Governance research

Keeping up with technology megatrends is a constant challenge for boards. One report after another seems to bombard readers with information on disruptive technologies that will re-invent business. Directors could be forgiven for finding this information a blur.

The MIT Sloan Management Review has produced an insightful guide on technology megatrends. In “Seven Technologies Remaking the World”, MIT provides a framework on core technologies that some boards could use as a basis for strategic discussion on disruption.

Each megatrend on its own has profound implications for global industry and therefore organisations and boards. As MIT notes, the most intriguing part of these megatrends is the potential to combine them and create even more powerful super technologies.

Here is a snapshot of seven trends:

1. Pervasive Computing: Embedded, Proactive, Networked Digital Processors

Also known as ubiquitous computing, this technology is characterised by vast networks of embedded microprocessors in everyday objects. This technology is driving the so-called Internet of Things (billions of connected devices) and is making computing networks “unseen, everywhere and always available”.

2. Wireless Mesh Networks: High Bandwidth, Dynamic, Wireless, Smart Connectivity

Wireless Mesh Networks (WMNs) are smart networks of wireless devices that can form, reform or disperse at a user’s command. They are created through the bottom-up connection of devices (powering the Internet of Things) rather than through costly, top-down telecommunication infrastructure. When devices start creating their own networks, and do not need to connect via fixed points on hub-and-spoke networks, the changes will be immense.

3. Biotechnology: Technologically Created and Enhanced Life Forms and Systems

Advances in digital technology, genetic engineering, informatics, cell technology and clinical sciences are rapidly expanding biotechnology boundaries. “Biotechnology has the potential to both expand existing industry boundaries and create entirely new industries, but it is easy to frame this technology too narrowly,” says MIT. Boards that view biotechnology only through a life-sciences lens could miss key opportunities and threats for their industry.

4. 3D Printing: Digitally designed, chemically manufactured objects

MIT says the capabilities of 3D printers – machines that use successive layers of materials to bring digital designs to life – are evolving rapidly. They are now mobile and can precisely print everything from concrete to living cells.

“If current research bears fruit, in the future, 3D printers will operate at the molecular level. In other words, we will be able to print with molecules, combining them to create more complex molecules that will yield a host of new products, such as new forms of LED lighting and solar cells and truly personalised medicines,” the report said.

5. Machine Learning: augmented, automated data analysis

Big data, cloud computing and artificial intelligence will drive rapid growth in machine learning. MIT says: “… Today, data is bigger than ever before. It is sourced from inside and outside the boundaries of the company. Further, it is both structured (a transaction, invoice, or receipt) and unstructured (a tweet, a video, a blog post). This chaotic flow of data can seem like a threat or inconvenience on the surface, but it harbours an enormous opportunity to gain valuable insights into the operation of a company and the larger ecosystem that includes its customers, suppliers, and stakeholders.”

6. Nanotechnology: Engineered Atoms, Super-Materials

MIT argues that advances in nanotechnology, which encompasses molecular engineering, may usher in a new era of power, speed and memory in computing devices. Nanotechnology could also drive the next wave of new product development as more devices incorporate technology. A glass window, for example, could use nanotechnology to display the weather report.

7. Robotics: Precise, Agile, Intelligent Systems

MIT says robotics, mostly used so far in cost reduction through automation, is being used to reimagine business, sales, technology and customer service, and “to open new frontiers in business innovation”. It says robots are now an essential element of the new workforce, helping human employees with a wider range of tasks and taking over many transportation roles.

Segars, A. “Seven Technologies Remaking the World: An MIT SMR Executive Guide”, MIT Sloan Management Review, March 2018.

Handling uncertainty a vital leadership skill

Ability to quickly change tack in the face of disruption a must have for directors

The concept of organisation “agility” is getting more airplay as companies move faster to respond to industry disruption. But what of personal “agility”: the ability of directors to change their thinking and govern organisations through constant change.

McKinsey & Co argues that disruption calls for transformational leaders who have heightened personal inner agility. But at times of uncertainty, too many leaders revert to old habits, such as overanalysing problems and excessive delegation.

McKinsey says leaders must learn to relax at the edge of uncertainty, paying attention to subtle cues in the environment and the moment that can inform unconventional actions. Extrapolating McKinsey’s view to governance suggests directors must embrace uncertainty and develop personal strategies to oversee organisation transformation during industry disruption.

In its quarterly publication, McKinsey suggests five strategies to build inner agility. The Governance Leadership Centre has applied each strategy to governance:

1. Pause to move faster: For directors, this is knowing when to step back and create space to test assumptions and decision-making biases and make clearer decisions. It’s also about knowing how to pause for clarity while remaining engaged in intense boardroom discussion and decisions.

2. Embrace your ignorance: Effective directors use their lack of knowledge about a specific issue or market as an opportunity. They seek a wide range of perspectives, listen carefully and are not afraid to ask basic questions, to pull issues apart. In doing so, they approach issues differently to executives and put themselves in the shoes of different stakeholders.

3. Radically reframe the questions: Asking challenging questions, says McKinsey, can help unblock your existing mental model. For directors, that means taking time to assess questions being asked. Are you asking the same types of questions with the same biases? How can you approach an issue differently by creating a subset of question variations?

