Misjudging Your Industry Boundaries

Many companies are guilty of misjudging the arena they are playing in. The CEO and executives maintain a narrow view of their business based on history and tradition, and so fail to see how the industry may be changing and the larger mission the company can play in it. This has double consequences. First, executives may fail to notice new competitors entering from the periphery, using disruptive technologies or alterative marketing and distribution techniques. Second, they may miss opportunities for growth by expanding their products or services beyond what they have done in the past.

Take Nestle; the company suffered from this blindspot for decades, viewing itself only as one of the world's leading “food” companies. This self-imposed label constrained Nestle into selling only a narrow band of food products. But when the CEO bravely redefined the company as a leader in the “health and wellness” industry (see https://www.slideshare.net/tskeys/who-is-looking-after-you-blurr), he launched a brilliant strategic extension of Nestle's boundaries that opened up dozens of new product lines and services. This even included entering the medical field, leading to the successful acquisition of several medical clinics. All it took was a reframing of the industry that Nestle saw itself operating in.

Another striking example of industry myopia is how its competitors perceived the threat from Uber. While most focused on Uber's offering as simply transportation for individuals to go from point A to point B, they failed to recognize that Uber was about more than that. It was really about connecting people with assets and available capacity with those who need them. Given this reframing, it is easy to see how Uber soon applied its model to connecting many others with assets or skills (plumbers, tutors, cleaning professionals, painters, etc.) with those who need to hire those services.

An expansive view of its industry opened up a variety of new opportunities for Uber. In October 2018, the company launched a short-term staffing business called Uber Works that markets and provides services from over a thousand professionals, including security guards, waiters, and other temporary workers, for events and corporate functions. (A similar player following Uber's expanded model is Go-Jek, out of Indonesia, which is also offering through its app to connect citizens not only to drivers on scooters, but also cleaning ladies, massage therapists, beauty estheticians, and others.)

In addition, Uber is utilizing the inefficiency of restaurants having spare capacity by offering ordering-out services to those who need meals through its Uber Eats delivery service. Uber is even creating a whole new food industry: virtual restaurants with no tables or seating. Using its algorithm, it is able to analyze that certain areas are keen on certain types of food, such as Greek or Mexican. This data allows entrepreneurs to open restaurants that exist only via an app. Effectively a large kitchen making many types of food to be delivered, the concept will soon compete with standard fast-food franchise chains. In a few years, I suggest that the Burger Kings, Pizza Huts, and KFCs of the world will find themselves outflanked as Uber grabs the hungry market.

Underestimating Competitors and Their Capabilities

Executive teams often tend to boast about their company's competitive strengths, and when they present to the board, it can be hard to resist their enthusiastic assessments of where the company stands. Indeed, 80 percent of annual reports claim that the company is “the leader in the market.” The problem is, organizational ego is sometimes based on overblown perceptions that lead to complacency and missed moves to protect against competitors.

Financial institutions and insurance companies have been highly prone to this blindspot. Many financial institution boards have failed to see the new players coming around the bend. Google, for example, is quietly testing selling car insurance and already holds a banking license. Square, PayPal, and the start-up Affirm offer credit card merchant services that banks formerly dominated. (PayPal now amounts to close to a third of credit card payments in Canada.) Even with such competition, financial institutions in the United States and Canada, despite their relatively protected market, also seem to be failing at taking seriously the potential for Asian competitors to come and play in their backyard. For instance, Alibaba surprised many when conducting their IPO in the United States. I would suggest our North American institutions look carefully at Softbank and their recently launched PayPay application (see https://www.fool.com/investing/2018/12/06/tencent-and-line-team-up-to-counter-alibaba-in-jap.aspx).

Another instance of underestimating competitors is the entire auto industry in which every major car company misjudged Tesla. Yet in the United States, Tesla sold three times as many electric cars as the rest of the entire car industry in 2018. In fact, it not only dominated the electric car market in the small and mid-sized luxury car sales segment, it outsold its nearest competitor, Lexus, by a factor of five.

Many auto industry experts once argued their Tesla would fail because building efficient manufacturing plants in this industry takes years. Arguably, the cars produced in the Fremont plant are just now rolling out of the factory at a decent clip as it took Tesla years to achieve production momentum. Nevertheless, it is clear that Tesla is singlehandedly accelerating the transition of the car industry to electric vehicles, forcing all existing players to scramble to escalate their R&D efforts.

