational Planning for both start-ups and existing business units. Our Mergers & Acquisitions practice focuses on maximizing shareholder value by advising board and company leadership on buy-side and sell-side transactions.