NACD and Marsh & McLennan Companies will host a Board Committee Forum on Strategy and Risk at the upcoming 2017 Global Board Leaders’ Summit. This forum will explore converging risk and strategy issues facing boards as companies respond to digitization and artificial intelligence.
Business and society at large are in the midst of a remarkable change not seen since the Industrial Revolution. Boards and the C-Suite must understand the fundamental scope and impact of the changes to guide their organization through the next ten years.
There are two ways companies can view this change. From one perspective, it’s time to play defense. Automation is expected to rapidly erode job security for entire categories of workers. Increasing transparency will melt away the ties that bind together vertically integrated businesses. Scale-driven manufacturers will see 3D printing create decentralized and fragmented production, making many traditional factories obsolete. Virtually no conventional business will be spared by this exponentially accelerating change.
But there’s another perspective—and a wholly optimistic one. Just as there has never been this degree of change, there has never been this degree of possibility for innovation. But what will it take to win customers in this new world of extreme connectivity and automation?
To answer this question, Lippincott has worked extensively across industries to predict the changes ahead. The six fundamental shifts below offer a picture of the customer of the future and the world for which companies need to prepare.
1. A life flow. New models of work, platforms for sharing information, and constant connectivity that technology provideswill upend the traditional concepts of one job, one house, and singular ownership of things. Optionality will be what provides stability in a world that prioritizes access over ownership and experiences over possessions.
Companies that are able to move with their customers in a de-centralized, independent fashion will undoubtedly do well in the future. Convenience and flexibility will become crucial selling points. The acts of hailing a cab, visiting the grocery store, or stopping at the bank have already been streamlined to a swipe of a finger. Even the most minor interruptions will stand out.
2. A transparent existence. The amount of data created by these technologies will explode, as everything and everyone increasingly becomes tracked and scored. Tracking each facet of life presents companies with enormous opportunities—but also accountability to customers who will demand transparency around how their data is being managed. This heightened visibility will lead to a rise of ratings, and every brand we consider will have a score. Companies will need to be more transparent than ever, opening up their customer experience for full accountability. Those hiding anything will quickly be exposed.
3. The rise of the omnipotent individual. Products offered on digital platforms will be modular, customized, and democratized. As a result, customers will wield god-like power over each component of their lives, from their homes to their genes. In response, the production of products will become flexible and dispersed, customized to the unique wants of these empowered consumers.
Companies will need to give their customers the power to unbundle, customize, make, modulate and mix. They’ll need to go beyond a “one size fits all” approach and grant customers the power to control their own unique experiences. Those that master this will be rewarded handsomely for it.
4. An on-demand world. Technology makes the world more immediate. On-demand access and automated task completion will serve appetites for instantaneous results, and customers will reward the fastest solutions with their dollars and data. While customers will have less to do, they will have more to manage. For companies, it’s incredibly important to keep up with customers’ ever-increasing expectations for immediacy and efficiency throughout every aspect of the customer experience.
5. Exponential intelligence. Consumers will have more access to information than ever before, shifting who and how they trust. As a result, their decision-making processes will change from being a personal deliberation to a collaborative and connected feedback loop. Lippincott’s research shows that 62 percent of consumers would rather make decisions based on intelligent apps and crowdsourced information than on the advice of family and friends. Companies should strive to provide their customers with as much knowledge about their business and its products as possible.
6. Synthetic reality. Virtual reality and the real world will overlap, expanding consumer perspectives and opening up new possibilities in information access, communication, how people shape their personal identity, and the monetization and gamification of products and commodities. The companies that help their customers navigate between the two worlds with ease will open up new channels to connect, creating a business differentiator in the process.
As these six shifts unfold, they’ll yield a bounty of new innovations and value propositions. Companies and their boards need to think deeply and strategically about what these changes portend for the fundamental underpinnings of their business designs and value add to the customer of the future. And for those that do, something great is just beginning.
To read Lippincott’s full report on these six shifts, click here.
John Marshall is the chief strategy and innovation officer at Lippincott.
