Its Time To Develop A Social Savvy Board Of Directors
As today’s digital technologies continue to shape consumers daily activities and investors’ sources of value, corporate boards continue to lag in their understanding of this important shift in power and participation. The result: they are unknowingly creating strategic risks for their enterprises. To get a sense of the impact that digital and mobile technologies and social media are having on business, consider the following:
- 9 out of 10 U.S. Internet users now visit a social networking site each month (Nielsen) and in many countries, social networks approach Internet usage.
- Online retail sales are growing at five times the pace of traditional retail and are projected to overtake traditional retail sales in less than 10 years. (Gridley & Company)
- Global e-commerce sales are growing at 19.4 percent a year and are expected to reach nearly $1 trillion by 2013 (BCG).
The implications of these trends for boards, given 70% of CEO’s do not use social media (Domo and CEO.com) and more than 80% of boards claim to have little or no understanding of these technologies (PWC) can not be understated. Compare these statistics to the fact that 1 plus billion customers use social media and 4.6 billion use smart phones. This chasm – between CEO and boards use of social media versus their stakeholders (customers and employees) - and you can understand why 12 countries fell during the Arab Spring while once great companies like Kodak, RIM, Best Buy, Blockbuster and others are also failing.
Equally important, our research shows that boards of directors have an instrumental role in capital allocation – and therefore how organizations spend their precious time and money. To that end, boards and CEO's need to better understand the following:
- Today’s sources of value are social
20 years ago, 80% of corporate value was derived from physical things (plant, property equipment and financial capita) and today that number is 20%. Further, research indicates that as billions of people adapt to these next technologies, companies like Apple will continue to reign supreme.
- Digital technologies are critical for success
When things and money ruled, having a board comprised of (if not dominated by) professionals who understand and embrace things and money over intangibles (people and insights) mattered. Now, things and money play second fiddle in creating value. So therefore should board members with these skills.
Once your board and CEO understand these stark realities, the next step is to recruit board directors from the social, mobile and cloud technology fields. This may mean compromising conventional benchmarks, such as prior board experience or international expertise, in favor of more contemporary skill-sets, for example, experience with building social software and analytics companies. Additionally, boards should understand that potential corporate directors with these digital competencies might not have achieved the same stature as candidates from more traditional fields of finance, operations, leadership, and sales.
In short, today's sources of value, and the technologies that enable them, come from young, ambitious and, oftentimes, time-starved professionals who often have less established career paths than their traditional corporate boardroom brethren. But when you are trying to cross the chasm to the new world – you need people who have traveled the distance and are willing to take the risk. Remember, those that got you where you are, are not likely to get you (including your boards and organization) to where you need to go. So start your journey today and recruit corporate directors who know where you need to go!