11 top tips to better understand the future and what it means.
Katherine Woodthorpe FAICD is a fan of board colleagues sharing insights. She recently recommended to colleagues John Carreyrou’s Bad Blood, a tale of a start-up that had a US$9-billion valuation after misleading investors, employees and regulators.
Dr Woodthorpe, a former CEO of the Australian Private Equity and Venture Capital Association, has encountered many start-ups. She could not put Bad Blood down and suggested colleagues read it as a “reality check” in an era where some start-ups achieve sky-high valuations.
“It’s a warning about what happens when you leave your scepticism at the boardroom door, buy into a good story and get sucked in,” says Woodthorpe, chair of the National Climate Science Advisory Committee, Antarctic Climate Ecosystems and Cooperative Research Centre, The HEARing CRC, and Fishburners, a leading provider of co-working space for start-ups.
Recommending a book to board colleagues seems trivial. For Woodthorpe, it all is part of directors being well-read, curious, open to ideas and willing to share information – a process that helps directors check their decision-making biases and look to the future.
Understanding the future has become an even bigger issue for boards. In this age of digital disruption, characterised by artificial intelligence (AI) and automation, boards need to consider opportunities and risks of emerging technologies more than ever.
For Australia’s largest companies, that has meant board trips to Silicon Valley or other innovation clusters and meetings with executives of leading global tech firms. Or paid presentations before board meetings from tech experts or futurists on AI and other topics.
Or directors attending international conferences to hear latest insights about their organisation’s industry, either funded by their board or through their own means. Or they subscribe to industry reports or take expensive professional-development courses.
Nobody doubts that is useful. But most organisations cannot afford to send their board to Silicon Valley to grasp the future. Listed companies outside the ASX 200, charities and government boards often rely on directors to source their own information about emerging trends.
Woodthorpe says boards of smaller organisations must consider the best approach to “environmental scanning”, a term used in governance to describe the process for directors to develop information sources and keep up with latest trends.
“Visiting Israel to learn about innovation sounds great in theory,” says Woodthorpe. “But it is not realistic in terms of time or money for most directors. The board cannot justify the cost, and the study tours are not essential. I have seen some directors who visit Silicon Valley or Israel, drink the ‘Kool-Aid’ and become obsessed with technology, which is not great either.”
Woodthorpe says directors must be resourceful when sourcing information. She attended an overseas conference this year that benefited several organisations she governs, so asked four of them to fund the trip jointly.
“Directors should attend at least one international conference a year, so you need to think of ways that can be done, particularly when serving on a not-for-profit,” she says. “One board, for example, might fund the airfare and another could pay for accommodation. Directors should be proactive in finding the best conference to attend and sensible ways to fund it.”
Woodthorpe says directors should take advantage of local events and speakers. She recently attended an AICD presentation on artificial intelligence and found it valuable.
“There’s a lot of good events at industry associations and universities if you are willing to make the effort. And some good local experts who will present to a board, without payment, if asked, as part of their broader work to understand industry needs, build networks and share ideas.”
Woodthorpe says directors of large organisations should meet with start-ups for a different perspective. Fishburners, for example, links corporates with its start-up community and has regular presentations on emerging trends and technologies that are open to the public.
She says it is important that directors share insights with colleagues, without going overboard. “One way to maximise your research effort is to email links of useful reports or papers, or notes or presentations from conferences, to your fellow directors. I find it immensely useful when others on the board send information to me and I try to do the same in return.”
Measured approach to environmental scanning
David Kirk, chair of Trade Me Group and Kathmandu Holdings, says understanding an organisation’s strategy, customers and competitive position is the starting point for directors sourcing information. “Directors can easily go off on tangents when looking for information about trends if they are not clear on what drives value in the organisation and where it needs to get to.”
As co-founder and partner of Bailador Technology Investments, a listed investment company that invests in promising growth-stage IT companies, Kirk has daily exposure to emerging technology trends. He says visits by boards to Silicon Valley can be over-rated.
“Directors go on study tours overseas and hear from the CEOs who talk at a high level about big-picture trends and their tech company, thinking they are going to get unique insights,” Kirk says. “I find presentations from senior ‘talking heads’ in the tech sector often add little value. You are better off talking to someone a few rungs lower in the organisation, such as a division head or product manager who is immersed in the technology.”