To learn more about strategy and risk, attend the 2017 Global Board Leaders’ Summitwhere you will have the opportunity to explore emerging risk issues with peers. A detailed agenda of NACD and Marsh & McLennan’s Board Committee Forum on strategy and risk, can be found here.
Greg Conderacci is a personal energy expert. He teaches marketing at the Johns Hopkins University Bloomberg School of Public Health and consults on change management and corporate identity. Conderacci will speak at NACD’s 2017 Global Board Leaders’ Summit in October on the power of energy and how to harness it within your business.
Are boards keeping up with today’s fast-paced and complex business environment?
The message is clear: you cannot govern a twenty-first-century company with a twentieth-century board.
What are the traits of a high-performing, modern board? The commission says it without saying it directly. It’s energy. Underlying the challenge of keeping up are a few key facts:
You can’t get more time; there are only 24 hours in a day; and
You can get much more energy.
There’s a reason that the popularity of Starbucks, Red Bull, and a host of other energy drinks and potions is booming. Unfortunately, if your board is low on energy, serving 5-Hour Energy drinks at its meetings won’t solve the problem.
Changing the expectations for board membership will. In the past, board members were typically asked if they had the experience, insight, wisdom, expertise—and the time—to serve. While time is still important, we need to add energy to the list. Indeed, energy is one of the most important, often-ignored attributes for board members. Director skills and insights must be applied to benefit an organization. And that takes energy.
Specifically, board-level engagement demands four separate kinds of energy: physical, intellectual, emotional, and spiritual. If the board is not capable of overseeing the ever-changing priorities of the company, the board might need an energy refresh. Here’s a fast, four-part diagnostic tool to find out if your board could stand a little pick-me-up.
Physical Energy. This is the least important type of energy associated with directorship, and the one most associated with age. Can the members show up to all planned meetings and events? If yes, this basic requirement has been met.
Intellectual Energy. This is the type of value that directors are recruited to contribute. Are directors’ intellectual contributions creating long-term value for shareholders and the enterprise? Do directors willingly take on additional challenges? Will they tackle messy, complicated problems that demand creativity and resourcefulness? Are they “ahead of the curve” or just reactive? Do they stay engaged between meetings and prepare adequately before meetings?
Emotional Energy. This critical energy is often the undervalued elephant in the room. Is the boardroom atmosphere charged with good energy? Do members dread going to meetings? Do they approach difficult issues with zest, or is the board table covered with automatic negative thoughts? After inevitable conflicts are resolved, do the seeds of an ongoing feud remain? Or do they leave as an energized team?
Spiritual Energy. Are the members true to the vision, mission, and values of the organization? Are they willing to retool them, if necessary? Do they have a passion for the company’s products and services and compassion for the people who deliver them? Do they have the courage to adapt to market shocks, to admit failure, and to deal with leadership problems (including those on the board)?
For a board to be a strategic asset in the twenty-first century, directors have to do much more than put in their time. They have to help contribute the energy to “supercharge” the organization. And that’s critically important—no matter their age.
The uncertainty of looking to the future presses boards to consider how confident their senior executives and supporting teams are in executing strategy. How can the board help the companies they oversee to face the future with a greater sense of confidence?
Confidence is neither a cliché nor an assertion of mere optimism. Rather, it is a quality that drives leaders and their companies forward. The Oxford English Dictionary defines confidence as “the state of feeling certain about the truth of something” and “a feeling of self-assurance arising from one’s appreciation of one’s own abilities or qualities.” This definition focuses on the board and management’s appreciation of the collective capabilities of the enterprise, including the ability to carry out a company’s vision. It raises three fundamental questions:
Do weknow where we’re going directionally and why? Are our people committed to achieving a common vision that is clearly articulated, meaningful, and aspirational?
Are we prepared for the journey? Does our staff have the capabilities to execute our strategy? Do we have a great team, a strong roadmap, and the required processes, systems and alliances, and sufficient resources to sustain our journey?
Dowepossesstheability, will, anddiscipline to cope withchange alongthe way,nomatterwhathappens? Does our board have the mental toughness to stay on course? Is our management team agile and adaptive enough to recognize market opportunities and emerging risks, and capitalize on, endure, or overcome them by making timely adjustments to strategy and capabilities?
