Seasoned venture capitalists during a keynote session this morning at the 2014 NACD Board Leadership Conference discussed future trends in marketplace disruption.
Scott Kupor, director of the National Venture Capital Association and managing partner at the venture capital firm Andreessen Horowitz, said that from an entrepreneurial standpoint, the so-called next big thing is whatever a business is doing to be innovative in their field. What many entrepreneurs are doing is streamlining the chain by which products or business ideas make it to market. They’re getting rid of the middle man.
John Backus, managing partner of venture capital firm New Atlantic Ventures, highlighted the importance of companies being aware, and staying ahead, of upcoming trends. As an example, Backus recalled a past employer, a home phone company in the 1990s that was so focused on its way of doing business that it totally missed the technological innovation of the Internet. Companies can essentially be wearing blinders, seeing only what they and their three or four nearest competitors are doing, ignoring the potential for disruptive innovation.
Kupor said his firm missed out on becoming an early investor in Airbnb.com–a San Francisco-based startup founded in 2008 that allows people to list rooms in their homes as being available for temporary rental instead of a hotel. Airbnb is now connecting people to available rooms–or couches to sleep on, in some cases–in 190 countries and more than 34,000 cities. Kupor said that the mistake that he and his team of investors made was in limiting their thinking to whether they would use the service. Their group wouldn’t, so they decided not to invest in the business; however, they later realized that many other people would use the service, so Kupor’s team later decided to invest in Airbnb.
“Big businesses have a really hard time changing the way they do business,” Backus said. “If you don’t innovate, somebody’s going to do it for you.”
Bill Reichert, managing director of Garage Technology Ventures, said that when a company finds out about a new innovative idea, corporate directors can’t just sit in the boardroom at the strategic level and say: “We’ve got to watch that, monitor that.” A company must react.
That reaction can play out in a variety of ways, depending upon the innovation and the industry.
Backus said that in some cases, companies react with merger and acquisitions. They purchase a company whose innovation might be disruptive and competitive to their company’s strategy. Then, they can either foster that innovation and bring it to market, or–in some cases–shutter the innovation to get rid of the threat of competition.
Other companies decide to invest in research and development hubs overseas, outsourcing their innovation to less expensive and more highly concentrated development teams in other countries.
Still other companies spin off their own team of venture capitalists to travel and seek innovative technologies in which to invest.
All the panelists agreed that the key to staying ahead of marketplace trends, after becoming aware of potential innovative ideas, was to take action. In other words, innovation ignored is a bad business practice.
Organizations face risk on multiple levels and from an enormous range of factors. And being seen as a “high-risk” company certainly impacts valuation. Of the many concerns for risk managers today, two of the biggest are global economic uncertainty and information technology.
Cyber attacks that lead to data theft threaten not only the valuable information a company might possess, but the trust and confidence of its investors as well. Just ask Sony, Epsilon and RSA Securities, who all recently suffered data breaches.
Because of these new oversight and risk management demands and higher stakes for corporate boards, NACD is offering two separate sessions discussing risk assessment and management at this year’s NACD Board Leadership Conference in Washington, DC from October 2-4.
The Reshaping the Risk Agenda session features expert speakers who will explore possible blind spots in risk assessment and the implementation of early warning systems, as well as the importance of scenario planning. A major focus of the panel’s discussion will be the board’s role in overseeing risk versus avoiding risk in the current economic environment.”
This year’s conference also offers a Risk Board Committee Forum where professionals from the leading global management consulting firm Oliver Wyman will discuss methods for improving oversight processes and examine the links between strategy and risk. A special focus of this forum discussion will include the board’s role in overseeing IT risk.
NACD understands that the best way to mitigate risk is through education and learning from people who have already been on the front lines battling these issues—and winning. That is why we want you to be there to share your experience and hear from your peers.
A recent conversation with one of our members via the NACD LinkedIn Group has prompted me to think about how social media might affect the work of companies, the behavior of shareowners, and thus the leadership of boards of directors.
The conversation started like this: I attended an elearning conference and, inspired by some of the sessions, decided to solicit the views of NACD membership on how the emergence of social media might require new skills and mind-sets from those charged with company oversight: the board of directors.
I had only one response. “Neil” wrote: “Other than the notion that social media plays out quickly, are the oversight issues any different from what they were in the past? In the pre-social media world, companies I served had policies (and less formally, unwritten “understandings”) in place with respect to media/public communications and crisis management. Other than establishing a proper framework that includes setting policy and ensuring there’s a system of assuring (or at least optimizing) compliance and reviewing the policy/program from time to time as appropriate, I see actual oversight (i.e., implementing, monitoring and executing) as the realm of management.”
Hmmm. I had meant the general role of overseer, not just the oversight of social media initiatives. It’s also interesting that my correspondent immediately equated social media with crisis whereas my colleagues at the conference instead saw it as a valuable tool for collaboration. People talking to each other, sharing ideas and swapping stories can be, of course, both a boon and a threat. Perhaps what it threatens most is the long-established idea of control and command leadership, as practiced by so many boards and C-suites. Thus, if implementing, monitoring and executing business activities remain the responsibility of management, oversight of these activities today could, for good or ill, be provided directly by stakeholders, moving at a speed and with a force that is completely out of kilter with the careful deliberations of the best boards.
At the conference, presenter Phil Cowcill (follow him on Twitter here) shared the idea that “technology makes companies naked,” forcing a new transparency that private meetings and closely held notes could once have hidden. “Invite technology into the room,” he advised, “for you cannot keep it out. The value of collaboration is more valuable than the threat of the loss of control. Learn to treat your stakeholders as partners and you will benefit from knowing what they think and feel.” The baseline extrapolation for a board would be to make intelligent use of the social media environment to solicit relevant third-party views on business issues, winnowing worldwide views to supplement the information provided in the board book.
Bob Reisner, former vice president of strategic planning for the U.S. Postal Service, agrees that the speed and ease of information sharing and communications poses leadership challenges for boards and management teams. “Shareowners, customers, employees, suppliers and communities can now insist that they be included in guiding the shape of the future,” he said, “and that will either be frustrating and bewildering for those who seek to maintain control, or enriching and transformational for those who anticipate the wave and act.” Bob is writing a book—provisionally entitled DemocratizingTransformation—and shared some of his thoughts when we talked recently in Washington, DC. “Constituents have access to their own collaborative tools, official or not,” he said. “When they engage the official media and have the same collaborative tools, boards will have to work out how and when to engage them in governing and shaping the future. The democratic impulse can’t be stopped or contained (without new costs), and so it will require leaders to define new rules and embrace a new, collaborative, open, transformational style. Increasing risk and uncertainty has raised constituent activism, and many traditional constituents (and some new ones) will view the future as too important to trust to management [and boards] alone”
You may still receive the information that informs your board decisions via the board book, the newspaper delivered daily to the front door, and your deep experience of the industry and company you serve. You may still cherish your leather seat at the beautiful board table, and the tenor of the high-level discussions that take place behind closed doors. And you may be right that your board has the people, commitment and brain power to continue to act as a strategic asset to the company, and as an effective monitor of management. But keep an eye on the social media tsunami, and follow this drill to ride the giant wave:
Bring stakeowners and shareowners into decision making—solicit information, listen, learn and act, and encourage company managers to do the same. Support company initiatives that encourage collaborative problem-solving at all levels of the organization.