Another risk of study tours, says Kirk, is the potential for directors to get a technology bug and distract management. “If a director attends a presentation about artificial intelligence and the next day rings the CEO and tells her we absolutely must have this technology, he is not doing her any favours. It’s important that boards encourage management to look up from the daily grind from time to time, to think about emerging trends and new technologies, but directors must be disciplined about not immediately recommending the latest idea they hear at a presentation or read in a report, to management.”
It’s fine for directors to get industry, broker or media reports provided by the company. But you don’t want everybody relying on the same information. You need directors who are naturally curious and willing to search for insights that challenge their view and extend their knowledge.
Kirk, a former Fairfax Media CEO, says a structured process to understand technology trends is not a substitute for directors doing their own work to understand technologies and consider what impact they might have on the business. “There is nothing wrong with having a process to keep up to date with reports, conferences or the like. But I find the best information is often the relevant ad-hoc kind; directors coming across an interesting report that is applicable to challenges the company is facing, and sharing it with each other.”
Relying mostly on management to supply information about an industry is equally problematic, Kirk says. “It’s fine for directors to get industry, broker or media reports provided by the company. But you don’t want everybody relying on the same information. You need directors who are naturally curious and willing to search for insights that challenge their view and extend their knowledge.”
He says structured board information is most useful as an introduction, exposing directors to issues for the first time. “For example, a board might arrange a presentation on AI to directors. That should be viewed as a starting point to get directors interested in the topic, and a prompt to get them to do their own digging on AI and become more knowledgeable on the topic.”
Kirk says directors can overestimate the benefits of understanding the future. “Directors can get distracted by things they cannot predict. Rather than guess the future, it is more important that boards ensure their organisation has the people, culture and skills to adapt quickly to whatever is thrown at it.”
Tips for trend scanning
Here are 11 tips for directors who want to develop processes to better understand the future and how it relates to their organisations. These ideas suit boards that have fewer resources and cannot afford to send directors on costly study tours or arrange paid presentations.
1. Strategy: A deep understanding of organisation assets, opportunities and risks is essential when directors source information. Without it, directors can waste time.
2. Internal information: Review the current information set the board receives. Does it include daily press clippings, industry reports or other information? Is there too much information or can the pack be improved with additional resources?
3. Management interaction: Some boards arrange a short videoconference between directors and the CEO in between board meetings. Or the chair shares notes from a weekly or fortnightly catch-up with the CEO. The best source of information on emerging trends often come from management, so find ways to increase interaction without disrupting them.
4. External information: Without being too structured, develop a broad information set for each directorship. That could involve subscribing to international business magazines or journals, or other industry reports. There could be overlap between board roles.
5. Events: Develop an annual plan for international or local conferences or events that will help your directorship. Some larger events can be planned well in advance; smaller events might be attended on an ad-hoc basis. Look for good events run by associations, universities, start-up communities or other organisations within and outside your industry.
6. Professional development: As part of your annual directorship development, consider courses or events that add to your governance skillset. A director of a utility, for example, might attend a cybersecurity course to understand latest privacy requirements and techniques.
7. Synergies: Look for information synergies across directorships. For example, a director of a retailer might join the board of a tech start-up, to better understand e-commerce. A director of a financial services organisation might join a board of financial technology (fintech) start-up. Top directors often have diverse governance portfolios that help them “join the dots”.
8. Share information: Encourage your peers to share information and return the favour. Look for informal processes to share “collected wisdom” without swamping your fellow directors with data or using the information exchange as a form of self-promotion.
9. Be well-read: Nothing beats directors being well-read on business and the future. Look for annual lists of top business books from McKinsey and leading business newspapers, and set time aside during the year or on vacation to catch up with the most applicable books.
10. Develop networks: Inevitably, the best information comes from people in the industry rather than information packs or staged presentations. Build your industry networks and use them to glean insights about emerging trends. Understand the risk of spending too much time with industry executives and potentially jeopardise current management relationships.
11. Have a process: Some directors review information about emerging trends in an unstructured way: they read something interesting when they encounter it. Others have a process to keep up with a defined set of information each week and allocate time in their diary. Choose a method that works for you, but know that effective directors are curious, well-read and always looking for information that challenges their view, or that of the board and executive.
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