Companies face a confusing mix of trends and countertrends, making long-term strategic planning especially challenging.
This is according to Susan Stautberg, CEO, co-founder, and global co-chair of WomenCorporateDirectors (WCD), the largest organisation of women directors in the world. “What’s happening is that boards are taking on a greater role in the strategic direction of their companies – reaching down into issues that were once management’s domain,” she says.
The “pain points” stemming from a more global, connected market and supply chain dominated the discussion at WCD’s recent Global Institute in New York – where 250 top global directors, board chairs, and CEOs gathered for a deep dive into the most pressing board issues today. At the Institute, a number of common challenges emerged as the key areas directors are focusing on for Q3 and Q4 2015; WCD members will be taking a closer look at how these challenges impact business in Asia.
The 10 pain points for global boards were identified as:
It’s a small world – for the criminals, too. “Global connectivity means that you can find customers anywhere, but it also means that criminals anywhere can find you,” says Stautberg.
Gabrielle Greene-Sulzberger, a general partner of investment firm Rustic Canyon/Fontis Partners and a director of Whole Foods Market and Brixmor Property Group, addressed the risks companies are facing if they don’t bring their cybersecurity systems up to date: “The U.S. is behind other countries: ‘state of the art’ now is Chip and PIN, which Europe adopted several years ago, but, here, we’re still a year or two away. This is part of the reason why American retailers are such a lightning rod for criminals right now. There’s the joke that ‘you don’t have to outrun the bear – you just have to outrun the other guy.’ Well, right now American retailers are the other guy; it’s just so much easier to hack them.”
Taking cybersecurity out of the tech silo. Former Dell CIO Adriana “Andi” Karaboutis, who is now EVP of Technology and Business Solutions at Biogen and on the board of Advance Auto Parts, said that “we need to not think about cybersecurity as only an IT problem – it is a business problem; it’s strategic.”
Both management and the board in many cases have to re-align their thinking, she said. “How does the cybersecurity strategy align to the business strategy? If your company is opening plants overseas in a new country, it’s not enough to ask about the workforce there, or the financials there, or whether the tax situation is favourable. An added question needs to be around what the security and cybersecurity profiles look like.”
Throwing out cost models. Innovations in manufacturing are challenging the most basic cost and revenue models for the production and distribution of goods. Supply chain expert Andrea Abt – a director at Brammer, a non-executive director of SIG plc, a member of the supervisory board of GerresheimerAG, and a former head of supply chain for Siemens – discussed how the trend of 3D printing is changing the “givens” of supply chain.
“You can print the parts at your customer site, saving on logistics and saving on assembly. This affects the whole cost of operations. And 3D allows for greater inventory control: you can print on demand and not have to warehouse items, which can get costly.” With companies able to 3D print everything from fuel nozzles to military drones, assumptions about costs, turnaround times, and the geographies that come into play must be completely rethought.
Environmental costs of development. Responsible and ethical corporate governance demands that companies conduct a more accurate accounting of the real costs in manufacturing goods – including the impact on the local populations and environment. A board member for the International Crisis Group who has also served on a number of public and private company boards, Maria Livanos Cattaui has seen other companies ravage local environments when extracting resources.
One of the largest paper companies in the world that sells extensively to US firms, she says, had once been a “case study in how not to take care of a forest” in Indonesia. “Many in the macroeconomic field agreed that we are often measuring the wrong things when it comes to GDP. Indonesia would measure how much timber was cut down and exported, whereas it should consider the real measuring to include how much of a virgin forest is not being cut down. That should go into the wealth of a country.”
The supply chain is an enormously complex issue, and companies must be equipped to be able to measure this complexity, Cattaui says, driven by a board who is paying attention.
Bringing in boardroom talent. Maggie Wilderotter, executive chairman of Frontier Communications and a board member of Xerox, Procter & Gamble, and Juno Therapeutics, encourages both management and boards to provide opportunities for qualified women. She herself has served on 24 public company and seven private company boards, and is eager to get more women in top leadership and governance roles.
