Interview with Dr. Thomas A. Gutzwiller

Partner GWPartner AG, Chairman St. Galler Kantonalbank AG

The importance of innovation in the strategy process

swissVR Monitor: How important is innovation as a part of the strategy process?

Thomas Gutzwiller: You could say that strategy and innovation are two sides of the same coin. The aim of strategy is to use innovation to improve the company’s value creation. The company decides which new areas of business it wishes to embark on, and that forms the basis of its corporate strategy. Its business area strategy is based on decisions as to how the company can better differentiate itself from its rivals. And organising the value stream is part of its configuration strategy.

swissVR Monitor: What are the different dimensions of innovation?

Thomas Gutzwiller: There is an initial distinction to be made between product innovation and process innovation. Then there is a distinction between functional innovation and emotional innovation in the customer experience. A third relevant distinction is between radical innovation and incremental innovation. The strategy process in particular needs to engage with all three of these dimensions.

swissVR Monitor: What is your view of the interaction between the Board of Directors and senior management in the area of innovation management?

Thomas Gutzwiller: Innovation management is a role for senior management. The Board should maintain a broad focus on innovation as part of strategy development, raise fundamental issues and identify ‘black holes’ in the strategy presented to it that require action.

swissVR Monitor: Are you aware of examples where key innovations have been initiated by individual Board members?

Thomas Gutzwiller: Initiating individual innovations is not the primary role of the Board, especially in large companies. Senior management is responsible for managing innovation and for specific projects, while the Board is responsible for taking a strategic approach to fundamental issues. A Board should read the documents and proposals submitted to it thoroughly, ask smart questions that can, of course, include its own ideas for innovation, and give positive feedback to senior management where something positive emerges. Of course, individual Board members can also feed in their own experience and innovative ideas as part of their interaction with management. This is particularly important in SMEs, where the Board can support senior management more closely.

swissVR Monitor: How can the Board of Directors actively encourage innovation?

Thomas Gutzwiller: The Board can identify gaps in the strategy process, such as weaknesses in innovation or a corporate culture that is hampering innovation. Such gaps should be tackled as part of the company’s corporate development. The Board should focus on fundamental aspects, including process and culture, and ensure that the company develops skills and promotes a culture of error.

swissVR Monitor: Should the Board sometimes also act as a brake on innovation projects?

Thomas Gutzwiller: The Board’s role is to ensure that strategy is actually implemented, that there is incremental innovation, and that the company’s pace of innovation is good. Its role with respect to specific innovation projects is not so much to act as a brake on innovation as to offer a different perspective, particularly in relation to considerations of risk. One of the principles by which business operates, for example, is ‘If your core is broken, you need to fix the core’. It may be risky for management to suggest solving a problem in its core business by diversifying into new business areas, so the Board needs to consider whether in fact shareholders’ interests would be better served by selling the company in line with a different principle: ‘If your core is broken and you can’t fix it, you need to sell it.’.

swissVR Monitor: How can the Board of Directors promote a healthy culture of innovation within the company?

Thomas Gutzwiller: A culture of innovation arises out of a healthy corporate culture. From the Board’s perspective, this includes respectful and transparent relationships – and not just with regard to successful innovations but also with less successful ones. It is crucial there is an understanding that the company needs to change and move forward on an ongoing basis and to hold back added value to enable it to invest in innovation.

swissVR Monitor: What are the major challenges and barriers to innovation that a Board needs to be aware of?

Thomas Gutzwiller: The greatest barrier to innovation is a lack of financial resources. A company can afford to innovate only if it holds back sufficient added value. It can be dangerous if companies tackle problems with their core business by switching into money-saving mode.

swissVR Monitor: You are President of the Board of Directors of St. Galler Kantonalbank. How would you characterise the particular challenges facing the bank?

Thomas Gutzwiller: The banking sector is tightly regulated, and that regulation requires a strict separation between the Board of Directors and the senior management team. However, the Board should be tackling fundamental issues of strategy and innovation management. The particular market environment within retail banking means that we have limited potential for genuine product innovation. There is more room for innovation with processes and in the customer interface, particularly in the area of emotional innovation in the customer experience.

swissVR Monitor: How should a Board organise itself so that it can provide optimal support for innovation within the company?

Thomas Gutzwiller: In my experience, it is particularly beneficial for the Board of larger companies to set up a Strategy Committee to support management as part of the strategy process. This committee’s main role will then include innovation management.

Prof. Dr. Thomas A. Gutzwiller

Partner GWPartner AG, Chairman St. Galler Kantonalbank

Prof. Dr. Thomas A. Gutzwiller is partner at gwpartner AG, a consultancy specialising in transformational growth. Since 2013, he has been President of the Board of Directors of St. Galler Kantonalbank AG. He is also President of the Board of other companies, including Manres AG, ELCA Group SA and hkg Group AG. Prof. Gutzwiller was the co-founder of Information Management Group (IMG) and its CEO until 2006. Since 2006, he has been the Director and, subsequently, the Delegate of the Executive School of Management, Technology and Law (ES-HSG) at the University of St. Gallen.