Why Different Talks Require Precise Scripts Versus General Talking Points

Talking points and full scripts each have advantages and disadvantages. Choose between them based on how precise your words need to be and your own confidence in the subject. Leverage talking points when you’re confident and can be flexible. Use a full script when your confidence is low and precision matters.
Charlie Shimanski’s first major gathering as head of the Red Cross’s Disaster Response organization and US Secretary of State Colin Powell’s presentation to the UN on Iraq’s weapons of mass destruction provide opposite examples.
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How The New Perspective On The Purpose Of A Corporation Impacts You

This past week, 181 Business Roundtable CEOs signed a new statement on the purpose of a corporation. The most important change is to take into account all stakeholders including customers, employees, suppliers, communities, and shareholders. This changes the way any corporation adopting this thinks about everything they are doing.
A lot of corporations have been following the Friedman Doctrine in which Milton Friedman suggested that “the social responsibility of business is to increase its profits.” Doing that then allows the business’s shareholders to decide which social initiatives they choose to pursue with their shares of the profits.
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Why You Should Help Your Best People Get Better Roles Working For Someone Else

When experienced leaders look back on their careers, almost inevitably their number one regret is not moving fast enough on people. For most that means not getting poor performers out of bad roles fast enough. For the most effective leaders, that also means not getting star performers into roles that are better for them fast enough.
This is counter-intuitive. Why would you ever want to get rid of your best performers? Because that’s what’s best for them when they outgrow the role.
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How To Avoid Following Your Strategy Off A Cliff

As I said in my earlier article on What It Takes To Accelerate Through A Strategic Inflection Point, there are four primary areas of focus: design, produce, deliver, or service. Pick one as your main strategic focus, with other activities and your culture flowing into or from that. Said it. Meant it. Still believe it. But if that is all you do, you’re heading for a cliff. Every organization has to get all four of these done as well as marketing and selling. It’s a question of balanced focus, not complete exclusion.
You know the difference between generalists and specialists. Right? Generalists know less and less about more and more until eventually they know nothing about everything. Specialists know more and more about less and less until eventually they know everything about nothing. Both go off the cliff into uselessness.
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The Case For Choosing The Likely Over The Possible

The #1 job of a CEO is vision and values – purpose. That’s the inspiring part of inspiring and enabling. But you don’t have to get there in one fell swoop. Choosing the grandest, boldest, riskiest big steps is more dramatic, but less certain than enabling your team to take a series of smaller steps, each with a higher likelihood of success.Witness the way Tiger Woods played the last hole of the 2019 Masters. His winning that tournament seemed almost impossible when he hit bottom after his personal and health issues. As someone put it later, “It wasn’t so much that he won, but that he won after not winning for so long.” If Tiger had needed seemingly impossible shots on the last hole, he would have gone for them. But he didn’t. All he needed was to take five shots on a par four.
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Marketing and AI: What Boards Need to Know

Intelligence (AI) is about to exit the hype cycle, and innovative boards should
be empowering and positioning their companies to take on the advantages and
challenges that come with it. Chief marketing officers (CMO) in particular are
either using AI for competitive advantage already, or they are chafing at the
bit to do so. The directors of companies need to be ready to oversee the work
they are doing with the technology.

Whether used by
marketing departments for customer data analytics, targeting, recommendations,
or chatbot support within a company, there are implications to AI
implementation for a company’s leadership, strategy, risk, ethics, and
corporate social responsibility. The good news is that board members do not
need to understand the working of every feature, part, and possibility of AI to
be able to govern its use. This is like driving and even enjoying a Tesla—business
principles apply to and drive governance. Understanding exactly what is under
the hood can come a bit later.

Four broad areas exist
for company directors to consider:

Understanding and
staying abreast of developments in AI;Implementing AI within
marketing;Governing AI
initiatives after implementation; andContinuing with AI in
the future.

