How to Tackle Organizational Blind Spots and Disruption

With the pace of change, technological advancement, geopolitical developments, and business model evolution in the marketplace, the topics of organizational blind spots and industry disruption continue to command interest in the boardroom.

In October, Protiviti hosted a NACD Directors Summit™ session and a webinar attended by more than 700 directors and senior-level executives to discuss these topics. Below are 10 key takeaways and lessons for boards.

Adopt an enterprise risk management (ERM) mind-set to identify blind spots. Risks are dynamic, shift frequently, and give rise to multiple issues simultaneously. An ERM mind-set emphasizes having robust processes for analyzing risk in the context of key objectives, designing cost-effective mitigation activities, and evaluating preparedness for the unexpected. The management team should present its view of the top risks and the mitigation efforts in place to the board periodically. In turn, directors should ask, What would we do if various scenarios were to happen?

Identify scenarios and gather around the table. Tabletop exercises help organizations play out unexpected scenarios such as cyberattacks, the loss of major customers, data center outages, and product failures. At the events, commenters noted that more attention should be given to scenarios involving reputational issues, talent acquisition and retention, the effects of demographic changes and declining population growth on the workforce, changes in customer loyalty, and new competitor innovations. These exercises encourage leaders to think outside the box in their preparations.

Foster more engagement and forward-looking dialogue. Blind spots interest directors because they understand that what they don’t know can often be as impactful as what they do know. They also understand that the world is unpredictable. Thus, strategic discussions in the boardroom regarding the issues that matter should be used to establish a context for identifying blind spots. For example, boards should keep the focus of their meetings on the three things going well for the company, the three things not going well, and the three things with the greatest uncertainty. Board decks should be condensed and focused to be a strategic tool rather than an administrative exercise. Boardroom culture should foster forward-looking, critical thinking.

Identify potential disruptors. A significant number of CEOs are concerned about their companies’ viability over the next 10 years. Uncertainty may be at the root of this concern, including as it pertains to the impact of innovations on industries. Disruptive blind spots mentioned during the two events include responsible AI deployment, supply chain disruptions, energy grid attacks, unexpected succession issues, education's role in developing relevant workforce skills, and ransomware attacks. These and other concerns provide context for boardroom discussions and highlight the need to identify potential disruptors affecting the company.

Don’t wait to be disrupted. Recently, Fortune featured Mary Barra, CEO of General Motors Co., on the cover of its magazine with a quote: “We’re not going to wait to be disrupted.” Barra is leading General Motors to adapt and transform the company proactively rather than passively waiting to react to the inevitable changes in the industry. Her point is clear: waiting for disruption is incongruent with an organization’s intent to thrive.

During the October events, various steps were suggested for companies to stay ahead of the wave of disruption before it crests. Basic suggestions include focusing on customer feedback, continuously analyzing market trends, gathering competitor intelligence, investing in innovative products and processes, upskilling the workforce to succeed, embracing digital transformation opportunities, and implementing strong cybersecurity measures. The fine points include adopting agile practices, entering into strategic partnerships, diversifying revenue streams, maintaining liquidity, and adopting sustainable practices. Directors should insist that these and other appropriate proactive measures be considered during the strategy-setting process to better manage the risk of disruption.

Know where the company is on the disruption continuum. Companies that are disrupted often are those that stick to the status quo, are digitally underdeveloped, are too asset-heavy, are constrained by short-termism, or are complacent in hiding behind moats they believe to be impregnable. They fail to anticipate future customer needs and are content with incremental improvements. The concept of "disrupt or be disrupted" encourages businesses to be proactive and agile. Companies can be disruptive leaders, disruptive aspirants, agile followers, reactive followers, or skeptical laggards. Their position on this continuum reflects their commitment to adapting to customer preferences, making data-informed decisions quickly, and innovating continuously. In today's digital world, companies must shape their future or cede this opportunity to competitors.

Recognize promptly when the company is being disrupted—or face the consequences. In the October webinar, more than 400 directors and C-level executives responded to two questions about disruption: How would you know you are being disrupted, and when would you know it? To the first question, the top responses involved: monitoring emerging trends, industry fundamentals, and competitor actions; significant revenue declines; or the loss of major customers. To the second, the top responses were: in time to pivot with necessary adjustment, when strategic assumptions were no longer valid, and when core market offerings were no longer relevant. These two questions are highly relevant to boards.

Make the company’s crisis management plan world-class. The existence of blind spots suggests it is impossible to anticipate every possible disruption. Therefore, any discussion of blind spots and disruption must acknowledge the need for a world-class crisis management plan that ensures clear, transparent, and timely communication during a crisis to maintain stakeholder trust. For directors, the important question is, When does the board engage?

Reduce blind spots by interacting with employees. Many board members serve on multiple boards, giving them a broader perspective as they look across more than one company. In addition, board members can minimize their blind spots by interacting with managers and employees at levels below the C-suite—particularly those who are market-facing. To that end, they should take advantage of opportunities to meet people outside of the boardroom (e.g., at a reception before the board’s dinner with all the company’s officers) and use their emotional intelligence to pick up on color commentary regarding organizational culture issues and the company’s strengths and weaknesses.

Pay attention to board culture, skill sets, and performance. In today’s digital world, the big question is whether the board’s composition and culture are a fit with the company’s needs looking forward. A board, committee, and director evaluation process; a procedure for removing a director who isn’t meeting the needs of both the board and the company; director education on industry and technology developments; and executive sessions for planning further interactions with management are important practices to consider. 

The above discussion is neither the first nor the last on blind spots and disruption. The challenges of this complex and unpredictable world place a premium on agility and resilience. For that reason, board members would be wise to continue to highlight these matters in the boardroom for a long time to come.

Protiviti is a NACD partner, providing directors with critical and timely information, and perspectives. Protiviti is a financial supporter of the NACD.