In an age of disruption — trust is a real issue for boards
A key issue for boards to embrace is that the real disruption happening is not technology itself, but the massive trust shift it creates.
Many boards have an institutional mindset towards trust — centralised, controlled and top-down. Today trust is shifting from institutions to individuals and that’s a whole new ball game. In a world of online reviews and social media, a company’s customers are now becoming their social ambassadors or worst critics. Conventions of how trust is built, managed, lost, and repaired are once again being turned upside down.
For many organisations, regaining control over how they are perceived has become a major challenge. When things do go wrong not only is there nowhere to hide, there is no wiggle room to fix things before opinions — sometimes ill-informed — spread across social media platforms like wildfire so boards need to shift their thinking about transparency. They need to imagine they are operating behind a glass wall and think about how that would change the organisation’s culture. We are living in an age of radical transparency; once trust is squandered, it takes time and investment to rebuild it. Warren Buffett summed it up nicely when he said, ‘It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.’
There are many instances where technology has outpaced the law and yet we still see directors and regulators applying old ways of thinking to new business models. Boards need to be comfortable with business practices that literally involve rewriting and reinventing the rules. It’s through uncertainty that innovation happens and new value is created, it requires a distinct culture that starts with the board.
Thriving in the digital age means having a higher tolerance of risk and an ability to swim through uncertainty and complexity. It also calls for leaders with more courage, curiosity and a higher level of comfort with ambiguity. It’s a real balancing act for boards to act responsibly yet at the same time give people a fishing line to explore unchartered waters.
Rethinking the structure and content of the traditional risk matrix is also long overdue. A black swan event can quickly cannibalise a core business. Real threats come from events and forces most can’t foresee. For boards it means having the courage to confront what could kill the organisation — not just threaten it or create more competition.
Directors also must get up to speed on technologies that will impact most industries over the next decade. Artificial intelligence, automation, blockchain, the Internet of Things and the like are carving out a whole new world that directors must become familiar with.
Longer term I’m predicting the rise in blockchain enabled smart contracts where you can code in rules and pre-determined decisions. I know it sounds slightly out there, but in the next decade a robot will have a seat on a board. Using artificial intelligence, robots could be better at making decisions in some instances than humans. Now won’t that shake up a board!
If you’re a member or subscriber, you can read the interview with Rachel Botsman in the May 2017 issue of Governance Directions. If you’re not, find out about our membership and subscriber options to gain access to our monthly journal.