According to Webster, a simple definition of the word disruption is “to cause to be unable to continue in the normal way; to interrupt the normal progress or activity of”. By definition then, the board, which is responsible for the continuity of the organisation, is directly concerned by disruptions. This is even more true now that disruptions are accelerating and are happening in all areas of business. They are hitting more companies, changing the status quo, and requiring boards to modify modus operandi to be better equipped to act and react. Technology, cybersecurity and human resources are three primary sources of disruptions that require immediate attention from corporate directors because they directly impact business strategies and company growth.
- New Technologies
Disruptive technologies have always been discussed at the board, but in the past, there were longer lag periods before these would cross the chasm. Boards had time to support the business in gradually adjusting to changing environments. This is no longer the case. New technologies are on the horizon that have as much potential to change the landscape as the internet, social media and smart phones had in recent years, to the point that some predict 40% of current companies will not exist in 10 years. The tops technologies driving this revolution that boards should be actively tracking include: Internet of Things (IoT), artificial intelligence, Big Data, advanced genomics, drones, wearable devices, gamification, advanced robotic and smart machines including driverless cars. A prime example of how these technologies will impact even traditional industries is found by looking at strategic questions raised in the Insurance industry. Will product liability need to be redefined for driverless vehicles? How will insurers assess the value and risk of a 3D-printed structure, body organs, or vehicle parts? How will drones help underwriting and claims? Could gamification be a new channel to help drive increased market penetration through engagement and education?
Many of these emerging technologies are forcing companies to rely more and more on digital assets to conduct business. IoT, Big Data, and smart machines are just a few examples. Gartner predicts that by 2020 (less than 5 years from now), autonomous software agents outside of human control will participate in 5% of all financial transactions. As digital capabilities are included in more and more systems and transactions, the impact of a cyber breach on business will become even more catastrophic. Hollywood Presbyterian Medical Center was the target of ransomware and just paid $17 million to hackers that had encrypted its internal IT systems taking it down for 5 days and jeopardizing its ability to deliver medical care. Their board now has a clear understanding that cyber risks are disruptive.
- Human Resources
New technologies, changes in consumer behaviors, and cyber security, among other factors, are causing major shifts in the talent pool, and the new skills required are scarce. By 2018, 6 billion connected things will be requesting support from humans and human-managed businesses. What’s more, as the nature of organizations and workforces continue to change, the leaders and boards of tomorrow will need a different mix of skills and attributes than those of today.
Most boards understand that disruptions are occurring and occurring with increasing regularity, and that they have to take action. Pervasive innovation, ubiquitous security, adaptive strategies, and agile boards are a few of the solutions to consider.
- Pervasive innovation
Possibly the most effective way to react to accelerating disruption is to foster innovation in all aspects of the business. Innovation today needs to be a part of an organization’s culture and tone at the top, including the board, and is the key to ongoing success. Three elements are required to ensure a resilient, innovative organizational culture that engages in innovative behaviours and practices, (1) awareness, (2) organizational agility and (3) effective resources. These will ensure monitoring what is happening, reacting very quickly to changes and continuously adapting HR to a shifting environment. Part of the board oversight duty is ensuring those elements are in place and irrepressible.
- Ubiquitous security and resiliency
An important step to improve data security and lower cyber disruption potential is to make the entire workforce cyber savvy to ensure operating in a secure, vigilant, and resilient environment. Interestingly, the premises of a ubiquitous cyber resilient organisation are the same as innovation’s: awareness, agility and effective resources. So developing a culture of innovation will help foster ubiquitous security.
- Adaptive strategic planning
With disruptions accelerating, assumptions on which boards base strategies are changing rapidly, possibly more rapidly than the strategies themselves. Boards need to accelerate the pace of some parts of the strategic planning process. Key assumptions need to be identified, monitored and discussed more frequently. KPI that focus on potential disruptions should be included in the strategic dashboard. At least one member of the board should be focusing on new technologies over the horizon in order to complement C-suite expertise and support adaptive strategies.
- Agile boards
In this fast changing environment, boards have to become more agile. Governance is about planning for the future, that future is continually changing and the board needs to keep ahead of that change, adapting as needed. The need for diverse skills such as digital leadership capability, deeper consumer knowledge, cyber security awareness and new technology understanding should be driving periodic shifts in board composition. The board will have to strike a new balance between experience and expertise, knowing the organization and knowing what is coming ahead.
If you agree with me that disruptions are accelerating and occurring in all aspects of business, you will also agree that governance is being disrupted and needs to adapt. To meet this challenge, the three characteristics of a culture of innovation, awareness, agility and effective resources have to be present at the board level. This is a shift from traditional governance that was more geared toward continuity, and is a challenge for many organizations. But with great challenges come great opportunities. Organization, and boards, that embrace these changes will emerge as stronger and will know greater success.