Throughout his career, George Martinez has examined innovation initiatives from a number of different perspectives—as CEO of a large financial institution and as a director of several corporate boards.

As the co-founder of Sterling Bank and current CEO of Allegiance Bank, he believes innovation is often the very heart and soul of private companies, many of which are formed to develop and market new products or services. And, he says, from a board member’s perspective, a company’s failure to value innovation creates a competitive risk.

“If a company moves too slowly to embrace change, it could face pressures that could adversely affect revenue,” Martinez says, pointing to failed bookstore chains as an example. On the other hand, he says, if a new company relies strictly on innovation, it could lose the game by its inability to generate the needed revenue to remain viable, which is what happened with many dot-coms in 2000.

Board members are charged with bringing discipline to an organization, which is particularly important when companies are led by creative types, Martinez says. These four areas are critical when the board evaluates the risks and rewards of an innovation initiative:

  • Is the idea worth pursuing? Is there a market for the product or service? Does it meet a need that isn’t already being met, or does it improve upon existing options that are available?
  • Will the company need to raise more capital or does it already have the resources to fund it? If it needs to find money, does it have viable channels for doing so?
  • Can management really pull it off? Can the product be manufactured or the service be provided as envisioned? If so, is the right team in place to make it happen?
  • Is the timing right?
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