Spencer Stuart recently hosted a dinner for local Boston executives and board directors to discuss how rapid technology changes are disrupting business models, and what that means for the board. Guests were joined by Mark Barrenechea, CEO of OpenText Corporation. Adi Ignatius, editor of the Harvard Business Review, moderated the discussion. Highlights are summarized below.
A nexus of technology changes
Barrenechea described a “nexus” of distinct yet complementary technology trends that are creating a perfect storm of disruption for companies, which must either adapt to the new technology landscape or be defeated by it. Among the most important technology trends are the speed with which products get to market, large-scale digitization and the immediacy with which new disruptors can become omnipresent.
Speed to market. Two decades ago, it would typically take a software engineer about 18 months to transform written code into a new product. That is almost unheard of in today’s fast-paced technology landscape, according to Barrenechea. “There’s a remarkable pace of new graduates coming into technology getting product to market at faster and faster rates of speed.”
Digitization. “You’ve got to digitize or die,” Barrenechea said. “The pace of disruption enabled by digitization is increasing.” Consumers are embracing digital platforms at ever-increasing rates of speed, and digitization is transforming every sector of the economy, from media to financial services to manufacturing and beyond.
Ubiquitous mobility. What Barrenechea calls the “ubiquitous mobility” of technology products and services works in concert with the speed and digitization described above. Because of the emergence of the cloud and mobile technologies, businesses can reach consumers wherever and whenever; consumers have seamless access to products and services. When Uber debuted, for example, it was suddenly everywhere, leaving the taxi industry reeling.
The momentum created by this nexus of technology trends is reducing barriers to entry for new competitors by getting more products and services to more people at a faster clip. Companies are increasingly energized by the power of new technologies, and the new generation of engineers are more emboldened to take risks. This is creating a crowded marketplace and raising the awareness for boards at companies that may find themselves in peril.
What does this mean for directors?
Barrenechea noted that this momentum will only intensify in a new work environment driven by a fundamentally changing workforce, pointing to a study he ran at OpenText: “By 2020, 60 percent of my workforce will have been born in the Internet era.”
These and other technology trends are impacting the way companies interact with their customers, their suppliers and their employees. This poses a question for directors, many of whom are older and limited users of these technologies: how can the board help the company foresee the impact that technology changes are having on the business?
To ask the right questions about the impact of digital on their businesses, board members must understand two major forces: the rise of enabling technologies and changing personal behaviors. Technology enablers such as constantly connected mobile devices are combining with changing human behaviors around the sharing of personal data and use of social media — and reshaping industries in the process. To “skate where the puck is going” and anticipate critical consumer trends, directors needn’t be sophisticated coders steeped in technology; but they need to pay attention to their customers, suppliers and employees in order to ask the right questions to ensure management is getting ahead of the right trends in the right way.
Participants raised three fundamental and complementary ideas:
Consistently engage in strategy and business model discussions. This lies at the crux of the board’s mandate: the oversight of strategy. While technology has enabled disruptive competitive forces in many cases, most businesses fail because the leadership missed key trends in consumer behavior. Keeping a finger on the pulse of customers and suppliers will keep the board abreast of potential threats to the company’s business model. One does not have to be a software engineer to anticipate how consumers are using new technologies to make purchasing decisions, or to ask management probing questions about the evolving threats to the business. Barrenechea said that strategy must be a constant element of the board’s cadence and cannot be sidelined from the rest of the board’s discussions: “If that happens, you are already lost.”
Stay abreast of technology trends. Barrenechea said it is useful to have some technology expertise on the board. The board can gain that experience through continuous technology training and by exposing directors to junior employees, outside consultants and customers who have a direct, user-based handle on new technologies. “We push the board to spend time with engineers coming out of graduate school, with some of our newest employees,” Barrenechea said. “Our newest employees are sometimes the smartest technologists in the room.” The OpenText board also meets quarterly with a customer, business partner or outside speaker.
Consider whether specific technology expertise is needed. Boards may want to recruit a director who has significant technology experience. Technology CEOs and CIOs from large companies often make excellent additions because they have a broad perspective on the business and can apply keen technology insight to business and strategy questions. It is important to understand the specific business need before recruiting a new director because experts can have a wide range of digital or technology experience.
Trends at Work
Before organizations can identify digital priorities and the leaders they will need to help shape and execute those priorities, they must understand the two major forces driving digital: the rise of enabling technologies and changing personal behavior. Technology enablers such as high-powered, constantly connected mobile devices are combining with changing human behaviors around the sharing of personal data and use of social media — and reshaping many industries in the process.
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For additional perspective on adding digital expertise to the board, see the article “Digital Expertise in the Boardroom: Delivering the Right Impact.”