Technology has revolutionized our day-to-day lives, enabling our cars to guide us where we want to go, turning our televisions into a smorgasbord of on-demand viewing options and giving us 24/7 access to everything from information and products to one another. But those same digital capabilities have also placed a heavy burden on companies and their boards.
As a director, you’re now expected to advise and oversee your company through ever-shifting technological challenges on a continual basis, weighing the need to reinvent your business model to adapt to changing times and emerging technologies. At a time when every aspect of business seems to entail technology directly or indirectly, it’s little wonder that digital disruptions are featuring more heavily than ever among boards’ top concerns. In fact, 23 percent of directors surveyed by Corporate Board Member within the context of our 16th annual What Directors Think survey[i] reported disruptive technologies and innovations as the #1 issue they would like to see receive more time and attention at a future board meeting.
That’s an interesting evolution of the governance landscape because it marks the first time in six years that an issue has replaced long-term growth strategy in the list of topics directors believe their boards aren’t addressing as much as they should. This year, disruptions have indeed surpassed growth strategy by seven percentage points—and the red-hot issue of cybersecurity by nine.
One reason for this new reality perhaps lies in the fact that several directors in our survey told us that providing oversight of this risk is highly complex and one they find difficult to fully wrap their heads around, as it implies a very specific skill set and being able to tell the future, in a way. There’s no doubt that in our digital era, the question of whether boards need members with IT skills at the table has been heightened, but it seems the constant disruption brought about by new technologies emerging at the speed of light has reignited the debate: Are boards that don’t have directors with sophisticated IT skills setting themselves up to fail in this environment?
Sophie Vandebroek, COO of IBM Research and director of IDEXX Laboratories, doesn’t believe so, but she says it’s imperative for boards that don’t have at least one director who’s deeply immersed in the latest technologies to stay up-to-date by reading the right magazines or newspapers “because you don’t need to be the expert, but you do need to know the kinds of questions to ask,” she says, noting that the questions are often very basic, such as asking the management team what artificial intelligence or blockchain means to the company. “How is this going to include more effectiveness and efficiency? How is this going to allow us to create truly differentiated new products or solutions that are going to be winners in the marketplace? How do we mitigate the risks that come with it?”
Michael Berthelot, CEO of Cito Capital Corporation and chair of the compensation committee at Fresh Del Monte Produce, says instead of looking at disruptions as some unknown coming around the corner, directors should consider the issue as one of looking inward at how new technologies can help move their company forward.
“Some people think of disruptive innovations as Uber to the taxi industry, but they don’t necessarily think of it in terms of using drones to monitor your business, using different means of distribution that won’t totally replace it but can be a significant marginal change,” Berthelot says.
For Thomas Harrison, chair of the Nom/Gov committee and member of the Compensation committee at Zynerba Pharmaceuticals, the matter of disruptions and innovations should be part of a general corporate strategy discussion.
“One of the questions that I tend to ask the company…is ‘if you were starting your company again today, knowing what you know today, what would it look like?’ And if you get a really, really honest answer, the answer is going to be something different than what the company generally looks like today because we’re all running companies based on the legacy issues we’ve been facing for years,” he says. “But if there were no shackles on the company and it were starting again today and understanding the marketplace that actually currently exist…that talks about innovativeness.”
He says once you’ve answered that question honestly, then it’s a matter of determining how to get there. “That delta between where you are today as the company versus where you would like it to be; that Delta is the innovation. Then it becomes, ‘well, how do we get there? And how long is it going to take to get there? What do you need in terms of people resources or financial resources, or what might you need to get out of in order to get into something else?’ You get into all kinds of conversations.”
[i] 2019 What Directors Think, a Corporate Board Member/Grant Thornton survey, fielded from September to November 2018 and received 249 responses from directors at U.S.-based publicly traded companies.