How CEOs and Board Members Think About Innovation Investment and Competitive Advantage

By Hadley Thompson |  February 13, 2024

What do the C-Suite and the board really think about innovation, versus simply growing the core business and adding low-risk incremental features? At Impact 2023, we assembled an all-star panel that included Rich Gotham, President of the Boston Celtics; Sonesta Interational Hotels CEO John Murray; and Shira Goodman, the former CEO of Staples and a member of the board of directors of several public companies, including CarMax, CBRE Group, and Henry Schein. InnoLead Co-Founder Scott Cohen moderated.

Some topics of discussion included investing for the long-term, generative AI, and managing people.

This session was recorded at Impact 2023 on October 26, 2023. To watch the highlights, click “play” above. Below is a transcript of the video.

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Scott Cohen: 

So let me just ask the personal journey question. I don’t think people know this, but you’re a technology guy. You came out of FTP Software, and you were at Lycos. I don’t know if you remember the internet pioneer Lycos — a search engine — and then you went to what I assume was kind of a stodgy, 1946 origins, old school, cigar-filled company. What was that like? 

Rich Gotham: 

I mean, it was interesting. Everything I had learned in my career previously, was surprisingly, directly applicable to the business of the Celtics, which was really kind of a mom-and-pop business, when I joined back in 2003. It was not innovative at all, in any way. But very culturally different from the tech world. That’s maybe some context for the conversation today. Innovation, as I knew it in tech, was [about] how do we change people’s lives? 

We built a first-generation search engine [at Lycos] based on technology cultivated in an IT lab at Carnegie Mellon University before there was even Google. That’s a very different take on innovation than it is at the Boston Celtics, where what we’re trying to do from an innovation standpoint is put our team in a position to win championships. How do we create competitive advantage in order to do that? 

In sports, it’s not just competitive advantage — how do you build a better team? — but it’s really, how do you build a better business that provides the funding for the better team? The two sort of go hand-in-hand…

Rich Gotham, Boston Celtics

In sports, it’s not just competitive advantage — how do you build a better team? — but it’s really, how do you build a better business that provides the funding for the better team? The two sort of go hand-in-hand in our business. We generate revenue to pay players, which correlates with winning championships. So we’ve got to look at innovation across those two different parts of our business that come together to hopefully deliver a good team and a good product. 

Ultimately, winning championships is good. That’s our mission. But then you sort of say, “Why? What’s the purpose?” We’re all competitive and a bit ego-driven in what we do in sports, but the purpose is to deliver joy to people. It’s to deliver these great moments for people, during times like we’re going through now, that allow people to sort of get a little bit of relief from everything else that’s going on in the world around us, and get into your own little private world and have some fun. That’s what we do — we deliver joy to people.

Scott Cohen: 

So this room is filled with people who are running innovation at big companies — heads of digital, R&D, transformation, strategy. Do you have someone like that? I mean, who owns innovation for you guys? I’m also curious about how you think about budgeting for this stuff.

Rich Gotham: 

Not one person owns innovation, which you could also say that no one owns it, right? Our business is a little different. I think about innovation in context. We do so many different things from that opening sizzle reel you saw. Why am I seeing a bunch of kids in a gym, bouncing basketballs, versus the Celtics? We do so many things, as a part of our business, whether it’s the work we do in the community, whether it’s our Jr. Technology Celtics youth basketball initiatives, whether it’s trying to optimize player performance through technology and biometrics and understanding that, or things like the user experience for the television viewer — or anyone viewing our games through an app or on a phone.

All of those are very different areas of innovation. It’s probably impossible for any one person to be expert enough to oversee all that and understand it. So to some degree, it’s my job to champion innovation, to push for it, but I’m pushing it to the people who run those individual businesses within the Celtics, which are all very different, to be innovative in what they do, for a couple of reasons. One, it’s kind of cool. We want to be at the leading edge of things in sports, it’s part of our brand. But two, it’s the only way you grow. We are in a business — you could look at it like a legacy business — you could say, well, people are unplugging from cable television now and going towards streaming. What are you going to do? That’s a huge part of the sports ecosystem, particularly at a local and regional level. Do you sit there on your hands or do you say, “No, we’ve got to figure out how to go direct to consumer with a product that’s got a value proposition that gives the consumer not what we want to sell them to take the most money off the table, but what do they actually want? What are they telling us?”

…The most important thing I have to do is get the hell out of the way for the people who are a lot closer to the ground, and really understand what today’s consumer wants.

