As you return from the holiday break and look towards your first quarterly board meeting, consider a few of the stories from 2017 that signal change for the year ahead and the implications in the boardroom. The bottom line: big changes are coming, and you need to be prepared.
1. Google, Facebook & Twitter go to Washington. In what is sure to be the first of many trips to Congress, executives from these companies testified before the Senate Judiciary Committee in the fall of 2017, facing increasing scrutiny over their position that they are “just a technology company.” Amid concerns about Russian intervention in the 2016 election by purchasing ads on these mega tech platforms, the executives claim they were blithely unaware. Officials are quickly becoming concerned of the potential hazards of these behemoths and the power and influence they have over individuals without the same accountability as other media outlets. The big tech giants, however, offered little more than “to try to do better.”
What to Know in The Boardroom: These big companies are wielding enormous power over individual lives, which has a ripple effect to your work force, as well as your customers. When the masses are often misled (whether intentionally or not) and these companies earn billions by selling advertising from the misleading information, they can no longer hide under the umbrella of being “just a technology platform.” Much like laws were needed to regulate industries in the 19th century after abuses occurred during the industrial revolution, regulation is likely coming. We’re now a full 20 years into the internet revolution, but it’s really just been in the last five years that the potentially negative impact of these companies is visible. Be prepared for massive shifts in digital operations, how they and you make money, and how you manage your workforce.
2. Uber, Weinstein, Spacey, Lauer and the list goes on . . . . Uber was in the headlines throughout the year, but most prominently by female employee, Susan Fowler, shining a light on sexual misconduct and harassment of women in the frat boy culture that allowed the company to grow faster than nearly any in history. Her blog and revelations began an accelerating trend of women coming forward with their stories of misconduct against some of the most well-known men in the media industry. What was different this year was the reaction in the boardroom. With the digital #me too spreading virally, a zero-tolerance approach was put in place across organizations, recognizing that the digital age meant women can quickly share their stories and build anger and hostility towards organizations who safeguard this inappropriate behavior.
What to Know in the Boardroom: Undoubtedly this will mark a turning point for a new standard in legal and human resources to manage workplace behavior, but it also signals the power digital gives to the individual. This behavior has gone on for decades, but with the power shifted to the individual via digital platforms, it can no longer be swept under the rug with a quick payoff and non-disclosure agreement. Directors and senior executives need to now be mindful of this power and recognize the need to react quickly to these situations. Much like a cyber-hack, many companies are likely already exposed to these types of claims. Rather than waiting for it to hit the headlines, make a point of discussing how your board will respond to a sexual harassment claim against your highest profile of individuals and be prepared so you can respond quickly to minimize the damage.
3. Equifax Could Have Prevented the Infamous Hack with a FREE Open Source Patch. This story, probably more than any other this year, sends a ripple of fear through boardrooms with directors asking, “could we be next?” There will undoubtedly be more scandalous hacks than the Equifax story in the year ahead, but take pause to consider what you can learn. What should trouble directors is the fact that this one was so easy to prevent. If Equifax had a working open source compliance program, this would not have happened.
What to Know in the Boardroom: This goes beyond the obvious, “make sure you patch open source code and update all your software.” The solution here is not rocket science, but it does take leadership, discipline, management and someone outside of your own IT group checking to make sure it’s done. If there’s any lesson for the boardroom, it’s that cybersecurity is just like finance. You don’t have your own accountants audit your financials so why would you have your own IT folks check themselves? Someone else needs to do it to ensure objectivity. This needs to be budgeted and planned for in the future. How are you auditing your company cyber-security initiatives? The answer is key to being prepared for the growing sophistication of cyber-attacks. No company is safe, and the job is never done – this is the new reality.
4. Amazon attacked by Peruvian Government. You probably didn’t hear this one. In its five-year bid with ICANN (the Internet Corporation for Assigned Names & Numbers) to own and operate its powerhouse name at the top level of the internet (i.e. instead of amazon.com it will be shop.amazon or groceries.amazon or any millions of other combinations), the government of Peru has drawn a line in the sand saying Amazon does not have the right to do so because the Amazon river flows through its country. That’s right, that’s the argument. Amazon owns a trademark, pretty much world-wide, and is known world-wide for its name, AMAZON. The ICANN rules governing how a company was to acquire their name at the top level have all been met. It has won every appeal within the ICANN system and is now awaiting a final decision of the ICANN board, likely to come in the spring. Amazon has already migrated its cloud offering of Amazon Web Services over to Buildon.AWS where it can create a secure walled garden and own and control its most important assets – their digital properties. Moving the powerful Amazon.Com over into a top-level domain platform it solely owns and controls may not seem like a big deal, but longer term, it gives them more ability to secure their future. If the ICANN board sides with Peru, Amazon will likely take this to court in California, marking an unprecedented lawsuit of corporation versus government in the landscape of ICANN’s power. This could have long-reaching impacts on how the internet is governed for years to come.
What to Know in the Boardroom: The expansion of the internet is really under the radar. It’s one of these movements that no one knows about until there is a tipping point. You should find out if your company has a top-level domain and get good advice about what to do with it if you do. The landscape of the internet is changing. Don’t wait for it to happen to you, understand what’s happening and the impact and ask your general counsel questions about how internet policy could impact your own digital operations and cybersecurity. All of these issues are connected and related. In the boardroom, you need to connect the dots.