Tesla also tapped into new pipelines to find creative executives, bringing in high-level expertise from other industries. The head of supply chain management, Sascha Zahnd, gained his supply chain expertise at the Swatch group and IKEA, and the head of Tesla's Mexico subsidiary, Francoise Lavertu, used to manage the marketing and CRM for Louis Vuitton.

Board members cannot be blind to executives who overestimate their firm's strengths or underestimate competitors. Markets can change extensively, altering how customers obtain a product or service. Small competitors can be purchased and quickly folded into a larger company with greater resources to take you on when you least expect it.

I was personally involved in one instance of this when I was trying to help the board of CAE Electronics recognize this blindspot. In the 1990s, CAE was one of two world leaders in the field of software and hardware for flight simulators. They built sophisticated simulators that they sold to airlines to use in their own training centers for pilots. Each simulator's cost can easily exceed US$20 million dollars. CAE and Thomson (now Thales) dominated the market with over 80 percent share combined. The remaining players were just small firms, building less sophisticated simulators used primarily by smaller airlines that could not justify the cost of operating their own training centers and instead used third-party centers. One such player was a small company in the United States called Flightsafety International (FSI), which produced their own simulators and ran their own training centers. CAE executives always looked down on FSI training centers, judging their simulators as less efficient and precise.

I tried during those years to make CAE executives and its board accept that their market was not solely about selling flight simulators, but about training pilots. This larger definition of their market would open CAE to bigger opportunities, as they could be more involved with the cycles of pilots needing to keep their training current each year and less dependent on just big airlines purchasing their simulators. The board resisted for many years, as the skillset of the company was deeply engrained in software development rather than operating flight training centers. They even refused to consider FSI as a competitor, claiming it did not have the capabilities required. (We found out eventually that FSI was building as many flight simulators as we did, but they used them in their own training centers so we could not even track their sales and installations.)

To our surprise, however, FSI was unexpectedly acquired by Warren Buffett in 1996. A year later, Boeing launched a joint venture with the company to operate training centers. Boeing had been one of CAE's largest customers to whom we had sold our simulators. Now they were going to operate their own training centers using FSI simulators. The CAE board had grossly underestimated their competitor's appetite for growth.

It took time, but the CAE board finally came around to realizing they could not maintain a narrow vision of their industry. Today, CAE has become one of the larger operators of training centers in the world and is well positioned to benefit from the huge rise in young pilots coming onboard as the older generation is retiring and many new airlines (from the Middle East and China) are hiring new pilots who need training as well.

Lack of Foresight to Spot Trends

It is difficult for executives to project where their industry will be evolving—before competitors do—without having the input of a great strategic foresight process. Strategic foresight is often defined as a set of tools and methodologies that help companies deal with uncertainty and change. Foresight typically should come from the three following processes:

• A structured intelligence process to capture, codify, and discuss key trends that will affect the company, its industry, and its customers.
• A second process also to spot, capture, and interpret weak signals. Weak signals are snippets—not streams—of information that can help companies figure out what customers want and spot looming industry and market disruptions before competitors do. Sometimes companies notice them during data-analytics number-crunching exercises, but it can also arise from employees who listen to the street chatter and apply thinking more akin to art than to science to spot new ideas. Either way weak signals are caught, companies can use them to do further number crunching and test anomalies they're seeing or hypotheses the signals suggest. Recognized now as vital intelligence to have, companies are just beginning to capture their value.
• A third process to integrate the insights from key trends analysis and weak signals analysis to define new businesses and update the risk matrix of the company. This could take the shape of the well-known scenario planning exercise, but it could also be integrated into other endeavors.

Antidotes to Competitive Blindspots

Table 35.1 presents some tipoffs when board members should consider if they are missing a blindspot stemming from one of the competitive sources and questions they can ask to fathom it out.

Mitigation Strategies from Best Practices to Avoid Competitive Blindspots

I recommend three actions to ensure that board members do not fall prey to competitive blindspots:

1. Challenge your traditional industry boundaries, by carving out time to do a strategic offsite meeting during which you have an intense, thoughtful discussion about the industry your company is operating in and whether there is a need to extend that definition. One useful tool I have seen is involving the board in figuring out the purpose of the company, rather than leaving it to the marketing team to work out. This evaluation often leads to a fruitful discussion of how to best serve that purpose. This action has particularly been valuable for family businesses I have been involved in consulting.