Institute an AI Council Within the Board

One of the most significant challenges involved in governing the use of AI is the frenetic pace at which the technology is advancing. Boards should be aware that AI can be applied to a variety of traditional marketing functions: dynamic pricing, demand forecasting, increasing conversion, customer support, and even for customer retention. A recent McKinsey study found that AI will make an impact on various retail sector business functions to the tune of  $600 billion, with other sectors facing significant disruption, too.

Meanwhile, boards should also understand the race across the world that is happening to understand, apply, and reap the benefits of AI. Eighty-five percent of Chinese companies are actively working in AI and China is dominating AI research and implementations. The European Commission chartered with ensuring trust about the use of AI published seven essential guidelines on ethics for AI including human agency, transparency, bias, social and environmental wellbeing and privacy.

While these are not yet governance laws, boards should expect to see laws sometime in the near future. For instance, the General Data Protection Regulation (GDPR)  already requires transparency about any algorithms used. Algorithms need auditing for bias from both technical and social perspectives. A similar law could emerge for use of AI, or GDPR could be more broadly applied to AI, for instance.

For these reasons, it
is useful to constitute an AI council within your company that is specifically
charged with educating the board on the technology and related regulations,
monitoring strategic AI initiatives and competition, reporting on risk and
ethics, and bringing the board up to speed on other related AI oversight
matters. An AI council with a diverse set of experts is best suited to create a
detailed and feasible transformation plan to ensure longevity and staying ahead
of the competition. With the help of an AI council, the rest of the board can
understand the landscape quickly in the business context and be ready to take
on strategic and governance challenges.

Implementing: AI As a
Platform, Not A Point Solution

AI presents a unique
opportunity to market across the customer lifecycle. Companies currently struggle
to consolidate customer data from channel silos and rely either on human skill
or chance to drive conversion. AI presents the real possibility of running one-to-one
marketing and sales to increase conversion based on individual customer

By consolidating customer data across traditional marketing channels along with transactional, customer support, and loyalty programs into a customer 360 database, AI can provide the following: highly targeted messaging, individualized promotions and pricing, and automated customer engagement and support, all in order to increase repeat and first time conversion.

Siloed marketing departments
with inadequate IT support find expensive and ineffective external point solutions
to make this type of marketing happen. A comprehensive data and customer
lifecycle platform that uses machine learning and AI is able to model the data
as required for differentiation and success at greater speed. 

To realize this potential, boards must drive transformation and sustained long term strategy. Technology implementation should start with clarity on business goals and continued transformation. Here are pitfalls to consider during implementation of such transformations that boards can help companies avoid.

Governing: Oversight

Since AI adds new challenges
and opportunities to marketing, directors need to be able to understand the
motivations, results, and risks for any marketing processes that use it. At the
outset of the board’s work to oversee AI practices within the company, the
board should request from the CEO and CMO a summary of the following:

opportunities being
pursued via AI;functions and features
in use;types of data and how they
are being used;privacy, bias, and ethics
considerations paired with measures or audit trails to track them;any findings by AI
such as new customer micro-segments or product and service features needed; any external sources
of data being used;any data partners who
might share data and how they might do that; and  any explanations or
assurances provided to stockholders, particularly around any rulings around
data, ethics, and corporate social responsibility.

Thereafter, a report every
six months on changes or progress within these areas is a good way to keep the
board informed about AI’s use and role within the company.

In regular reports, the CMO typically presents metrics such as “ad to sales” ratio and “contribution to sales.” Most marketing departments still struggle with attribution of marketing spend to conversion and cannot readily cite customer acquisition cost (CAC). The use of AI along with customer 360 data enables clarity on customer acquisition, conversion, satisfaction and retention or customer lifetime value (CLV). CMOs in concert with business unit owners should then present KPIs such as CAC, CLV, and sales growth, as improved by AI every half year.

Audit also plays an
important role in the board’s ability to oversee AI marketing efforts. Audit
reports on privacy and bias provided by the audit measures and independent
auditors must be presented yearly. The strategic plan should have half yearly
and yearly benchmarks for the use of AI. The board should gauge the need for
adjustments in strategy or actual progress based on the goals in the plan.