Definitive, positive responses to these questions from the board will enable confidence across the organization.
Looking back on experiences working with successful companies, seven attributes were identified that organizations must have when facing the uncertainty of future markets.
How to Build the Foundation for Confidence
Confidentorganizationssharecommitmenttoa vision. Commitment to a vision provides a shared “future pull” that is both inspiring and motivating. This perspective fuels enterprise-wide focus and energy to learn, which encourages participation and altruistic camaraderie. An effective vision crafted by the board and executive team leads people at all levels of a company to recognize that the enterprise’s success and their personal success are inextricably linked.
Confident organizations have a heightened awareness of the environment. A confident organization constantly reality tests its market understanding by facilitating effective listening to customers, suppliers, employees, and other stakeholders. Boards should encourage companies to generate sources of new learning, encouraging systemic thinking in distilling and acting on the environment feedback received, with the objective of driving continuous improvement. The confident organization fosters a culture of sharing and supports formal and informal continuous feedback loops to flatten the organization, get closer to the customer, and promote a preparedness mindset.
Confidentorganizationsaligntheirrequiredcapabilities. It is a never-ending priority of the board to ensure that the right talent and capabilities are in place to achieve differentiation in the marketplace and execute strategies successfully. Capabilities include an enterprise’s superior know-how, innovative processes, proprietary systems, distinctive brands, collaborative cultures, and a unique set of supplier and customer relationships.
How to Sustain Confidence
Achieving a foundation of confidence is necessary, but alone is not enough without concerted efforts to sustain confidence. Astute directors and executives know that the ability, will, and discipline to cope with change are also needed to sustain their journey. Those winning traits are enabled by the attributes below.
Confidentorganizationsare risk-savvy. The confident organization is secure in the knowledge that it has considered all plausible risk scenarios, knows its breakpoint in the event of extreme scenarios, and has effective response plans in place (including plans to exit the strategy if circumstances warrant). Most importantly, the confident organization should have an effective early-warning capability in place to alert decision-makers of changes in the marketplace that affect the validity of critical strategic assumptions. In a truly confident organization, no idea or person is above challenge and contrarian views are welcomed.
Confidentorganizationslearnaggressively. Confident organizations improve their learning by: creating centers of excellence; embracing cutting-edge technology to drive the vision forward; fostering an open, transparent environment of ongoing knowledge sharing, networking, collaboration, and team learning; perceiving admission of errors as a strength and requiring learning from the missteps; and converting lessons learned into process improvements. Aggressive learning stimulates the collective genius of the entire enterprise.
Confidentorganizationsplaceapremiumoncreativity. Innovation should be an integral part of the corporate DNA of the confident company, and should be evidenced by setting accountability for results with innovation-focused metrics at the organizational, process, and individual levels to encourage and reward creativity. Companies committed to innovation have the creative capacity to take advantage of market opportunities and respond to emerging risks. When innovation is a strategic imperative, companies empower and reward their employees to take the appropriate risks to realize new ideas without encumbering them with the fear of repercussions if they aren’t successful.
Confidentorganizationsare resilient. Confident organizations have adaptive processes supported by disciplined decision-making, and are committed to adapt early to continuous and disruptive change. They have the will to stay the course when the going gets tough, and are prepared to act decisively to revise strategic plans in response to changing market realities. They do not allow competitors to gain advantage by building large capital reserves, having great relationships with their lenders, and by cultivating trusting relationships with their customers, vendors and shareholders. The strategies that their boards approve include triggers for contingency plans that directors and management will implement if certain predetermined events occur or conditions arise.
In summary, the speed of change continues to escalate, creating more uncertainty about future developments and outcomes. If there was ever a time for a board to assess an organization’s confidence, we believe it is now. It’s one thing to have a confident CEO, but if the people within the entity lack confidence, the organization itself may not have the creativity and resiliency needed to sustain a winning strategy.
Jim DeLoach is managing director with Protiviti, a global consulting firm.