   Blindspot	The Company Is at High Risk When:	Board Members Should Ask Executive Management These Questions:
   Misjudging your industry boundary	There is little discussion about the focus and mission of the company or it has not been revisited in the past five years. The board never had a conversation whether the industry boundary should be redefined. A majority of directors come from the same industry background.	Are we stretching the boundaries of our industry to derive strategic insights and identify risks?   Is our own board members' view of the industry different than the one we portray in our annual report? Do we all agree with the definition of the industry we operate in?
   Underestimating competitors and their capabilities	The competitive outlook presented to the board always includes the same traditional competitors and/or the same analysis of competitors' strengths and weaknesses.	Are we seeing at the board level the same list of competitors as last year? Do we include in our list of competitors those in so called emerging economies? Does the company incorporate in its competitive scanning nontraditional competitors (i.e., companies that are not yet competing in the same arena but could)? Are senior leaders exploring different business models? What is the process they use to prototype those models? What are their assumptions?
   Lack of foresight to spot trends	A review of long-term trends (10–20 years out) has never been on the board's agenda. There is an assumption that key trends are well-known and they are therefore never discussed. No one pays attention to the weak signals about trends, believing they are not useful.	Is there a structured competitive intelligence process? How much board time is spent on analyzing and discussing strategy? How much of our discussion deals with the second and third horizons (more than three-year time frame) versus the current one? Do we invite experts and futurists to come to the board to offer us a view of future trends and weak signals?

2. Study nontraditional competitors, even those who might not yet have entered the market, and ensure their profiles, different skillsets, and unique assets are fully discussed and evaluated in the boardroom.
3. Invite lower and mid-level managers to address the board, particularly those who connect with customers, suppliers, and other stakeholders who may be able to provide insight into any weak signals they are picking up that might need to be integrated into your strategy discussions.

Anchoring to the Past

In what I consider one of the preeminent articles on biases, McKinsey's “Hidden Flaws in Strategy” (Roxburgh, 2003) highlights how entire industries can be blindsided by anchoring in the past. As an example, the article gave the following instance: “In the insurance industry, changes in interest rates have caused major problems due to anchoring. The United Kingdom's Equitable Life Assurance Society assumed that high nominal interest rates would prevail for decades and sold guaranteed annuities accordingly. That assumption had severe financial consequences for the company and its policyholders.” In effect, the article pointed out how the company's directors relied on their past experience and thus failed to even imagine that interest rates could swing dramatically downwards, undermining their financial models for annuities.

Lloyds' Names (the private individuals who participate in underwriting insurance policies under the Lloyds brand) learned a similar hard lesson from their own anchoring bias. In exchange for handsome tax benefits and the promise of substantial returns, the Names had pledged to cover risks with potential losses that, in many cases, far exceeded their means. In their view, the risks were minimal, as never in the past had Lloyds faced a financial crisis. In fact, it boasted 25 years of unbroken profits apart from a short period from 1966–68. But when the asbestos crisis hit in the 1990s in which thousands of individuals died from asbestos exposure (because it took several decades after insurance policies were written for victims to develop mesothelioma), Lloyds faced one of the largest financial devastations in its history. Thousands of private investors among the Names were forced to sell their houses and businesses to pay off the policies.

Having a history of success can warp objective analysis and decision making. Past achievements can blind board members to recognize changes occurring in markets or emerging paradigm shifts in their industry to which they should be adapting. Highly successful executives and CEOs are particularly susceptible to anchoring as they believe every decision they make will lead to the same string of wins they achieved in the past.

In 2015, Target Canada suddenly announced it was closing all 133 stores in Canada and laying off 17,000 people. Brian Cornell, Target's chairman and CEO, said the decision to exit Canada was the best option available to the company. “After extensive internal due diligence and research, paired with counsel from outside experts, we fulfilled our obligation to do what was right for our company and our shareholders, and made the decision to exit Canada,” he wrote.

What was not said, however, was that Target's failure was based entirely on an anchoring bias in a past success. When the company entered the Canadian market just a few years prior, its management assumed that the same recipe for profits in the United States would easily be replicated in Canada. Their assumption proved very wrong due to a simple error in judgment. A study by Consumerist summed up the failure: “Target couldn't just box up its behind-the-scenes software and send it to Canada, since it was built specifically for the use of Target in the United States and couldn't handle French characters or Canadian dollars. They bought a new system from an outside vendor, which usually took stores that were already operating several years to implement.” The result was empty shelves and total disorganization in the stores. The merchandising team quickly realized that there was so much inaccurate data in the system that they would need a week to verify with suppliers every piece of information (size, weight, everything else you can imagine) about every item that the stores planned to carry.

