Can Your Board Handle Business Disruption?
Adding independent directors with transformational technology experience help companies stay on top of innovation
By Alok Gupta
The management of a privately held company providing real estate services to retailers needed to transform the firm’s business model, including adopting new e-commerce strategies and demographic analytics.
Unfortunately, the existing board – made up of company insiders – did not have the expertise to advise managers. So, the decision was made to bring in someone from the outside with transformational-technology experience to share insights on future trends in big data analytics and innovation.
The firm ended up adding two independent board members with business disruption expertise who assisted management to create additional high growth and high margin business units while continuing to pursue its core strategy of reinventing themselves and increasing customer centric value to their clients.
Board of private companies, if properly structured and with the most qualified independent members, can help founders, key executives, and major investors achieve competitive advantage and upside profitability by providing overarching guidance and outside-in insights.
In today’s commercial world with a norm of innovation and disruptions, to now succeed sustainably, every company must be fully aware of change and embody new thinking and approaches.
Private companies which out-perform the competition are those who have a board of directors with a fair number of independent board seats, as well as truly engage with, listen to, and seek paths to value and outcomes from their board. Governance at these organization is not just for show.
Today, smart leaders realize that oftentimes an outside perspective is necessary to question “sacred cows”, provide a different perspective, and bring forward new ideas which are critical for their organization’s survival and longevity. Private companies don’t have the same entanglements that publicly traded companies do with responsibilities to shareholders, regulations, and compliance. Therefore, private companies have the opportunity to assess risk in a very different way.
They may not have the advantage of scale; however, they do have the advantage of being flexible and nimble. And, by leveraging independent board members’ outside-looking-in perspective and acting on those opportunities, they can move faster.
Not only is it important to bring in and listen to independent board members, but it is as equally important to ensure the board comprises of a supplemental mix of skillsets amongst these members, consistent with how your company plans to win.
Today, many of our clients are seeking to add individuals who are visionaries in technology and innovation. An informal survey of high performing CEOs at our clients – including private-equity and venture-backed firms, and family businesses – suggested that less than 40% were comfortable predicting how their industry and company would be performing 6 months-out due to unknowns and disruptions.
Simply, an independent perspective in a fast-changing world helps company leaders to envision, move forward, and take advantage of windows of opportunities so to avoid the risk of being left behind.
Here are a few reasons an independent member, especially one with a visionary technology and innovation perspective, on your board will add value:
- They question “sacred cows” and processes and focus on how companies can re-engineer – break down and rebuild differently.
- They share insights on new technologies and how they may be leveraged.
- They provide perspectives of how technology is changing; where technology may be 10 years in the future, for example; and how organizations can change to get ahead of the curve.
If selected carefully, having an independent board member with these insights and mature judgment will bring a unique perspective without a huge investment for an organization that may not have a depth of this skillset within its own doors. After getting this perspective and conducting initial research and due diligence, the leadership can decide how best to power forward, by making a business case and investing; or not.
The best leaders recognize that “they don’t know what they don’t know” and embrace outside voices so they can effectively compete in today’s digital, fast changing world.
Alok Gupta is a partner with The Koblentz Group, an executive search and leadership advisory firm.