“What we have to do is to give competent and capable women a chance, take risks on them, and put them in positions where they can continue to move, morph, and grow in their companies. That prepares them for board service.” Wilderotter has made multiple connections for boards seeking women directors – and vice versa – having helped place approximately 20+ women a year on corporate boards.
Penetrating a patriarchal climate. Dr Herta von Stiegel, the founder and executive chair of Ariya Capital, which develops and invests in clean energy and infrastructure projects throughout sub-Saharan Africa, understands the challenges in entering many countries in the region, but there has been progress, she says.
“When I moved to Nairobi last year, I was very pleasantly surprised that certainly in East Africa, at least, there are quite a few women in government. A number of constitutions actually mandate that at least 30% of the cabinet posts are held by women.”
But, while a lot has happened on the political front, “it’s still a very, very patriarchal environment. If you show up as a woman in business, you’re still thought of as ‘Plan B’ or ‘Plan C.’ But women are progressing; they are moving forward. There is a sense of ‘we need to be at the table’.”
Meeting customers where they are. Having worked extensively in both India and the US, Kalpana Raina – a director at John Wiley and Sons, Information Services Group, and Yellow Media Group – understands the need to address very different customer bases, dependent on the local nature of the markets.
“Where real innovation is happening is the process and resource engineering in places such as India – where it is called ‘jugaad.’ Jugaad is an innovative fix or work-around to address a specific problem – typically a solution aimed at addressing consumers with lower spending power. We’ve seen this ‘innovation at the edges’ with a product called ‘ChotuKool Fridge’, made by a local Indian manufacturing company. A small, lightweight, and mobile cooling unit, ChotuKool doesn’t use compressors, and appeals to consumers at a vastly lower price point than a typical refrigerator. This is the kind of innovation being done to solve local problems.”
Rethinking risk and control. The very concept of risk, which might be strongly compelling to start-ups who may need to jump on some wild ideas in order to break into a market, can be frightening to larger companies. But today’s shifting markets and technologies demand that big companies redefine their relationship with risk.
CEO and president of GE France, Clara Gaymard, says: “GE is a 120-year-old company, with over 300,000 employees all over the globe and are present in 170 countries. Being a big company was to control the risk in technology or the risk in selling – in everything. But now, the biggest risk you can take is not taking risks. This is the big shift. Big companies build a lot of processes to be sure that everyone across the globe goes step by step with everything they do, and we have to kill this idea. We have to give up some of the control, and empower people at a local level.”
Defending against disruptive competitors. Digital platforms are able to bypass existing business channels – changing traditional ideas about sectors and competitive sets. This offers new opportunities for emerging firms, especially those grounded in new technology, but presents new threats for more traditional companies.
A director of Nordstrom who has chaired both the audit and compensation committees on the board, Alison Winter has helped her company adapt to the dramatic changes in the retail environment over the past decade. “As a board, we look at our competition as Amazon, not the other retailers. When that’s your competition, you are constantly looking at what’s new – what can we do differently?” By purchasing hot sales sites such as HauteLook and interweaving them into a Nordstrom web platform, the company has been able to drive huge digital sales.
Up-ending assumptions about demand. As demand explodes in certain regions, companies must be careful about assuming that success in one market will make it easy for them in others. Lynn Schenk – chair of the board’s risk committee at Biogen, a director at Sempra Energy, and a trustee of Scripps Research Institute – said that boards must ask the tough questions and do their homework.
“As a board member, one must really get to know the culture of the place,” she says. “Knowing the patients, for example – how do they relate to doctors? In the US, there is a growing partnership between patients and physicians, but this is not true in many other countries. There is also the question of who pays for healthcare and treatment, which varies dramatically country by country, and yet another variable is the regulatory climate.”
These kinds of socioeconomic and cultural factors can affect people’s recognition that they even need a product – which has an impact on how companies can enter a market and what kind of infrastructure and understanding must be in place before they get there.