Limited Frame of Reference

A related blindspot results when board members and executives, through their own limited experience, bring a limited frame of reference to the table when they are strategizing. This anchoring issue is not about relying on one's past achievements, but about being unable to admit that you are lacking in a wide view of the industry, new technologies, or changing markets.

Boards seldom bring in outsiders to examine and discuss other business models to learn how their company could operate differently. A good example to demonstrate how new thinking has reshaped an entire industry is what happened to the taxi business. Initial analysis focused on how Uber's disruption was based on its model of private citizens using their own cars to drive riders and lower fees than taxis. What many boards and executives missed, however, was that many riders also cited the ease of being able to exit their ride quickly, having paid in advance through their credit card on file with Uber.

A limited frame of reference impacts companies by missing meaningful opportunities to grow. We once worked with a company that learned this the hard way. FieldTurf in Canada sells artificial turf. The company was founded by Jean Prévost in 1988 after he purchased the patent for the FieldTurf product. In 1995, John Gilman, a former Canadian Football League player, joined the company as CEO and under his leadership the company became the leader in artificial turf for football fields, achieving about 80 percent market share.

With such a dominating position, however, there was little room to grow. A management analysis of new markets naturally led to the conclusion that there are other sports fields where artificial turf could be sold, such as soccer fields and golf courses. But convincing the CEO to enter those markets was a hard sell, largely because he was anchored in his only frame of reference: the football culture.

Working with the company, we explored other opportunities, including realizing that the product could replace public grass in cities, eliminating the need for watering and the use of pesticides. In fact, we argued that the company should give the turf for free to cities, and then monetize it by offering to clean and maintain the turf. But this step was still too far for top management to accept.

A few years later, FieldTurf was acquired by the French firm Tarkett, a leader in the manufacture of flooring products in France. Getting this new frame of reference has since propelled FieldTurf into revisiting the definition of their industry—covering surfaces—that enabled it to grow into several new markets. In 2010, Tarkett acquired the American firm EasyTurf, headquartered in San Diego. Today, the company is active not just in the sports field turf business but also in the residential and commercial synthetic grass covering market.

Antidotes to Anchoring Blindspots

Table 35.2 presents some tipoffs when board members should consider whether they are missing a blindspot stemming from one of the anchoring issues and some questions they can ask to fathom it out.

Mitigation Strategies from Best Practices to Avoid Anchoring Blindspots

I recommend three actions here to ensure that boards do not fall into anchoring blindspots:

1. Diversify your talent pool. Make sure management includes or has access to people who do not think like them. Invite in iconoclasts and outside experts. Send your executives to Burning Man festival (or other such “alternative” festivals) to learn independent thinking. When recruiting for a board position, ensure that at least 20 percent are individuals from outside the industry. Seek out people from other generations (e.g., a consumer goods company should have at least one Millennial-generation person on their board) and other geographies.

   Blindspot	The Company Is at High Risk When:	Board Members Should Ask Executive Management These Questions:
   Anchoring to the past	Past performance shapes the forecast of future revenues. The board never asks for or revisits the key assumptions underlying their future projections.	How much do projections rely on past performance? Is there a reason to trust past trends? How much are we paying attention to revisiting key assumptions, especially those based on past performance? When was the last time a board member spoke to a client/customer? Do we have a process to encourage opposing views to be presented?
   Limited frame of reference	Board members have been chosen for their deep knowledge of the industry and at least a third of board members come from the same industry. The same data is consistently used to rationalize strategy.	Does the executive team profile reflect the diversity of our customers (gender, age, geography, etc.)? Do the CEO and the chair of the board both have experience in the exact same industry? What is being done to diversify the company's frame of reference? Are we always pulling our strategic data from the same source of information?