Continuing: Future-Proofing
and Longevity

Faced with ever-faster disruption, companies must future-proof themselves and their technology with continual transformation. Even the government is doing it. Boards must support a culture of measured risk-taking and agile culture and process. Preventing regime change from restarting and reinvesting is a key board responsibility. The AI council should work in concert with the board to list anticipated market changes and product or service features that drive deep differentiation. Whether by internal efforts or by acquisition, strategic planning and preparedness will ensure companies survive.

Tuning Up the High Frequency Enterprise

In my role looking after enterprise strategy for Amazon Web Services (AWS), I employ a team of former chief information officers to help large enterprise customers with their cloud adoption strategies. There are a number reasons why so many enterprises are moving to the cloud, including cost savings and improved performance and reliability, but more often the reasons motivating a move to the cloud include the business’s need for greater speed and agility to help accelerate their digital transformation efforts.

Many enterprises are stuck in what we call a “low-frequency” mode of operating—or an environment where any change involves risk, introduces instability, and requires a lot of effort, ultimately leading the enterprise to move at a slower pace. This is opposed to “high-frequency” enterprises that have achieved a rapid pace of change and reduced risk, where the focus is on frequent value delivery rather than ensuring change does not disrupt operations. In my team’s new eBook, Tuning Up the High Frequency Enterprise, we discuss what the C-suite and board should know about the idea of moving from an organization operating at low-frequency to one of high-frequency.

the Low-Frequency Model

Why are so many enterprises stuck in low-frequency mode? Boards should understand that low-frequency digital operations are typically due to a mountain of technical debt within the company’s information technology practices. The debt could have been piled on or caused by years of accrued workarounds and shortcuts for issues in existing systems and applications that were never addressed. This debt is compounded by outdated models of security, risk, and compliance that fail to build in processes meant to discover performance issues or vulnerabilities early in the development process when they are less costly to resolve.

Another reason why low-frequency operation
models persist is that when the digital leaders of an enterprise develop a new
vision and objectives, that vision and grand roadmap too often are expected to
be matched with what we like to call “big execution” in information technology.
Before any team writes a single line of code, months are spent by executives,
managers, and project managers in intricate planning, trying to map out every
step of development and product delivery along the way in advance. The problem
is that in this mode projects tend to grow larger and more unwieldy, with the
scope expanding as more and more requirements are added in by a broader set of

Taking this approach means months or years can go by before anything is put in the hands of the customer. It can also mean that the project is completed without any periodic validation that it actually achieves the original objectives of the grand vision or strategy. As a result, boards will likely have a more difficult time gaining visibility into the actual progress of these large, low-frequency investments, and assessing whether or not they pose a risk to the future growth and health of the enterprise.

to High-Frequency Success

On the other hand, becoming a high-frequency enterprise means that the company’s leaders are guiding it towards being an organization where technology is a true enabler of continuous improvement and business value generation. Operating in high-frequency mode means your company’s digital leaders and teams can make changes to products, systems, and applications at the quick pace your business’s strategy requires and at the speed that your customers demand.

How does our team know this works? We have worked with thousands of the largest enterprises globally, and our team is comprised of experts that have led our own digital transformation efforts at companies like Coca-Cola Co., Capital One Financial Corp., and the Department of Homeland Security. Through this work our team has identified seven of the most common strategic shifts needed to get out of this low-frequency mode. Enterprises must identify the rigid and slow-moving anti-patterns holding them back and work to develop new behaviors. The board and the innovation and technology committee can play an active role in this process by working with its technology leadership at the C-suite level to drive an assessment of their current state relative to these patterns, and can suggest that the company prioritize these strategic shifts towards becoming better, high-frequency practitioners of digital transformation.

As board members, your role is of course to look beyond the technology. It’s important to recognize that a mindset shift is usually required to move the business into high-frequency mode. Leaders need to set the agenda, and role model the new patterns for their teams. Change is a fluid journey that requires building a continuous learning culture, constantly refactoring your systems, and always working to reduce your time to delivery. I hope the guidance provided here and in our eBook can help your board understand the enterprise patterns that will speed your digital transformation strategy to success.

