Future of governance: Mindsets are pivoting from profit to purpose; from hierarchies to networks; from controlling to empowering; from planning to experimentation and from privacy to transparency. The emerging digital world must be built from the Board downwards using a completely new mindset and culture. Future boards must be capable of creating a new culture that will pivot on these five trends.
- Managers get ready to be exponential and not linear in thinking.
- The company creates and improves value for customers through innovation and process improvement. Foresight, not just a vision, drives all impulses. Foresight is the deep understanding of trends and technology, demographics, regulations and lifestyles, which can be harnessed to rewrite industry rules and create competitive space.
- High growth companies do not assume anything. The Board should persuade the leadership team to constantly innovate to rise above competition and not imitate products. In times of uncertainty, the key to success is to change the mental model of the company’s business. This is to be done by looking outside the industry. Customer service is not good enough but value creation is the key to making strategic differentiation in the marketplace.
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Customer experience management through:
1. Process change and value creation: The Toyota way via lean principles. (Capacity = value +waste) Value innovation is about offering unprecedented value not technology or competencies.
2. One tool that is often overlooked is conjoint analysis. Conjoint analysis measures consumer response to different bundles of products, a technique that allows marketers to uncover preferences, better gauge the strength of certain kinds of product features, and understand which customer problems will be most advantageous to solve.
Time pacing and governance
A Harvard Business Review articulates: Is the creation of relentless sense of urgency around meeting deadlines and concentrates people on a common set of goals in terms of introducing new or improved products. Time pacing is the strategy for competing in unpredictable markets by scheduling new product introductions at predictable time intervals.
Event pacing on the other hand means changing or introducing new products in response to a certain event like drop in profits, market shares or when a competitor introduces new products. In stable markets event pacing is good yet it is reactive and not proactive. What does a future-prepared board member look like?
- Ability to build trust through a means of offering clarity amidst growing complexities.
- Seeks to better understand the interconnectivity across environmental, social and governance challenges and ensures alignment across the short, medium and long-term.
- Utilizes technology in driving data-driven solutions that uphold health and privacy in highest priority.
- Is Socially responsible and recognizes the idea of social license to operate.
- Loves the planet and is willing to speak out on environmental stewardship and drive investments and mindset changes towards goals that will eliminate pollution and degradation of nature.
- Is sensitive to best practices in Governance and seeks to bring them into Boards served on.
What new competencies are, or should be, demanded of Board members? - Deep understanding of emerging risks and opportunities and how they impact capital allocation decision making in practice.
- Understanding of fiduciary duty.
- Climate competencies and its relation to business strategy.
- Continuous learning attitude that brings in fresh ideas for the Board to adopt.
- Is cognizant of Global changes so that the entity business model can be protected from disruption or when the model has collapsed, can bring about quick dissolution so resources can be redeployed.
- Is a champion of value creation continually
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What does Stewardship in the 21st century look like?
- Inclusivity Diversity and integrity.
- High level of transparency and accountability.
- Understanding the role of the company in society.
- Courage, curiosity and clarity in articulation.
Corporate disruptions that shape governance
Only some stated here are transforming into forces of rapid digitization and are combining and converging at a furious pace never known before! Without them we would not have got a workable set of vaccines to give the human race hope and confidence.
- Blockchain, leading to digital currencies and a super valuation for bitcoins.
- Frictionless Value Transfer disrupting all credit and debit cards and Chequers.
- Mobile Connected Devices driving up e commerce to almost 20% of all purchases.
- Internet of Things driving 10x productivity gains.
- Cloud Computing leading to non-siloed digital data driving fresh insights.
- Neural Networks powering Machine learning through powerful algorithms.
- Reusable Rockets creating a ubiquitous internet with download speeds never known before.
- Adaptive robotics making dangerous work safe.
- 3D Printing promising to eliminate the 1.2 billion homes shortfall to deliver homes for all.
- Autonomous Mobility making Tesla the most valued automobile company, Elon Musk the richest human on the planet and all car Companies and FAANGS (Facebook, Amazon, Apple, Netflix, and Google) reaching out to dominate the phenomenal Mobility market.
- Battery Systems to power mobility.
- Gene Editing leading to the promise of health care.
- Immunotherapy Sequencing Technology providing for human chosen longevity.
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Sustainability challenge
The 17 SDGs set by the UN in 2017 have now been combined into the ESG framework and entire nations and entities in numerous ecosystems are adopting these as inputs to their Strategic planning processes. Measurement systems are being evolved and converged to track outcomes using the ESG framework.
- Outcomes are being reported using the six capitals of integrated reporting:
- Physical
- Environmental
- Social and relationship
- Intellectual
- Brand and intangibles
- Financial
Spirituality: Trust, collaboration and self confidence
The true measure of spirituality are trust, collaboration, and self-confidence that were realised during the pandemic. As a result, there is a natural move towards responsible capitalism, with a tremendous thrust on social equality and a sharing of the commons.
- Wearing the lens of Strategic Foresight to project into the future, Governance systems are pivoting ;
- From conservative Risk Management to Taking calculated risks to achieve escape velocity
- From “Net Zero” for current business models to “Gross Zero” for all new initiatives.
- From Global supply chains to digitized, localized production and delivery through automated processes.
- From being human labour led to ML and AI led, highly productive systems harnessing converging technologies.
- From being satisfied by Linear growth to shooting for exponential growth, using disruption as the leading paradigm.
E-commerce will overwhelm physical retail; electric vehicles will be preferred to ICE vehicles; genomes will be aggressively mapped to tailor make food, medicine and supplements; education will go online and will be driven by AR- VR; communities will be housed in 3-D printed homes, and the factories and warehouses will be operated by a few people.
Data is becoming the new oil and data entry is giving way to data set capture in a world which is seeking to fulfil emerging demand tailor made to the individual consumer. Mass personalisation is the new mantra. All the 6 Ds (disruption, digitalisation, demonetisation, dematerialisation, deception and democratisation) are working overtime to create a new world. Future Board members and corporate leaders will need to operate in this new environment.
Shailesh Haribhakti is a Chartered and Cost Accountant, an internal auditor and a certified financial planner. He is a board chairman, audit committee chair and independent director at some of the country's most preeminent organisations. He is a thought leader on the Indian economy and public policy.