Taking Strategy ‘Back to the Future’

Those who remember when the movie Back to the Future came out may recall the wonder of seeing the flaming DeLorean and being amazed by inventions the scriptwriters believed would exist a half century into the future. One of my favorite quotes from the movie is, “I guess you guys aren't ready for that yet. But your kids are gonna love it.”

That is appropriate guidance today for boards when thinking about a company’s long-term strategy: How will the next generation see it? Discussions about strategy are by their very nature forward-looking. However, the pandemic forced a myopic perspective that made it difficult to look beyond global unrest and volatility.

The EY Center for Board Matters has seen director focus and board conversations about strategy shift markedly over the past several months. Whether at the annual strategy off-site meeting or during quarterly meeting updates, directors are once again looking at the long term, embracing provocative questions, and having critical open-ended debates to lay the foundations for the future while thinking beyond today to how different the company can (and may need to) be when it is handed over to the next generation in five years or more.

Thinking Differently About Strategic Discussions

While several approaches and tools exist to help boards think about future possibilities, two in particular resonate with directors: structured exercises around future trends and deep dives into emerging technologies as part of strategic thinking.

Look through the lens of a futurist. Working with future scenarios ranging from least to most likely to occur is standard practice for many board strategy discussions. However, these projected scenarios are often based on extrapolating from current trends and industry dynamics to make assumptions about a few years into the future. Instead, one useful futurist methodology boards can use is future-trend mapping.

Future-trend mapping (i.e., future-back thinking) starts with a megatrend that is likely to have wide-ranging impacts across multiple areas, such as autonomous vehicles becoming more ubiquitous on the roads. The next step is to consider the first level of implications. What might happen with more self-driving vehicles on the roads? It can be assumed that accidents will likely decrease, insurance rates will likely go down, and traffic congestion will likely decrease. What about the implications of these changes, or the second order of implications? If traffic congestion decreases, that might improve delivery times to customers, more people might move further out from cities, and productivity could improve because of spending less time in traffic. Any of these scenarios could then be taken and followed down another level or two of implications. Equipped with this information, the real questions turn to the positive and negative implications for the company and its business model.

These types of discussions are critical as companies and societies are faced with an uncertain and changing environment in which complex issues and possibilities should be explored.

Integrate emerging technology into strategy discussions. Emerging technologies are impacting every single industry, albeit at varying velocity. Yet far too many boards are having constrained or inadvertent conversations about technology, despite it being one of the largest change vectors for companies. Most board updates from management are focused on cost-cutting initiatives or data analysis via advanced methods. Instead, thoughtful directors should urge their boards and management teams to integrate the possibilities created by new technologies into questions about the future of the business. Directors can focus on the following questions:

• What do we need to know and understand about emerging technologies? Having a conversation that encapsulates technology and how it is developing is difficult without a base-level understanding. Whether the board should have a technology specialist will depend on the company and board. The bigger questions are: What does the board need to understand about today’s technology, and how are emerging technologies advancing capabilities? These can be answered by offering outside education and perspectives, as well as having directors supplement with their own individual learning.
• Where and when will we have these conversations? The importance of when and where the board has these conversations should not be underestimated. For example, these days, we see multiple boards considering a technology committee. According to our analysis of company disclosures, 13 percent of the S&P 500 currently have stand-alone technology committees. While ad hoc and working committees and subcommittees are in place for several other boards, these companies still represent a minority of the S&P 500 overall. Instead, emerging technologies are often discussed under the risk umbrella within the audit committee. When technology is viewed through the lens of risk, it is difficult—if not impossible—to also explore the potential for growth and innovation. More boards would be better served by reconsidering agendas and topic allocation to verify that critical conversations do not get short shrift.

As Doc and Marty embark on their adventure in Back to the Future, Doc says, “Roads? Where we are going, we don’t need roads.” This is perhaps worth keeping in mind as an example of what truly future-oriented thinking can look like — a world where we don’t need roads. Directors have the ability to see the broader horizon and to both draw from their past experiences and focus on what matters most in terms of business models and key drivers. Today, when things that once seemed to be science fiction show up on our doorsteps, that kind of curiosity and willingness to embrace forward thinking will serve companies well as they can respond more rapidly to the changing realities of our world.

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

The views reflected in this article are the views of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.

Cigdem Oktem is a director with the EY Center for Board Matters.