4 Set a direction, not a destination: A risk for directors, particularly those who came to boards through C-suite executive roles, is to expect teams and issues to move from point A to B. But in conditions of heightened uncertainty, such journeys are rarely straightforward or quickly resolved. Directors must be able to govern through journeys that can have many twists and turns – and no immediate end – as disruption transforms industries.

5. Test solutions – and yourself: McKinsey says agile leaders think of themselves as “living laboratories” who drive agile, ever-shifting, exciting organisations. For directors, this means embracing rapid experimentation and failure as part of the discovery process in disruptive industries. It’s a different way of thinking for many directors who built their career on avoiding failure and delivering a smaller number of successful projects.

Bourton, S., Et.al, “Leading with Inner Agility”, McKinsey Quarterly, March 2018.

Big-data surge a boost for artificial intelligence

But changing the mindset of workforce a problem for companies

Australian boards that believe the benefits of artificial intelligence are a long way off need to think again: a recent survey has found United States companies are investing heavily in AI and are starting to reap benefits.

Just over 97 per cent of Fortune 1000 companies are building or investing in big data or AI initiatives, according to the Big Data Executive Survey 2018 by NewVantage Partners, a US big-data and information-management consultancy.

NewVantage Partners says 2018 could be characterised as the year that AI gained meaningful traction with leading corporations. “Perhaps for the very first time, organisations now have ready access to meaningful volumes and sources of data that are providing AI solutions with sufficient meaningful data to detect patterns and understand behaviours.”

Disruption is becoming a bigger issue for C-suite executives, the survey found. Almost one in two respondents acknowledged the threat of disruption and displacement in the 2017 survey. Now, nearly four fifths of executive respondents in the survey perceive a growing threat from data-driven, highly agile competitors in their industry, as well as tech giants such as Amazon and Google.

About three quarters of respondents agreed that the proliferation and availability of big data was empowering AI and cognitive learning capabilities within their organisation.

Remarkably, almost 72 per cent of respondents said AI is the technology that will have the greatest disruptive impact, from 44 per cent in the previous survey.

People challenges loom large in the adoption of AI in organisations, the survey found. Just over half of respondents said insufficient organisation alignment or cultural resistance was the biggest barrier to AI adoption. Nearly all respondents said they were trying to create a data-driven organisational culture, but just under a third claimed success in that initiative.

The message for boards is clear: 2018 could be a breakout year for AI thanks to growth in big data. The biggest obstacle remains creating a digital mindset in organisations – something that should be a priority for boards looking at opportunities and threats from disruption.

NewVantage Partners. “Big Data Executive Survey, 2018”.

Disruptive innovation a boardroom headache

Director survey identifies top technology-influenced dangers for companies

Technology-led disruption is worrying more executives and boards. A new survey has found the speed of disruptive innovation is the top risk discussed in boardrooms and the C-suite.

North Carolina University and consultancy Protiviti surveyed 728 board members and executives across industries and countries. The report, “Executive Perspectives on Top Risks for 2018”, was published earlier this year.

The speed of disruption soared to the top risk for 2018 in the survey, exceeding concerns about the global economy and regulatory oversight. “This top risk for 2018 reflects respondent concerns that disruptive innovation or new technologies might emerge that outpace an organisation’s ability to remain competitive,” the report said.

Other top organisation risks identified by directors and executives include:

  • Resistance to change that stops the organisation adjusting its business model
  • Cyber security
  • Regulatory change and scrutiny
  • Organisation culture not encouraging timely identification and escalation of risk issues
  • Succession planning
  • Data privacy and identity management
  • The economy
  • Inability to use big data and data analytics
  • Intense competition from organisations that are “born digital” and have lower cost structures compared to incumbent companies.

University of North Carolina, Protiviti, “Executive Perspectives on Top Risks for 2018”, February 2018.

Pondering the Chief Data Officer role

Big-data survey respondents disagree on how it fits into company framework

Should large Australian organisations have a Chief Data Officer?

That question will test more CEOs in this era of big data, AI and industry disruption. It could also test boards that want to ensure their organisation has the right capabilities for the big-data revolution and that directors have a clear line of sight to the Chief Data Officer (CDO).

Tech industry researcher Gartner in 2016 predicted 90 per cent of large organisations will have a CDO by 2020. Almost two thirds of respondents in NewVantage Partners’ Big Data Executive Survey have appointed a CDO, from 12 per cent in 2012.

There were mixed views on whether the CDO should be an executive role. Half of respondents said it should not and about 13 per cent said the role should be phased out or is unnecessary.

NewVantage Partners wrote: “The CDO is a new corporate role and as such there is evident confusion and disagreement on the mandate and importance.”

Deloitte in 2016 argued that CDOs in financial-services organisations will move from data marshals and stewards to business strategists who draws on data insights to create value. That transition, if it occurs, suggests boards spending more time with their organisation’s CDO.

Boards need to understand the emerging CDO role and how it fits within other key technology roles, such as Chief Information Officer, Chief Digital Officer and Chief Analytics Officer, as well as reporting lines for each role.

The rise of big data and AI is forcing more corporations to change their executive-team structure, which has governance implications in areas such as succession planning.

If the CDO does become an elevated executive role, some boards might get more involved in that appointment, just as boards are showing greater interest in the appointment of Chief Information or Chief Technology Officers, and their successors.