Disrupting Disruptions: Can Boards Find the Answer?

Six in 10 directors know their industry is about to be broadsided, but few think management is ready.

It was already enough to make boardrooms nervous about their companies’ future. Even the word—disruption—is unsettling.

But welcome to Disruption 2.0, a new era where a significant jolt in an industry is only followed by another. Airbnb comes in and upends the travel industry, forcing a legacy brand like Marriott to create its own portfolios of home and share rentals. Now, a wave of start-ups powered by artificial intelligence threatens to upend things once more. And the question is: Are directors doing anything to make sure their businesses stay ahead of the next waves?

“Historically, you used to have a single technology that was the culprit of disruption,” says Soren Kaplan, a consultant who specializes in “innovative disruption” and the author of The Invisible Advantage. “Now you have multiple technologies playing together in a big hodge-podge of implications. You have blockchain, artificial intelligence, big data, robotics, and all of those are intermingling, intersecting, and converging in every industry. It’s creating this constant hum of disruption across everything, everywhere.”

Not surprisingly, anxiety is building inside boardrooms over all this. While 62% of all directors view disruptions as more important today than five years ago, only 19% are confident their management teams are prepared for the inevitable broadside, reveals a recent survey by the National Association of Corporate Directors. That’s doesn’t surprise Kaplan. When C-suites crowdsource ideas, he says, they’re usually only incremental suggestions within the core business model. “You don’t get the disruptive stuff,” he says.

Ensuring that companies are genuinely entertaining disruptive ideas starts with having the right people in the right place and clear lines of authority. “Boards always have a nose-in, feet-out orientation, but in this case it’s really about asking the right questions and creating awareness,” says Jane Stevenson, vice chair of Korn Ferry’s Board and CEO Services practice.

That means even reevaluating the CEO’s role, because the industrial transformations underway require a different kind of leader, argues Geoffrey Colon, head of brand studio for Microsoft Search Advertising and the author of Disruptive Marketing. In an acquisition-driven world, he says, the lawyer-CEO of the past made perfect sense, but today online retailers have moved into grocery store chains and medical insurance; ride-share services are developing fintech businesses. Today’s successful companies are, in short, moving vertically, not horizontally. “The new CEO has to be a behavioral psychologist and good at pattern recognition,” says Colon. “They have to be curious, looking across fields, able to blend science with art and culture, information technology with behavioral economics.”

Kaplan adds that boards should prod management to implement a “balanced growth strategy,” which means a diverse portfolio of seed investments that increases the chances the firm will be the first to spot and adopt the disruption. Executive teams should also listen closely to the disruptors they have in-house. A recent study discovered that roughly a third of a company’s employees and customers are “agitators” brimming with ideas and potential agents of positive change—if senior management would only listen to them. That’s not a foregone conclusion. Such agitators are often those annoying complainers and critics who are the bane of every manager’s existence and, not surprisingly, frequently sidelined.

But, in this day and age, the squawkers can’t be ignored, partly because, as Stevenson points out, mature companies tend to “kill innovation by dropping an egg from an airplane to see if it will fly.” Effective directors don’t let that happen and know precisely which executives are responsible for driving disruptive innovations forward inside the company. That’s in addition to always being acutely aware of what ideas are at “an egg, chick, or hen stage of their development” and ensuring they’re safely incubated, says Stevenson.