Rich Gotham, Boston Celtics

It’s a different consumer today. We’re lucky in the NBA. We’ve got a very young consumer, versus say baseball, which skews old, but that creates challenges. How do we deliver products and services that meet the sensibility of those consumers, which is very different than the sensibility of the old head like me? I think as someone who has to think about innovation, the most important thing I have to do is get the hell out of the way for the people who are a lot closer to the ground, and really understand what today’s consumer wants. I keep saying the generation gap keeps getting wider. That’s a way to say I keep getting older, right? Listening to our young staff, of which we have many, is an important part of leading innovation. 

Scott Cohen: 

You just heard kind of Rich talk about what innovation means for the Celtics, and the changing consumer dynamics and pricing. How do you guys think about innovation? Is it around the guest experience? Is it around the physical space? What does innovation even mean for Sonesta?

John Murray: 

That’s a good question. We face a lot of the very similar challenges that Rich talked about, except our arena is spread over 1200 locations, and there’s a game every night. So, we have to fill anywhere from 60 beds to 400 beds, every night. If we don’t get the revenue from those beds, then that’s lost until that same night next year.

Having the technology to understand, like this past weekend, our hotel down the street, the Royal Sonesta in Cambridge…knew that there was going to be The Head of the Charles [rowing races.] They knew that there were going to be parents’ weekends. And so they price their rooms differently when they knew that there was going to be that kind of activity, just like Rich probably gets a better price when the Celtics are about to beat the Knicks at home on a Saturday night. 

Knowing that dynamic, if you have a hotel — we don’t happen to have one — up in the White Mountains in New Hampshire and it’s the fall and foliage season, then your prices are high. But a week or so from now, maybe even today, the leaves are brown and the branches are empty. It hasn’t snowed yet? Then you’re relying on the online travel agents, the Pricelines and, to try to fill some of those beds. Because that’s the name of the game — to get people into the hotel.

Scott Cohen: 

What’s the board’s role in innovation?

Shira Goodman: 

I just want to say what a treat it is to be with these two guys. Rich, you should know that when I think about the Celtics, it’s not only joy, but they bring community. People who would otherwise never talk to each other, come together for sports. It’s like a common language. Don’t feel bad about the Hyatt, because I’ve spent a lot of time here and at the Royal Sonesta — the Royal Sonesta rocks, it’s much better. Anyway, the board — we don’t have the tough job like these guys. 

The board has three functions. Do we have the right CEO and the talent? Do we have the right strategy? Are we allocating our resources? The main way that I think the board adds value to innovation is, if you’re part of a public company, do you ever have to worry about quarterly earnings? Anybody ever heard that? Sometimes when you’re in management, it’s the quarter, the year that feels long-term, etc., and part of the board is like, “How do we get out of the trees up into the forest and see things long-term and stick to it?” 

From left: Shira Goodman, Rich Gotham, John Murray, and Scott Cohen.

I literally just last night came back from a CarMax board meeting. Quick poll of the audience: who here has bought a used car in your life? Great, a lot of hands. Who here has bought a used car without leaving your home? One hand, maybe. Nowadays, you can buy a used car without leaving your home, and that’s all because of innovation. So CarMax was just bricks-and-mortar. They realized the world was being disrupted. They have invested millions upon millions of dollars so you can buy a used car without leaving your couch. They have 50 product teams, a huge IT team, etc. Now, here’s where the board comes in. That is a big investment. It takes intestinal fortitude to make a big investment like that. And I guarantee you that if we cut our innovation, what would happen to our stock price in the short term? It would go up, our earnings would go up, and probably our stock price would go up. It’s really the board’s role to work with management and then keep to it, because we’re playing the long game. We’re not playing for the quarter; we’re playing for the ultimate win.

Scott Cohen: 

I want to spend a couple of minutes on gen AI, just because I feel like you can’t have a panel today without talking about gen AI. I’m curious — of the boards you’re currently on, and then I’d also like to hear from you guys — is that a thing? Are you guys thinking about it?

Oh, my gosh, it is gen AI 24/7. Every single board I am on.

Shira Goodman, Former CEO, Staples

Shira Goodman: 

Oh, my gosh, it is gen AI 24/7. Every single board I am on. And you have to understand, you take folks like myself, who’s not in IT or a techie, and the first thing you need to do is you need to get us up to speed. What’s the difference between AI and gen AI? We had the SVP from Microsoft come talk to us in the first meeting, and then in the next meeting, they’re showing us the six applications that they’re doing with gen AI. So you have to educate the board, and then you have to do it, and then by doing that, you’re gonna have the board’s support. 

Scott Cohen: 

Show of hands: Do you guys feel like your board is aware of paying attention to gen AI? Is that a thing for the Celtics? Are you guys thinking about it? 