5. Blockchain Emerges from the Shadows. Blockchain has undoubtedly become a hot topic in the boardroom with many still trying to understand how it is distinguished from the controversial Bitcoin. Meanwhile, Bitcoin, the digital currency powered by Blockchain, has surged in value amidst concerns that the unregulated currency is not as secure as proponents argue. I’ll be writing much more this year on Blockchain, but urge you to consider that Blockchain could be like HTML (hypertext markup language) was back in 1990 (HTML is what powers most web sites) or Java Script, which quickly followed in powering website development. It’s new, cutting edge and not yet understood, but could transform the way many transactions are managed. If you operate in finance, insurance or need to verify validity of a transaction, your company should have a team working to understand Blockchain and provide recommendations on possible disruptive implications. It took over a decade for web site developers to fully embrace Java Script, which is now a standard in the industry. Blockchain could easily become an industry standard in the years ahead.
What to Know in the Boardroom. You don’t need to fully understand blockchain to oversee this from the boardroom. But, you do need to recognize its potential to transform the back end of how you do things. Most things powered by a database could be powered by blockchain. This can’t be done overnight. Make sure your company has a team looking at it and reporting in on all possible disruptions or opportunities to your business. Ask questions of your technology team and ensure you are not waiting to react.
6. The Practical Side of Net Neutrality. Years from now, academics will write papers about the impact of putting in place Net Neutrality and then rolling it back just a short time later. I could spend hours debating the merits of rolling back the legislation versus keeping it in place and the other way around. The bottom line is there are pros and cons to both approaches and it’s been overhyped in the media with an Armageddon mentality to the internet. In short, there are no longer regulations on how companies providing internet services can charge for those services.
What to Know in the Boardroom. There will not likely be an immediate impact. It’s highly unlikely any of the big ISPs (internet service providers) suddenly dramatically increase pricing to any one company or customers. However, changes in policy ultimately impact a change in how companies make money and how they plan for a changing future. Net Neutrality is like any other regulation. When there is none, there is freedom to price things the way you want and do things the way you want and the market will determine if you succeed or fail. If you are on the board of an ISP, this will likely be a hot topic as you navigate the freedoms of the rolled back regulation with the market needs to fulfill for your customers. It could also mean an opportunity to innovate how you deliver better and faster services with the ability to generate additional revenue as a result. For all companies, you should understand the impact of this on your digital strategy. If you are putting out content, you may want to leverage new negotiating abilities and consider how you better serve the needs of your customers. Like all facets of digital, the corresponding policy, technology and strategy are all intersected. Ask the right questions of both your general counsel and chief marketing officer to ensure your company has considered the impact of net neutrality and how to be prepared. Are they working together, and do they have a solid opinion on what your strategy should be in response?
7. Mega Mergers & Anti Competition. Amazon acquired Whole Foods. AT&T acquired (or is trying to acquire) Time Warner. Disney announces a planned acquisition of Fox Entertainment. These are just a few of the big mergers of 2017. Mergers in technology, internet service, retail and media inherently signal continued changes in digital. When Amazon announced its acquisition of Whole Foods, stocks of the big grocery companies took a hit, merely at the possibility the retail juggernaut was coming for them directly. The Department of Justice is so concerned about the negative impact of AT&T and Time Warner joining together that it has sued to stop the merger. Disney, which now controls Star Wars & Marvel, ESPN, ABC & most children’s entertainment, will now also own even more movies and cable channels. I could analyze the merits of each of these big acquisitions and what it means for those companies for hours. But, for consumers, it means costs could be reduced and it could be easier to access what they want, whether it’s delivering groceries or ordering a movie and getting it delivered faster. But what does it mean in the boardroom?
What it Means in the Boardroom: We continue to be in the middle of a massive digital and cyber transformation. Twenty years ago the internet disrupted everything, but most businesses merely had to add a marketing function to put up a web site. Today, we are seeing the ramification of that disruption with true shifts in how companies make money and what consumers expect. The reality for every business is that disruption can come from unlikely sources. As the internet service providers merge, the way we access the internet will change. It could be better and faster or it could mean less competition. But, it will change. The way we supply ourselves as individuals and companies will change. It could make it easier and faster and it could put a lot of companies out of business, but it will change. We may have greater access to a bundle of content, but how we access it and what we pay for it will change. These changes mean every company, regardless of industry, need to understand how digital disruption and cyber threats will impact your business in 2018. Being prepared and asking the right questions should be part of your board preparation for the year ahead.
I’ve highlighted just a few of the big stories from 2017 that I see as a signal of what will come. In the Boardroom, you need to prepare to ask your chief legal officer, chief information or technology officer and chief marketing officer tougher questions about how they are preparing and planning for a changing future. Are they working together or in silos? Are they aligned in their approach to managing and preparing for disruption? How are you ensuring they are? Much like you carefully read the financials, you need to read the signals of change and know what’s coming and how it impacts your company to be prepared.
If you are interested in more information about how to prepare your board for digital disruption and cyber-security initiatives, contact Jen Wolfe at firstname.lastname@example.org or 513.746.2800 x1.
Jennifer Wolfe advises boards and c-suite executives on digital disruption and cybersecurity oversight. She has served as the CEO of Dot Brand 360 and Managing Partner of prominent intellectual property and technology law firm, Wolfe, Sadler, Breen, Morasch & Colby. She is an NACD Governance Fellow and Certified in Cybersecurity Oversight. Her latest book, Digital in the Boardroom is a handbook for directors to understand all facets of digital and what’s coming in the years ahead.