10 Pain Points Global Boards Face and How Directors Can Step UpCEO and Global Co-Chair of WomenCorporateDirectors
Companies today face a confusing mix of trends and countertrends, making long-term strategic planning especially challenging. Boards today are taking on a greater role in the strategic direction of their companies and reaching down into issues that were once management’s domain.
The pain points stemming from a more global, connected market and supply chain dominated the discussion at WomenCorporateDirectors’ recent Global Institute in New York. More than 250 top global directors, board chairs, and CEOs gathered to explore today’s most pressing board issues. A number of common challenges emerged.
1. 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.
Gabrielle Greene-Sulzberger, general partner at Rustic Canyon/Fontis Partners and a director of Whole Foods Market and Brixmor Property Group, addressed the risks companies face if they don’t bring their cybersecurity systems up to date: “ ‘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,” she said. “This is part of the reason why American retailers are such a lightning rod for criminals right now.”
2. Taking cybersecurity out of the tech silo. Former Dell CIO Adriana “Andi” Karaboutis, 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.”
“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 favorable,” she said. “An added question needs to be around what the security and cybersecurity profiles look like.”
3. 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, former head of supply chain for Siemens and director at Brammer, said 3D printing is changing the “givens” of the supply chain.
“You can print the parts at your customer site, saving on logistics and saving on assembly,” she said. “3D allows for greater inventory control: you can print on demand and not have to warehouse items, which can get costly.”
4. 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, 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 U.S. firms, she said, 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.”
5. 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,” said Wilderotter, who has helped place more than 20 women a year on corporate boards.
6. Penetrating a patriarchal climate. Herta von Stiegel, the founder and executive chair of Ariya Capital, which invests in clean energy throughout sub-Saharan Africa, understands the challenges in entering many countries in the region, but there has been progress, she said.
“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 percent 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.’”
7. Meeting customers where they are. Having worked in both India and the U.S., 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,” she said. “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.”
8. Rethinking risk and control. The very concept of risk, which might be strongly compelling to start-ups, 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, shared: “GE is a 120-year-old company, with over 300,000 employees all over the globe and is 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,” she said. “We have to give up some of the control, and empower people at a local level.”
9. Defending against disruptive competitors. Digital platforms are able to bypass existing business channels while 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.
Alison Winter, a director of Nordstrom, 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.
10. 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 said. “Knowing the patients, for example – how do they relate to doctors? In the U.S., there is a growing partnership between patients and physicians, but this is not true in many other countries.”
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.
With innovation becoming increasingly important in corporate culture and the economy more broadly, boards will need to dive into areas that management has traditionally owned. Without this action, we risk missing the boat on the major shifts in our economy.