Rich Gotham: 

I sit on the board of the college I went to, and we think about it all the time, because it has a huge impact on education, higher education, and the tools students now have at their fingertips. How that’s going to all play out is going to be really interesting. 

I wouldn’t say we’re at the leading edge of it. When I think about how are we using it, gen AI at the Celtics, the answer is we’re not really. We’re sort of trying to understand how it may impact sports. We’re in the content business, largely, whether it’s a live event or its digital content. It’s how we engage with fans everywhere. It’s really understanding what those people want, and how to feed them more of what they want. I think that’s really where AI comes in. I haven’t seen it yet on the basketball side — how do we use gen AI to better predict or project the success of a player we’re considering drafting, for instance? There’s a guy Mike Zarren, who is kind of our mad scientist within our basketball operations group. My guess is he’s out there talking to a lot of companies, just trying to figure out how we actually get a leg up on projecting which players will be more successful as NBA players, for instance. 

We use AI, and we’re continuing to increase the amount of usage.

John Murray, Sonesta International Hotels

John Murray: 

We use AI, and we’re continuing to increase the amount of usage. It helps us with our revenue management, with our sales, knowing what types of businesses are in the market at different times of the year, and knowing what other hotels of different sizes are charging, and what their occupancy levels are. 

We use it to mine customer data from our customer information, so that we know that if somebody’s checking into the Royal Sonesta down the street. If we see that the last time they stayed with us, they went and saw a Celtics game because they asked the concierge to get them a Celtics ticket, then maybe we would ask [if they would like to do that again.] Or if we know that when they stayed with us in New Orleans, they went to our spa, then we might say, “We noticed the last time you stayed with us you made a spa appointment. Would you like us to book something like that?” It’s been a big part of our business. 

Just one quick story, because it’s so front-of-mind for so many businesses. I was in St. Maarten at a hotel. I was with my wife in the pool. The general manager came up, and we had a little conversation and he said, “We’re just leaders in AI. It is everything to us.” It was this beautiful resort, and I am saying, “This guy is so full of crap.” And then I realized he was talking about all-inclusive. 

Audience Member: 

I have a question about where top-down meets bottom-up. So, you’ve talked about sort of bold initiatives, and driving things from the board. It’s all well and good. But in the guts of the organization, you see people who have great dreams, and huge ideas, and they’re submitting to the idea platforms and getting ignored, and that generates cynicism. 

Or when the executives rewrite the strategy, they rewrite their description, so it fits the strategy. There’s often this huge pool of opportunity and talent inside the organization, and these people often have to leave before they get appreciated by their organization. So how do you get visibility to the great ideas that may start small inside your organization, and decide whether to recognize or elevate them?

John Murray: 

At Sonesta, we created an executive leadership team position called strategy and innovation, the EVP of strategy and innovation. He has a staff of about a dozen people, and their job is to look out at the industry and see what’s changing and think about technologies and how that could change our business. But they also get out into the hotels, and meet with the general managers, and get into the corporate office and meet with revenue managers and salespeople and listen to those ideas. Yesterday, I was in Hilton Head, and we had our Chief Technology Officer bring all of his IT people, as well as the contractors that we use. They brought them together for a group meeting… 

There were a lot of things I could have done yesterday besides flying to Hilton Head. But I went down there and spent an hour explaining to them how important they are to our organization. Today, hospitality [is] still a people business, and it’s still dealing with our guests. But it’s at least half, if not 80 percent, a technology company. Our spending and our thought process is all about how to harness technology to make that guest experience better. So, we’re very open to it.

Shira Goodman: 

What I would say is, sometimes, if you want to make an omelet, you have to break some eggs. What I have seen work is when you have someone strong and willing to take risks, and ask permission after, and finds like-minded individuals, and they just kind of do it. So they’re not submitting an idea, they do it. They create an MVP, and then kind of that bubbles up. 

Sometimes, you got to follow the rules and go in, and sometimes you just say, “I’m gonna do it. I’m gonna find like-minded folks, and we’re going to make it happen.” As I recall, in the survey you put up, the number one issue, I think was fiefdoms, insular, etc., and I would encourage folks not to think about innovation and become your own fiefdom. Interestingly enough, I think sometimes it is easier for companies to do capital investment into a fund or a startup, than P&L dollars on it. Think of innovation broadly. It might come from within your team, and that’s wonderful, but it equally might come from pitching an investment, etc. And that’s all good, because the whole idea is to move the ball forward for your company.

Scott Cohen: 

John Murray, Rich Gotham, Shira Goodman — thank you so much for joining us.