Pivoting To The Board Of The Future

innovationThanks to technology-fueled disruption affecting every industry, corporate boards have an essential new role to play: supporting executives who break traditional rules of business strategy that no longer work.

In researching our new book, “Pivot to the Future:  Discovering Value and Creating Growth in a Disrupted World,” we found that companies master rapid change by overturning much of the conventional wisdom about managing business portfolios. They embrace instead principles that animate what we call “wise pivots.”  These companies:

• Renew their commitment to old and commoditized businesses, applying technology-led innovation to maintain profitability and create fuel for further growth, rather than prematurely abandoning them.

•  Accelerate investments in successful “cash cows” to maximize revenues, rather than starving them of R&D and innovation.

•  Commit resources to scaling rapidly their successful experiments in new business areas, rather than simply waiting for new markets to develop and hoping to be “fast followers.”

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To achieve these strategic pivots, boards that have been organized to support the application of the old rules need to understand that those rules no longer work, and they should explicitly acknowledge that they intend to support and not impede continuous reinvention.

That’s what the boards of some of the most successful companies in the world are doing.  Walmart, for example, became the world’s largest company in revenue by carefully and regularly deploying disruptive innovations.  Now, as the company undertakes a dramatic shift to become digital first, the board is once again playing an integral role in its evolution.

Board chairman Greg Penner pushed hard for the $16 billion acquisition of Indian e-commerce giant Flipkart, for example, even though doing so substantially reduced profitability.  He argued that Walmart was not simply a financial investor looking for solid returns and a good exit price.

Rather than applying the conventional wisdom of small-scale investment, or even considering exiting its troubled business in India, Penner instead pushed the company to double down and capture the real opportunity.

At the same time, current operations remain a key focus. Access to in-store pick-up from online orders, for example, has grown from 2 percent to 70 percent of customers in just four years.  The board has pressed for wage growth and talent investment to be a key priority, as well as additional in-store technologies and investments. To get to the future of retail faster, directors have supported continuing investments in Store No. 8, an incubator tasked with placing long-term bets in next-generation retailing, including computer vision and AI-driven personal shopping.

Following Walmart’s example, what should boards do today to secure the future value of their companies?  Here are three specific actions directors can take to ensure successful pivots:

• Push company leaders to reconsider the potential value of mature businesses and how to capture it.

• Question the appropriateness of the current balance of innovation investment in the company—across the old, the now and the new businesses—and its fit in light of potential disruptors whose arrival is imminent.

• Assess the adequacy of investment funds available for the next generation of the business, including for infrastructure—especially digital capabilities—to scale rapidly into new markets, including platform and other partnerships, joint ventures, and new kinds of collaboration.

One thing that hasn’t changed is the board’s role in providing both balance and focus for success, today and tomorrow.  In fact, directors in the leading companies we studied are more engaged with business leaders than their peers.  Often, the experience of board members provides the key success factor separating failed attempts at one-time “business transformation” from a continuous process of innovation.  An engaged board not only compels a continuous succession of pivots but makes each of those pivots truly wise.

Read more: When It Comes To Auto Industry 4.0, Separating Hype For Reality