Philip Potloff is head of enterprise strategy at Amazon Web Services (AWS).

Stavridis Challenges Boards to Evolve on Cybersecurity

A recent
Accenture report finds that as the challenges of cybersecurity continue to
rapidly change, increasing in impact and complexity, the cost of resolving cyberattacks
is also on the rise. In fact, in 2018, the average cost of cybercrimes on
affected companies increased by 12 percent from the year before, reaching $13
million per company. As these mutating threats grow in volume, sophistication,
and scope, companies and their boards will be forced to play catch-up with
threat actors constantly adapting their cybersecurity defenses.

Admiral James Stavridis, former Allied Commander of NATO, has been consistently beating the drum for enhanced cyberprotection for years, and remains concerned about the varied risks originating from cyberbreaches. Stavridis recently joined NACD to share his insights into board governance of this ever growing threat. He’s currently operating executive of the Carlyle Group, chair of the board of counselors of McLarty Global Associates, and chair of the board of the US Naval Institute. He is also a monthly columnist for TIME magazine, and chief international security analyst for NBC News. Admiral Stavridis will be a featured speaker at the NACD 2019 Global Board Leaders Summit.

Cyber Risks Present a
Unique Challenge for Our Times

Boards largely recognize the growing significance of cyber risks. The 2018–2019 NACD Public Company Governance Survey finds that roughly 77 percent of directors have reviewed their company’s current approach to securing its most critical data assets against cyberattacks. That said, boards remain concerned about governance of this risk area; according to the same survey, 97 percent of respondents report oversight of cybersecurity as an important area of improvement. And they are right to be concerned, as just half (50%) express confidence that their companies are properly secured against a cyberattack.

Directors’ anxieties over cybersecurity are well-founded, as
this security issue cuts across nearly all dimensions of modern life. From
national security threats to the devices we carry with us, or those found in
our homes, the proliferation of digital connectivity has increased our
vulnerability to these threats. For Admiral Stavridis, it’s important to
disaggregate the types of risk, as each will require unique treatments and strategies
to effectively address. He breaks these cyber risks down into the following:

activity. This comprises “for profit activity, which by some estimates may
amount up to one trillion dollars a year; and can include activity such as
stealing an individual’s most private and intimate details from the cloud. This
particular risk presents a massive challenge for most companies today.” Terrorism.
“This is the work of groups whose activities are ideologically-driven and
question the value of specific societal structures. These groups include the
Islamic State, Boko Haram, WikiLeaks, right wing nationalist organizations, [and]
international anarchist organizations.” State-on-state
cyber risk. “There are a lot of shadow national activities, which used to
take the form of espionage, but are quickly turning into shadow wars. Hackers
are infiltrating networks, planting devices, manipulating data, and producing
very real kinetic effects. In this arena, the US and China are the largest
rivals, but certainly not the only relevant ones—other important players
include Russia, North Korea, Iran, Israel, and France.”

Cyber-Risk Expertise
in the Boardroom

In response to these threats, observers are debating the
effectiveness of adding cyber-risk expertise to boards. Congress is getting
involved, with the proposal of a bill that would push publicly traded companies
to include cybersecurity experts on their boards. A separate congressional bill
has also been introduced, which if passed into law, would require public
companies to disclose whether directors are cybersecurity experts. Proponents
of these legislative initiatives believe these would elevate oversight of this
risk in the boardroom. Opponents question how expertise will be determined and
by whom, as well as the effectiveness of a single-purpose director.

Admiral Stavridis falls squarely in the camp advocating for inclusion of this knowledge base in the boardroom, noting, “I do think it’s mandatory that every single firm has at least one cyber expert as a board member. So often, boards are simply not up to speed. [To mitigate against this reality,] some boards bring in a chief information officer, technology officer, or another member from the management team. But there is no substitute for having a peer in the boardroom, who broadly understands cyber, as well as the company’s approach to incorporating this risk calculation into its operations.” 