2. Develop an “alien eye.” A term from Edie Weiner and Arnold Brown's (2005) book, Future Think: How to Think Clearly in a Time of Change, “alien eye” refers to stepping back and looking at events as if you are aliens who have come to Earth. You must explain what you see back to your cohorts on another planet. A good game to play at your next board meeting.
3. Play a disruption game. Another mitigating strategy consists of identifying four or five companies with disruptive business models and mindsets. Run a scenario where each company acquires one of your key competitors. How would the current strategy stand in that case? For example, let's use the major Canadian retailers, Walmart, Loblaws, IGA, Couche-Tard, and Sobeys, and match them with Tesla, Apple, Amazon, and Airbnb. What would happen if Amazon acquires IGA, Tesla buys Loblaws, and Apple buys Couche-Tard?

Unchallenged Assumptions

Many industries fail to question and revise their historic methods and operations. For instance, in many countries, the postal service never seems to ask why its pricing must remain constant all year. Most other industries—airlines, trains, hospitality—increase their prices during certain peak periods (months or just days) in which there is high demand. So why is the price of mailing a letter or shipping a package constant over the year? (If seasonal pricing had been in place, perhaps CanadaPost would not be announcing that it will stop delivering mail within five years). Why has the assumption that prices for a stamp should remain stable all year never been challenged? Companies are cutting themselves from profitable opportunities to increase performance.

In the retail industry, two unchallenged assumptions have prevented department store companies from adapting to a fast-changing customer base, creating a number of blindspots regarding store design that could easily be improved. First, nearly all department stores feature on the main floor the cosmetics and perfume departments. Yet, this does not make sense because those products are not usually the reason why customers enter the store. In fact, many people who need another product (e.g., socks and underwear are among the most sought after items) will end up buying them elsewhere rather than having to walk through the entire store, locate the elevator, and go to another floor to buy the item they need.

Ask any retail executive why the layout of the store is done this way, and I am sure none would be able to tell you that it derives in fact from the original Selfridge in London. At a time where horse-drawn carriages were leaving a less than enjoyable odor in the street, locating the perfume department at the entrance of store was meant to immediately attract the customer and set them in the right mood for shopping. This historic rationale clearly has no reason to continue being the design of modern department stores, yet all stores keep this layout because that design assumption has never been contested.

In another example of historic assumptions, if you ask around you where people go to buy their pants, the majority will answer they still go to a retail store because they want to try on the pants. Given this, wouldn't you expect that stores would make it easy to try on clothing in an attractive changing room? Yet, the reality is otherwise. Most changing rooms are cramped and dirty, often in the back of the store, and seldom is someone there to help with the fitting. In the majority of department stores, the space is dedicated to other purposes than the reason why people actually come into the store. This unchallenged assumption is one of the many reasons why many retail stores have failed while only a certain few continue to succeed against online clothing sites. Some retailers today have understood this well and go so far as to offer magic mirrors that improve one's looks, as well as champagne and chairs so that trying on the clothes is a better experience for patrons and their spouses or friends who often come with them.

Corporate Taboos

One of the keys to challenging historic blindspots is the willingness to question what are perceived as “taboos” in your company that you should never break. These taboos could involve ways of operating or the types of clients one serves.

In the fine-dining restaurant industry, for example, why does the service model continue to be that customers call in to make a reservation in advance, then they come in, have their meal, and pay as they leave. In the 1950s, the fast-food industry altered this model and today everyone accepts paying before you receive your food. The process is faster, more efficient, and less risky for restaurants. So why is it that 80 years after the fast-food model was introduced, a similar “pay up front” process is not being implemented in fine-dining restaurants?

It would seem that many restaurants believe they face an historical taboo preventing them from altering their traditions, as if it would demean the fine-dining experience. However, asking patrons to provide their credit card when they phone in to reserve a table or when they enter the establishment makes good sense. It could help restaurants avoid lost revenue by charging at least a minimal fee for no-shows who made reservations. It would speed up service for restaurants and customers alike. Patrons would finish their meal and appreciate being able to leave more quickly (waiting to pay the bill is a major irritant for many people who dine out), freeing up tables for the next patrons. The process would also simplify the wait service and possibly reduce the staffing needed. Customer feedback could also be provided online as companies like Uber and Lyft do.

Historical taboos exist in many industries and breaking them can seem inconceivable. But if you are willing to consider the benefits, sometimes the logic of a new method suddenly makes sense. For example, instead of fighting copyright infringement, creators of televised content such as the series Game of Thrones, the most illegally downloaded TV show in the world, should consider the opportunity in front of them. With over 5 million illegal viewers (equal to the 5 million legal viewers), why not monetize the illegal downloads by embedding ads in the episodes on which the content creators can make some profit?

