Boards and executive teams need to be progressive and imaginative, looking at new and exciting ways to accelerate growth. What they cannot do is fall into a state of complacency, assuming that the existing formula for success is going to be applicable in the years to come.
At Criticaleye’s fifth Asia Leadership Retreat, held in association with St James’s Place – Asia, in Singapore last week, the topic of debate on Day 1 was how executive and non-executive directors can manage the strategic and operational challenges posed by disruption.
Mui Hoon Poh, Independent NED at Singapore Pools and a Board Mentor at Criticaleye, told the audience: “Trusted business models do run out of steam. No matter how good the current performance, it is the responsibility of the Board and senior leadership to constantly question the status quo, as it is easy to get caught in the success trap.
“They have to think several steps ahead about whether the existing business model is right for delivering success in the future. This is even more true in today’s connected world, where the pace of change is accelerated.”
According to Matthew Blagg, CEO of Criticaleye, “the word transformation is overused these days as there is a constant element of change”. He continued: “Quite simply, an organisation that stays the same will not be there for a long period of time. Great Boards are evolving as they are winning and that’s when you really make a difference.”
Ian Stone, Independent NED at Tencent and a Board Mentor at Criticaleye, said: “As a Board, it’s our responsibility to ask lots of questions during a period of change, so we can understand the rationale behind the decisions being made.” One way non-execs can see what’s going on in more detail is through the audit committee, but Ian says that “ultimately, executives have to take the actions – the Board can’t run the company.”
It was agreed that risks must be taken, but in a controlled fashion. At Tencent, Ian added that “although there is a healthy paranoia about the competition, there is also an awareness, and discussion, of risk”. He explained that this mentality “extends not just to the executives on the Board, but also the layers below the leadership team, so they understand their responsibility”.
One danger for a Board is that it becomes fixated on worst-case scenarios. Till Vestring, Independent NED at Keppel Corporation and another Board Mentor at Criticaleye, said it can become a problem if “the Board becomes too focused only on risk and is putting the brakes on. You don’t want management to feel like the Board is simply stopping them from executing on their ideas.
“That’s not a good position to be in, as you do need to be able to take risks in order to be successful – it’s about knowing what risks you’re taking and making sure you get appropriately rewarded.”
It’s the responsibility of the Chair and independent directors to ensure that executives have considered the various outcomes of a shift in business model – both the good and the bad. “When a company goes into a new area, as a Board, you need to ask the questions and challenge the management on whether they have fully thought through the implications of taking a bold move and have a solid plan in place to make it work,” Till said.
Change is Coming
No sector is impervious to the forces of disruption. Tian Chong Ng, President of Asia Pacific and Japan at HP, said: “My view is that business models across multiple industries are being disrupted. There are a lot of new entrants into these markets and often it is driven by new technology – the obvious examples being Airbnb and Uber.
“This new technology allows new entrants to level the playing field overnight. Many companies have needed to respond very quickly to new ways of doing business in their industries. But it’s not only about the technology – a lot of these entrants create different experiences for customers, which can actually open up new target audiences through their alternate go-to-market structures," he said.
From an executive perspective, Tian Chong was clear that you need a diverse mix of people who are comfortable with change and moving at pace. He added: “Through the disruption and uncertainty, you have to build a leadership team which is able to stitch the seams.
“You want leaders who possess individual, technical excellence, but also the trust and respect to be able to work together as a team."
However, it was evident from the discussions that the ability of executives and senior leaders to succeed in moving to a new business model depends heavily on the Board taking a medium to long-term view. Mui Hoon summed it up when she said: “Transformation needs to be influenced from the top. The Board has a very important role to play in setting the tone and steering the company to the next areas of growth.”
Marc Barber, Managing Editor, Criticaleye