Future-Proofing the Business from the Board’s Perspective: Are you asking the right questions
After a challenging 2020, most companies’ leadership and boards are immersed in and fully occupied with the near-term performance of the business. At one end of the spectrum, there’s no tomorrow if there’s no today, so coming to grips with the effect of the pandemic and making the necessary moves to survive and emerge strong is paramount. At the other end of the spectrum, some companies are dealing operationally with unprecedented demand for their products and services — a high-class problem, but nonetheless a challenge.
A lot is certainly going on in the near term. But boards still have a critical mandate and responsibility to consider the long-term future of the business, especially with the heightened focus on overseeing performance during this period of risk and opportunity.
While boards have always been engaged in the oversight of business performance and strategic planning, many boards might want to embed the idea of “future-proofing” into their overall governance practices. A future-proofing mindset is a key responsibility of an engaged, high-performance, value-added board.
No business can really be 100% future-proof in a world of dynamic changes and continual shifts. But if board members consider a few key questions, the company will be well-prepared to adapt to a changing world. Try asking and answering these questions in your next few board meetings, with your management teams present.
Is this a future-focused organization?
Inevitably, the initial response to this question will be “yes,” assuming you have a core business model and a multiyear financial plan. But have you truly considered and debated real or potential changes in the marketplace, shifting customer needs and new competitive challenges? Do you address the most critical “what if” topics with openness and inquisitiveness, or do you cast them aside because you know you’re right?
Is the board curious, cautious or (over)confident?
Does the board have an intellectual curiosity about the business — the “how” and “why” of what you do? What about the “how” and “why” of what you might do? Do you take enough time for questions and discussion, or do you just slog through a packed agenda of reporting what’s already happened? Are you satisfied with current performance and simply focused on protecting it? Do you ask questions to see what can be learned if performance is great, especially since you always ask questions if performance is not? When performance is great, do you believe your own press releases, or are you humble and hungry enough to pursue getting even better?
Are board members great at listening and learning?
Do you have ways of gathering the views of current and potential customers and the success stories of competitors? Are these incorporated into your board’s thinking? Are you open to learning from others to influence what your company might do, or do you believe you know it all and that others are chasing you? Do you learn from mistakes, or do you search for the guilty to find fault? It would be wise as a future-proofing board to consider the wisdom of “emptying your cup,” as it is of no use when it is full of old experiences, confirmation biases and preconceptions. Only then can you be open to being humble, seeing clearly and entertaining new ideas.
Does the board embrace a full view of innovation?
Innovation is often a stated goal in every plan, but has the board defined it in a way that limits what it means to driving competitive success? Far too often, businesses think about innovation only as huge breakthroughs in new products or game-changing technologies. However, you can better future-proof your business if you define innovation as a culture and environment that equally encourages, rewards and celebrates continual optimization or betterment. You would be surprised at how many big breakthroughs can result from your efforts to optimize what you do. While innovation departments and programs can become critical initiatives, so can embracing innovation as something everyone can contribute to.
Is the organization as flexible, agile and resilient as it can be?
Since you know there are no perfect plans despite all the effort invested in trying to look forward, most businesses need to consider how to best incorporate flexibility into their thinking. Flexibility can vary depending on your business — is it capital-intensive, or do you have long-term customer contract commitments? Have you thought about potential pivots should your demand erode rapidly? Are you willing to pivot quickly in times of need (like the pandemic), or do you hang on too long? Have you always incorporated a resilient mindset in your culture?
Does the board view risks as opportunities?
In a world of risk management reviews and mitigation, boards often think about the downside of risks and how to protect the enterprise. This is certainly an important exercise and responsibility. However, you likely won’t be able to turn a risk into an opportunity unless you have a future-proofing mindset. In one case, a company’s leadership position was being threatened by new entrants who were also a key part of the supply chain, fundamentally increasing its cost structure. The board looked at this looming business model risk from a defensive point of view, focusing on protecting the company’s leadership position. Strong debates ensued with the aim of future-proofing the company. Instead of playing defense, the company went on the offense with a business model change, resulting in vertical integration and strategic scaling. Today, the company remains an industry leader with substantial new sources of revenues and profits and the mitigation of a competitive threat. Are you looking at “risk opportunities”?
Are the board and management unleashing the potential of the business?
Board directors pursue great results through great teams. But how do you know you are fully unleashing the potential of the business? Do you ever even ask that question at board meetings, or have you had that dialogue in collaboration with management? Try it and it may spur great future-proofing dialogue. You might end up with a better business model than you currently have, or you might even decide to compete with yourself in some experimental way. One such company asked this key question and has since embraced a portfolio of related businesses serving common markets to future-proof its business. The board also committed to both a legacy and a high-tech approach for one of its business lines to see which would work better. Is this something you would ever do?
Does leadership development have a future-proofing focus?
Leadership and talent development are certainly at the top of most board agendas, but are you considering your programs and people through the lens of future-proofing the business? Are you engaging your leaders in future-proofing discussions? Are you providing rising stars with leadership opportunities in challenging situations, or just the most promising ones? Do you ask management to lead an unstructured assignment, like competing with the board in scenario planning or even starting up a “captive competitor”? Are you preparing your talent to be the future-proof leaders of tomorrow?
I trust that if you ask these questions of your board and have engaged discussions about their implications, you’ll make great strides toward future-proofing your business.
Don Yee is an experienced CEO and independent board member of numerous private companies, from startups to multibillion dollar businesses. He currently advises growth companies on business building and serves on the board of several private companies. He was the founding chair of NACD-Capital Valley, is an NACD Board Leadership Fellow and serves as an independent judge on Deloitte’s Best Managed Companies program.