Western Union is a good example of a company that freed itself from its historic business of respectable money transfers when it created a thriving and profitable business by targeting the “unbanked,” for example, those clients, often illegal immigrants, who need to transfer money back to their home countries, which no other bank would serve. Breaking what seemed to be their taboo has resulted in a booming business.

Recently, Capital One broke free of the apparent taboo in the banking industry that banks must be formal, imposing, cold places to visit. Their new Capital One Cafés invite customers to come in for coffee, free workspace with wifi, and the use of community meeting rooms. Bank tellers are called Ambassadors who can engage with customers in friendly ways. The Cafés are open to everyone, and Money Coaches offer 1-on-1 help to anyone, even non-customers.

Bias Against Dissent

Many organizations have a blindspot about the value of dissent from the majority view. Many board directors find themselves in a situation where a decision in the boardroom has to be reached, but in the interest of time management or boardroom peace, they believe they must keep a dissenting opinion to themselves (which they later regret when the decision proves wrong). Of course, one does not always have all the facts needed to be able to bring in a well-structured data-driven argument. Agendas are increasingly tight and no one wants to be seen derailing the time schedule. In the boardroom, many other aspects also play out, such as the insidious fear of losing the coveted board seat if one does not “play along,” Dissent in any workplace is uncomfortable, but when managers and board directors alike feel it will reflect negatively on them, it can lead to serious organizational mistakes.

Antidotes to Organizational Blindspots

Table 35.3 presents some tipoffs when board members should consider whether they are missing a blindspot stemming from one of the organizational issues and questions they can ask to fathom it out.

Mitigation Strategies from Best Practices to Avoid Organizational Blindspots

I recommend four actions here to ensure that boards do not fall into organizational blindspots.

1. Examine unchallenged assumptions. One step the board could consider is as simple as writing down all the assumptions that management appears to base its strategy on and then challenge them one by one. This can be done at a specific board session, or implemented by the audit or other subcommittee to revisit the risk posed if key assumptions underlying the business plan need revisiting.
2. Be willing to break “taboos.” Question the most sacred rules of your business. Imagine how you could break at least one perceived taboo and then do it. Ask your employees about their perceptions of taboos. In our research, we have found that employees often have a far keener sense of unnecessary taboos than anyone in leadership.
3. Invite a variety of opinions among board members. Have a board member systematically go around the boardroom and ask each director to give their opinion, reducing the risk that one board member takes all the space to advocate for or against a decision. Build enough time in the agenda for crucial decisions to be discussed—and have the courage to reschedule discussions when time is too short. Ensure no corporate director on your board derives more than 50 percent of their income from the board fees to ensure real independence.
4. Create a “dissenter” position in your company. Sometimes called the “china breaker,” this person should be allocated time on the board agenda and executive meetings to throw the good dishware against the wall (i.e., to express dissent). Also end board meetings by going around the table and asking each director whether there is an issue that was not discussed but should have been.

Emerging Technologies

In every industry, new digital players are altering existing business models and operating processes. It is clear that digital and emerging technologies will fundamentally change a company's strategies, customer reach, marketing, human resource efforts, and supply chain management. Your technology investment must be able to meet new opportunities and threats. Companies must therefore work hard at adding digitally experienced directors to their boards. Yet, a recent survey by AMROP shows that in 2016 there were less than 5 percent of directors worldwide who were digitally savvy (36% in technology companies). If boards do not rapidly fill their technology intelligence gap, their companies will face critical injunction points when investing and utilizing new technologies, and they will likely fall behind more agile and savvy players.

Questions to ask:

• Are we using new technologies to find and enter new markets?
• What will our customers expect of us in the future in terms of the technologies we employ?
• What technologies are our competitors using to reach customers and provide better, faster services and customer experiences than we do?

The IT Abyss

Investment committees in boards of all companies are recommending or approving large capex investments in IT. Yet, from the Canadian federal government's issues with its payroll system, to the phenomenal failure of Target Canada, we have in our country many instances where organizations have failed to assess, supervise, and successfully turn around large IT projects. The impact on the financials of a company—not to mention the disruption in its operations—can be significant. Boards need to overcome their disinclination to get involved with IT challenges and learn to discuss IT with experts. At least one director with IT experience must be on the board. IT is often the key to reducing operating costs, improving customer response, and improving agility.