He also believes in the next couple years, the United States
Securities and Exchange Commission is likely to start mandating this type of
expertise for public company boards. According to the Admiral, “it will
resemble audit, in the sense that this will be a defined skillset, and will
require a committee that focuses on its oversight.” He uses one of his boards,
which established a committee on safety, technology, environment, and
operations, as an example. The board decided to incorporate safety and
operations into the committee’s responsibilities, as that is where much of the
firm’s cybersecurity concerns are concentrated. “It’s an interesting grouping,
but [to meet our company’s specific needs], that’s where we delegate governance
of cyber risk, as well as the technology function,” he explained.

Leading Practices for
Cyber-Risk Oversight

The Admiral believes the future of board oversight of risk
is likely to skew towards cyber risk. His decades of experience, in the public
and private sectors, have given him a unique perspective into these threats, boosting
the legitimacy of his warnings.

This issue is not going away anytime soon. Its impact is
likely to be more acutely felt in the coming years, especially as a growing
number of companies leverage customer data to transform business models and
create value. Effectively addressing this challenge will require an approach
that incorporates not only strategy and risk management, but also legal and
technological expertise. There is no panacea. There are, however, practices and
processes that directors can adopt to mitigate exposure to cyber risks.

The NACD Director’s Handbook on Cyber-Risk Oversight provides practical guidance for boards across company sizes and types. Its five key principles are highlighted below:

Directors need to understand and approach cybersecurity as an enterprise-wide risk management issue, not just an information technology issue.Directors should understand the legal implications of cyber risks as they relate to their company’s specific circumstances.Boards should have adequate access to cybersecurity expertise, and discussions about cyber-risk management should be given regular and adequate time on board meeting agendas.Directors should set the expectation that management will establish an enterprise-wide cyber-risk management framework with adequate staffing and budget.Board-management discussions about cyber risk should include identification of which risks to avoid, which to accept, and which to mitigate or transfer through insurance, as well as specific plans associated with each approach.

Hear Admiral James Stavridis, former Allied Commander of NATO, speak at NACD’s 2019 Global Board Leaders’ Summit, September 21-24, 2019, in Washington, DC. Register by August 31 to save $500!

D&O Liability: Three Emerging Areas to Watch

The risks for businesses are constantly evolving, and
the pressures on company boards and officers are continually growing. Gone are
the days when directors’ and officers’ main concerns were related to company
mismanagement and misrepresentation claims. Chief among the potential risks
boards must now deal with are emerging technologies, cyber-risk issues, and ever-expanding
litigation against companies and their boards. Given the emergence of these
three threats, it is imperative that you and your fellow board members review your
and officers liability (D&O) insurance for any
lapses in coverage.

Emerging Technologies

Technology is advancing like never before, and
businesses are using innovative technological tools to revamp everything from
back-office processes to the products and services they deliver to customers.
But with the excitement of new and arguably better solutions come a lot of

Although artificial intelligence (AI), blockchain technology, digital assets, and quantum computing are all emerging technologies with something to offer businesses, each also presents potential exposures that must be understood and addressed. Whether it’s the lack of regulation, the evolution of existing regulations to keep up with new technology, a company’s inability to keep up with the times, or a board’s failure to properly disclose associated risks or costs, these new innovations can give rise to exposures that are now only being discovered by courts of law and insurance companies alike. For example, the failure to adequately disclose the potential risks associated with the implementation of AI, or misrepresentations about those risks, could lead to a potential directors and officers (D&O) insurance claim.

and Privacy-Related Issues

In the relatively short history of cybersecurity exposure, boards have generally considered cyber-related loss to be a top risk for companies. The threats these incidents can pose to organizations, directors, and officers are becoming more apparent. Those threats include an increase in:

Securities class-action filings as stock drops
associated with data breaches continue.Derivative lawsuit filings against directors
and officers for alleged mismanagement or false or misleading statements related
to cyber incidents.

