The Role of Opportunity Oversight
In his recent book “The Coming Wave,” AI entrepreneur Mustafa Suleyman makes the case that the world is on the cusp of the greatest emergence of new business opportunities and social changes since the arrival of the printing press, automobile, internet, and mobile phone…combined.
Corporate boards on behalf of investors oversee the readiness and performance of management and the organization. As boards oversee risk, they must also assure themselves that management and the organization are ready, willing, and able to create value in this new, opportunity-rich environment.
AI, already with some capabilities beyond human intelligence, is no longer in the future. New applications arrive daily. Synthetic biology is out of the laboratory and is applied routinely with the potential to manipulate evolution. While these developments are here and now, others like quantum computers are evolving rapidly and will enrich and accelerate changes in business, industry, and society. While these technologies present risks, they also explode with opportunity.
The next waves of opportunities reside well beyond the immediate domains of AI, synthetic biology, and quantum computing. Consider, for example, the possibilities for new functionalities at lower costs in metals, ceramics, organic and inorganic chemicals and molecules, and the businesses that deploy them. Imagine services and service businesses, some of them in health care, detecting customer needs before the customer does and supplying service not just in time but just before time.
Leaders and managers of companies that win in this next wave will excel in imagination, creativity, and courage. They will also stand out, as always, for their ability to manage risk and protect value. It is the responsibility of boards, on behalf of shareholders, to “oversee” leaders and managers when it comes to both the creation of and the protection of value. Many of the processes, mindsets, and tools for managing risk are mandated by legislation, well-developed in the organization, and integrated into the affairs of boards. It is estimated that the investment in risk management tools and activities exceeds $50 Billion annually in the U.S. alone. No one is surprised to see the activities of Board Risk and Audit Committees; the surprise would be if these committees did not exist.
Unfortunately, oversight of a company’s approach to value creation – how the organization discovers/detects/creates new business opportunities – is not nearly as well developed, practiced, or institutionalized as is the protection of value. We see few boards with Opportunity or Value Creation or even Strategy Committees. Few boards routinely audit the Value Creation processes of the business. Some boards do conduct annual board and management risk assessments. Few boards do the same for opportunities over varying time frames. Oversight of value protection is alive and well in most companies. In too many companies oversight of opportunity is barely breathing.
This imbalance in board oversight of value protection versus opportunity creation is not new. What is new is that the world of business opportunities is expanding at an unprecedented rate. The future is arriving faster than ever before. To catch this wave the board needs to oversee the readiness of the business/corporation for success in the future by addressing issues like these:
To what extent are the illuminating questions about the future being asked?
Are the knowledge bases of scientists, engineers, managers, and leaders relevant for the future? If not, what is being done about that?
Are people with knowledge, ambition, and vision empowered?
How ready is the company to evaluate and capture today’s unprecedented opportunities?
Are the time frames that are embedded in the mindsets, processes, and planning of the businesses appropriate to capture numerous, sometimes fleeting, opportunities?
Are the relative “weights” of investment in yesterday's, today's, and tomorrow’s known developing and not-yet known businesses explicit, appropriate, and agreed?
Are the resource allocation, risk portfolio, go/nogo decision processes aligned with the emerging business environment (or are they stuck in the past)?
How effective is the Board in overseeing the identification and capture of today’s unprecedented opportunities?
To what extent is the board fully informed and do they understand these and related issues?
Does management promote board debates about the timing of new market developments, trade-offs of being a first mover or fast follower, and societal benefits and costs of new products and services?
To what extent does the structure, expertise, process, calendar, and agenda of the Board assure that the opportunity capabilities of the businesses and corporation are routinely assessed and continually strengthened by management?
How comfortable is the board that the current C-Suite is a good fit, not just for today, but for the unprecedented unfolding future?
The challenges enumerated here can be overcome. In our work with clients, we call the closing of the gap between oversight of risk and oversight of value creation “Opportunity Oversight.” This is a set of approaches, processes, and structures designed to assure investors that management and the organization are ready to benefit from all things new, especially in the coming wave of emerging opportunities. The stakes are too high for any board to ignore Opportunity Oversight.
Editorial Note - Dr. Bennigson has written and spoken extensively on this subject. For further information: Bennigson and Leonard. 2013. “Bringing Opportunity Oversight onto the Board’s Agenda.” MIT Sloan Management Review. March 19, 2013.
Sage Partner Larry Bennigson contributed this Sage Advice.