Adaptation and Innovation in the Boardroom
Industries were already moving quickly toward digital business models pre-pandemic and the knowledge and experience gaps in the boardroom were becoming more pronounced. Then the past year pulled the curtain back on several systemic failures - in health and eldercare, in business, in politics, and society’s tolerance around racism, social justice, the environment, the future of work and the expanding wealth gap on a global scale.
From the top, many boards have been paralyzed over the last year trying to manage a wide range of complex issues, often in opposition to each other, such as ensuring the financial health of the business in the current quarter while remaining focused on the longer-term interests of their stakeholders. Directors have been forced into the trenches with the executive team to manage these crises and board meeting frequency has increased as a result. This has made for a more dynamic working environment where board directors are learning to proactively test new governance approaches.
Innovation is being driven by necessity in this time of upheaval. Barriers are being broken down, traditional hierarchies are flattening, and organizational boundaries are becoming more porous. Technology is now the core for every business and leaders need to seek out internal opposition to change, including the culture that clings to how things have always been done
and the belief that failure is not an option.
“It is acceptable to make mistakes with innovation. It is not acceptable to claim ignorance about the associated risks, especially cyber risk,” says Lloyd Komori, C.dir., Faculty for The Directors College special program Innovation Governance for Directors, and former chief risk officer. “Prepandemic digital transformation projects did not require senior leadership or the board to prioritize their understanding of their information security strategy. The rapid escalation of technology-related
initiatives in response to the pandemic has now caused a major shift in the risk landscape. Now firmly in place, these digital innovations have created a wide array of new risks that directors must respond to.”
The bar has been raised on accountability. Digital success (and failure) begins with the board of directors, but under the strain of constant change, today’s directors cannot be expected to provide meaningful oversight for business models and value propositions that they don’t fully understand, and they can no longer claim ignorance when issues arise. Directors need to understand the new standards around accountability, liability, and their duty of care and they must gain knowledge into today’s technology to be well equipped to make decisions in the new normal. With the increase of swift innovative adaptations, the skills and capabilities of corporate boards need to expand.
Boards who can evolve, expand, and learn the art of the possible, will better survive adaptation. To gain a deeper understanding, directors need to develop both the general knowledge and the confidence to ask the right questions, and question the answers, to fully understand the digital economy inside and outside of their organizations. Boards need a firm grasp on what is next and the ability to quickly apply diverse domain expertise to that vision.
“In addition to a solid foundational understanding of governance, a truly effective board has to develop the behavioural competencies to navigate complex problems around issues like innovation and new technologies, ESG and ethics, and around dealing with the sometimes contentious and difficult agenda items that have arisen over the past year,” says Dr. Michael Hartmann, principal of The Directors College, Degroote School of Business with Mcmaster University. “It seems that every year we say that the role of the director has never been more complex or demanding – this has never been more true than right now.”
Education plays a key role. The Directors College Chartered Director Program offers comprehensive, innovative and actionable training for corporate, non-profit and crown board directors across industries, raising the bar for professional standards and the dynamic relationship between corporate governance and today’s most pressing and systemic issues. Custom and specialty programs, like Innovation Governance for Directors on March 24-27, 2021, help to expand director skill sets through strategic insights and tools from a global network of faculty with extensive experience.
The pace of change will continue to accelerate. The boardroom remains a critical part of successful organizations, but tomorrow’s board director must bring current, modern and diverse expertise to the table.
To learn more about how you can improve your director skill sets, visit thedirectorscollege.com.