Over the past year, we’ve seen greater regulatory scrutiny and
activity in the cyber exposure space, and it is not limited to civil litigation.
The Securities and Exchange Commission (SEC), for example, has settled
enforcement proceedings arising out of matters such as a company’s purported
material misstatements and omissions regarding a large data breach and alleged
failures in cybersecurity policies and procedures surrounding such a breach
that compromised the personal information of thousands of customers. We expect
that the SEC and other regulators will continue to focus on cybersecurity
threats and breaches going forward.

In addition to breaches, privacy regulations—such as the General Data Protection Regulation in Europe—are a priority for all boards and a major area of focus for regulators. For example, the Federal Trade Commission’s recent acknowledgment that it has the ability to penalize individuals for their companies’ privacy law violations is a reminder that individuals are not immune to these types of exposures.

In addition to liability concerns, cyber- and privacy-related issues can cause reputational harm. A rating agency recently downgraded its outlook on a company in large part because of breach-related issues. The impact of cyber- and privacy-related exposures on companies and their directors and officers are only beginning to play out.


One need not look far to find significant litigation risks for businesses and their boards of directors. According to an analysis by NERA Economic Consulting, 83 percent of completed company mergers are met with litigation, and one in 12 publicly traded companies are expected to be sued in a securities class action suit this year. What’s more, following the March 2018 US Supreme Court decision in Cyan, Inc. v. Beaver County Employees Retirement Fund, companies going through initial or secondary public offerings are now more likely to be met with litigation in both state and federal court than before.

The world of corporate governance has changed. Business decisions
are now closely scrutinized by the public. The use of email among company
individuals forever preserves a record of discussions that once might have
remained private. And actions taken in the public eye—including those through
social media—can expose a company and its officers and directors to some form
of liability.

Plaintiffs’ attorneys, meanwhile, become more resourceful every
day; even those firms that were previously not feared have turned filing
lawsuits into a factory business. And smaller to midsize companies that once
barely caught the eye of the plaintiffs’ bar are now squarely in their

According to NERA, 441 new securities class actions were filed in 2018, the most in any year since the aftermath of the 2000 dot-com crash. 2018 was also the fourth consecutive year of growth in the number of filings, exceeding the 434 filings in 2017. In the first quarter of 2019, 118 securities class actions were filed; that puts us on track for 472 class actions this year, and a fifth consecutive year of growth.

The heightened pace and total of securities class action filings that
has continued into 2019 is, in part, attributable to the growing number of
follow-on, event-driven securities litigation filings, as opposed to cases
involving accounting misrepresentations and financial restatements that have
historically made up the bulk of securities litigation. Event-driven litigation
occurs when some adverse event at a company triggers a securities claim—based either
on a stock drop following the announcement of such an event or in the form of a
derivative action thanks to an alleged breach of fiduciary duty. In addition to
cyber-,  privacy-, and sexual harassment-related,
event-driven litigation, an array of other incidents have led to securities
claims, including mass torts, product defects, product recalls, food safety
issues, anti-corruption scandals, and the California wildfires. These types of
risks are difficult to predict.

The cost of litigating even a baseless case that is dismissed or
settled early on can be significant, which has not gone unnoticed by D&O insurers.
The more litigious environment coupled with years of falling premiums and expansions
in coverage have brought the D&O market to a crossroads. The market has seen
14 years of generally soft conditions, providing buyers with favorable premium
pricing and broad coverage enhancements. Over the last few quarters, however,
we’ve seen a dramatic switch. Premium increases are now commonplace and policy
negotiations have become more difficult as insurers face pressure on primary,
excess, and Side-A—or personal asset protection—differences in condition

With the risks for directors and
officers constantly becoming more numerous and complex, insurance is more
important than ever. It’s vital to consult closely with your insurance and
legal advisors to ensure the companies you serve have robust D&O insurance
programs that protect both corporate and personal assets against these, and
other, potential threats.

Sarah Downey is the D&O product leader at Marsh.