Thinking of digital technology, how can the board plan for disruptions they don’t yet know are coming?

Diligent Institute assembled a virtual panel of accomplished global board directors to answer critical questions about board service, good governance practices, and challenging boardroom situations.

At a Glance

Our panelists discuss strategies to detect potential business disruptions and to respond effectively before it’s too late. They also discuss the importance of flexible governance processes and board and executive personalities in this increasingly dynamic business environment.

Discussion

John Hinshaw

First and foremost, it’s about having the right leaders looking at the problem within the corporation. The board’s role is to make sure that the right management team is in place.  That starts with the CEO, then who the CEO hires who creates an innovation culture and a roadmap.  This roadmap must embrace and be open to new technologies coming down the line. In some cases, that may mean having a presence in Silicon Valley or having an incubator type mentality inside the company. But it starts with the people and the strategy. For example, a more traditional company has functional silos that operate day in and day out the way that they always have. Sometimes, for innovation to happen, you need to create disruption within those functions and ask them to come up with new ideas or connect with Silicon Valley. Otherwise, you will likely be late to the party and lose out to your competition.

Leslie Hosking

This is a critical area for board education. The fact that most board members are probably from an era slightly before the digital disruptors, and therefore not always able to see the train smash that might be coming, requires them to participate in fairly regular education which specifically addresses what is happening in the digital, internet-of-everything, world. It’s about continuous, if not accelerated, education of all of the directors on the board to ensure an understanding of the digital disruption that can occur in just about every industry.

For example, I saw the development of blockchain, a distributed ledger system initially used on bitcoin, and I immediately saw it could be applied and adopted to many businesses that buy and sell or are providers of commodities. Whenever possible, watch how the Ubers of the world are disrupting another business and consider whether that exact same disruption, or a similar one, can occur in your own business.

Every company wants to avoid the Kodak moment, as we call it in Australia. One way to do that is going to see the technology developers. The AGL board recently spent a couple of days in the Microsoft laboratory in Seattle so that we could see what’s coming in the shopping mall and kitchen of the future in terms of electrical and gas supply.

Stuart Sinclair

This is really difficult. Things are very in flux right now, in general. There are intrusive regulators who are capable of changing the landscape completely in two years. You have consumers moving faster now, adopting new forms of social media faster now. And maybe you have a diminution of trust in big companies such that you never know if your brand has the pulling power that it used to. The answer is: with more going on in the world, and faster, you have to be able to tolerate ambiguity more.

Number one, you should have done some scenario planning for really strong disruption, like the loss of your top ten clients, prices under threat, loss of a distribution channel. Even without regulators forcing it, your board should still have a discussion about the worst thing you can possibly imagine from digital disruptors. When I joined GE in 1999, there was a program where every CEO had to run a project called destroyyourownbusiness.com and give thought to how you can survive a digital onslaught.

Second is optionality, in other words, the ability to swing a little bit within the planning structure. At an oil company, for example you don’t say we’re planning on 75 dollars per barrel, you need to say at 40 dollars this what we’ll do and at 100 dollars this is what we’ll do – they don’t anchor themselves to a single outcome. Everyone now needs to have that optionality and scenario approach.

Third, boards need to make sure that the top people who are being hired can handle that ambiguity. The company needs executives who can live with uncertain outcomes.

Donna Wells

Boards have to put in place data collection processes and listening posts that give them a high probability of recognizing disruptions earlier than their competition does. At the board level, you have to agree on a number of things – what data streams you need to stay plugged in, listening points at places of data collection, who’s going to analyze it and interpret it for the board, how that data gets filtered and presented into the board conversation.

And increasingly, it’s important to click down a couple levels on sources of information, because increasingly in the world of digital disruption, it’s not your closest competitors who are going to disrupt you. In many cases, it’s not even the startups in your vertical industry. It’s startups or established players that grew up in another vertical and are coming for yours. I work in fintech and we’re talking about Amazon, I work in AI and ML publicly traded and for profit companies, and we’re looking at what’s going on in the think tanks and in academia. In order to anticipate disruption, we have to think much more 360 degrees, where before it was easier to just know you’re industry really well. This adds even more pressure to make sure data sources are broad and providing you early signals.

Board members should provide assessments of quality and thoroughness of data and challenge for more or better where it’s needed, but this leads to another whole question we need to ask ourselves – what data should board members be collecting separate apart from and independently from management? What other intelligence are you gathering as a board member on industry development competitive moves, on new technology for business models in adjacent spaces, on social media review sites like Glassdoor to try to get raw unfiltered in the market information. This can all inform some challenging board room questions.

Finally, I always advocate for making this a part of each board meeting, typically that means talking about it quarterly, not leaving it to the once a year strategic planning offsite. Especially in the world of digital, if you’re waiting twelve months between digital strategy meetings, you’ve already lost your goal of foreseeing disruptions, and potentially putting early investment into what may be your core revenue generating business in three years time.

Laurie Yoler

You actually can know that the disruptions are coming if you spend time looking at overall industry trends, watching sci-fi movies, spending time with futurists, academic institutes (Stanford eWear, MIT Media Lab), incubators, and angel investors, and keeping your ear to the ground on what’s happening in start-up land. I’m in Silicon Valley looking at disruptors every day, tuned into the research and looking at what startups are doing to disrupt more mature industries. So as a board member, I can share the research from a startup or early stage company’s perspective. I can ask the board questions like: How are you sensing potential change in your industry? What’s your interaction level with venture funds and startups? What is your methodology for sensing changes?

Then there is a subsequent question: once you’ve collected the data on disruptors, how does the mother ship react? In some of the biggest disruption cases we’ve seen, it was not that someone in the company didn’t warn of potential change or disruption, but that the business machine’s response to the data was either slow or non-existent. It’s okay to say, “Well, we see this out there, but right now it’s too far afield from core business and what we have to achieve for customers in X number of quarters, so let’s assign someone to monitor it, or to make a prototype, or invest in some of the disruptor companies so that we can monitor the trends more closely.”

Board Panelists

John Hinshaw

John Hinshaw is currently serving on the Board of Directors at Sysco, DocuSign, BNY Mellon, and the National Academy Foundation.

Leslie Hosking

Leslie serves on the Boards of Directors of AGL Energy Ltd. And Adelaide Brighton Ltd., where he was the board chair from 2012-2018. He has previously served on the boards of the Australian Energy Market Operator (AEMO), The Carbon Market Institute, and Innovation Australia.

Stuart Sinclair

Stuart is currently a Non-Executive Director at Lloyds Banking Group and Senior Independent Director at  QBE European Operations. His previous board roles include being a Non-Executive Director at Provident Financial Group and a Senior Independent Director at Swinton Insurance.

Donna Wells

Donna is on the Board of Directors at Betterment and Happy Money. She previously served on the board of Mindflash, where she was the President and CEO, as well as Boston Private.

Laurie Yoler

Laurie is a Board Member and Strategic Advisor at Zoox, and serves on the Board of Directors of Bose Corporation, Church & Dwight Co., Inc., and Noon Home. Additionally, she was a Director on the founding Board of Directors of Tesla.

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