Questions to ask:

• How do our IT use and expenditures compare to competitors?
• Do we have the IT expertise on the board that we need?
• Does our current level of IT investments allow us to align our capabilities with our strategic aspirations?

Risks of Fraud, Scams, and Security Breaches

The threat of outside attacks on customer databases and confidential company information has risen to alarm-bell levels. With increasingly adept AI efforts, companies are subject to myriad types of fraud, scams, and security breaches that can be perpetrated on executives, employees, and customers that appear to be genuine and accurate. Boards must take far more effort to prepare for new methods of spoofing and defrauding their companies.

Questions to ask:

• Do we know what the company's “crown jewels” are, and did we estimate the level of security we wanted to attach to them?
• Have we as a board kept up on the most recent examples of threats that organizations in every industry have incurred?
• What steps are we taking to ensure that new AI-driven apps and programs will not defraud our management and employees?

Redefining What Work and Talent Will Mean in the Future

There is a looming HR blindspot on the horizon. As a result, human resource committees will increasingly have to think out of the box about the range of talent management efforts they need. For example, we know today that the next generation of workers will want to join projects before joining companies, so we need to rethink how to hire, train, and attract talent based on projects rather than based on sterile, fixed job descriptions. We must also learn how to respond to the many changing ways in which people will work, such as how to reintegrate boomerang employees (those who join the company for a while, then go outside to gain different experiences, only to return later); what pension schemes can be offered; what types of work contracts to offer to a generation of Millennials that wants more flexibility; and how to handle promotions and raises that can no longer be based on seniority. These types of issues will affect HR and compensation committees but also boards as they look at succession planning issues.

Questions to ask:

• What can social scientists offer us to better understand the coming generations so we can be prepared for them in the coming 10–20 years?
• What must leadership learn to manage new generations of employees?
• Is the board connected to the new generation of employees in the company?

The Longevity Economy

The demographics of markets are presenting the potential for many blindspots. From banks to media, companies are designing strategy to lure younger customers and 80 percent of marketing budgets are often dedicated to Millennials. However, 80 percent of the purchasing power is still in the hands of the 55+ demographic. Furthermore, most companies continue to think of the 55+ market as a homogeneous lump. However, an 85-year-old has vastly different needs than a 65-year-old retiree. We must be able to rethink the opportunities offered by the longevity economy and so integrate into our boards and management teams those who can help us understand these opportunities.

Questions to ask:

• How do we currently segment our markets and what adjustments do we need to make for the longevity economy?
• Have we considered what the longevity economy could mean for us to tap into an experienced pool of talent?

Understanding Asia, Africa, and India

As Asia and Africa become the largest future markets, boardrooms are still populated with people who have little to no experience with these regions. Without board trips to these regions and access to information about them, we will remain limited in our understanding of these markets and ability to dissect competitors' skills, future product pipelines, and alliances. Similarly, while many companies have emphasized investing and doing business in China, we cannot neglect India which, by demographics, social composition, and GDP measures, is likely to emerge as the largest power in the world in the next 20 years. How many companies and boards are ready for that?

Questions to ask:

• What efforts have we made to explore new markets as well as new competitors in Africa, Asia, and India?
• What expertise do we have on the board, or should we bring to the board, to understand Asia?

Future Job Competencies of Workers

As industries change and we face a technology tsunami, companies cannot fall into the blindspot of not knowing how they can recruit the employees who will get them to success in the future. We already know that the skills required will be dramatically different. In 2018, Accenture wrote in their report “It's Learning, just not as we know it” (https://www.accenture.com/ca-en/insights/future-workforce/transforming-learning): “It's a race between education and technologies. Blockchain, AI and advanced biosciences promise new efficiencies and growth opportunities at a time when leading economies are struggling with weak productivity gains and, in some cases, slow GDP growth. But it's easier said than done.…Train more engineers, raise the number of creative designers, produce more data analysts. But creating larger cohorts with specialist skills is not the answer.” Boards must bear the responsibility to make sure their companies are prepared for this future, and that compensation systems are optimized to attract and retain a new workforce and encourage the right behaviors.

Questions to ask:

• How might our industry change in the next five years? Are our employees equipped with the knowledge and the skills to respond to these changes?
• Are we tapping into pools of talent that have acquired those new competencies?
• How do we help our existing workforce make the transition to the new work environment?