More speed, more risk
The pandemic has changed business forever and from a strategic point of view, lots of boards are struggling. A board that is knowledgeable, informed and fluent in technology will help to reduce risk by asking the right questions.
Boards must accept that the pace of change is getting faster and the risks will escalate. Look at how the 2003 SARS outbreak (a much smaller event than the COVID-19 crisis) supercharged the development of digital payments and services in China, where you hardly see cash or card payments now. The overall speed of change is dramatic and it’s easy to be caught out – an example is how hedge funds have been outplayed by retail investors working through social media.
Increasingly, businesses may want a General Counsel in the boardroom. Not for pure legal expertise but organisations will need to address complex issues around how they collect and use data, diversity and unconscious bias in learning technologies and the impact of digital business models on environmental, social and governance (ESG) practice.
Digital needs the right culture
The biggest challenges and risks are often internal. Legacy culture and thinking can be major obstacles to change.
The most successful digital businesses are those that are allowed to grow culturally outside the constraints and distractions of the corporate environment, with their own governance model. The board should ensure power is transitioned to the digital entity, embracing a ‘heads up, hands off’ approach to oversight. For a digital business speed, agility and scale are critical and operating outside the core business is the only way to deliver that.
There’s a strong call for more diversity of background and capability to combat groupthink in the boardroom. Boards must resist the temptation to hire more people like themselves, from the same industry sector. Instead, search out ‘T-shaped people’, who have a deep understanding of one sector and have applied themselves in many places. Divergent voices and experience contribute greatly to innovation. Too many boards have lost opportunities because they asked for candidates outside the usual mould but when presented with options, recoiled and went back to their comfort zone. Moving the board to where the company is going will not always be comfortable.
Over the past 12 months, many businesses have taken the opportunity to restructure. The opportunity now is to set a path for the future. They say it takes six months for new behaviours to stick. That means we can be sure more flexible working, contactless payment and the uplift in online sales are here to stay.
We don’t know how the economy will behave as recovery gets underway. Another Roaring Twenties perhaps? Certainly, there is an appetite for in investing in transformative and disruptive enterprises – witness the Wall Street trend for SPACs (special purpose acquisition companies) set up specifically to buy technology-based business.
Despite challenges around Brexit, currency markets and disruption to global supply chains, it is not a time to hold back if you are a traditional business but to embrace change. The board that unites commercial experience with an ability to understand, discern and challenge new digital business models will be able to act fast and make the most of emerging opportunities.