Advisory Boards: A Means of Spurring Innovation

An experienced and well-connected board of advisors can help a business grow and prosper. More specifically, advisory boards fit particularly well with the pursuit of innovation. As a Business Development Bank of Canada study recently noted that 86% of leaders believe that having an advisory board has had a significant impact on the success of their business.” One of the areas of impact most often cited was innovation.

Innovation is vitally important to entrepreneurs, but what is it? Peter Drucker, the father of modern management, in an excellent 1985 book titled, Innovation and Entrepreneurship covers various aspects of innovation. He talks about how innovation gets started: entrepreneurs try to understand change and then how to anticipate it and respond to it. Drucker writes that an entrepreneur continually “searches for change, responds to it, and exploits it as an opportunity.”

Entrepreneurs do something different. In the realm of innovation this is not simply excelling at something that is already being done. Drucker remarks, “Innovation is the specific instrument of entrepreneurship.” Entrepreneurs view change as the source of opportunity in the marketplace—they embrace change, rather than avoid it.

Advisory boards can play a vital role in the process of innovation. Advisory boards are ideally comprised of members with unique and different experiences who can bring fresh ideas. This dynamic input can counteract the ossification of a company’s thinking. Outside advisors help companies to move beyond this limited vision and break out of the cycle of mediocrity based simply staying ahead of the competition.

Another author who provides good insight on the creative process and the role of outside input is William Duggan, author of Creative Strategy: A Guide for Innovation (Columbia University Press, 2013). Duggan talks about how innovation is successfully implemented in companies. He highlights a number of principles that could be facilitated by an advisory board.

Duggan points out that, “Innovation requires the search for the right combination of parallels within and beyond your own experience to apply to a new situation.” The best way to get beyond your own experience is to tap into that of others. This ties in well with the role of an advisory board which is to provide a set of experiences beyond that of the entrepreneur.

Duggan further explains with respect to innovation that, “We have to open our minds to everything we’ve seen and read and heard of, and seek out sources completely new to us.” The creation of an advisory board can help executives reshape old industries, inspire innovation in larger and more established firms, drive young companies to new frontiers, and cost-effectively import critical skills beyond a corporation’s traditional competencies.

Advisory boards allow entrepreneurs to leverage others’ specialized knowledge while honing skills and talents of their own. Reaching new markets, accessing new forms of funding, adopting new technology, and garnering information to manage risk are all necessary to scaling a sustainable entrepreneurial venture. A strong advisory board is one of the fundamental building blocks that will allow you to take your business to scale.

An advisory board plays a useful role in strategy. As Duggan notes, “It’s entirely possible, even likely, that some part of your [the entrepreneur] idea will call for people or knowledge you don’t possess at the moment. So part of your plan is how to acquire those missing pieces. Innovations usually go beyond your current abilities—that’s one thing that makes them innovations.” Sounds like again an advisory board would be a means of tapping into a wide range of experience.

In today’s rapidly changing and highly competitive markets, many privately held companies are creating outside advisory boards to give owners and CEOs fresh and knowledgeable advice. Whether for large or small businesses, setting up an advisory board can provide a significant advantage over competitors that are relying solely on internal talent.  An advisory board can be a valuable tool to fostering innovation within an organization.

Learn more about ELO Counsel's “Advisory Board Program” offering.