By Olivier Dellacherie, Executive chairman, Talen4Boards Inc.
In the changing business world, many companies attempt to find new paths to grow beyond their core business. In this day-to-day fight, company size does not always provide a competitive edge, because the larger the company, the higher are the restrictions, such as risk avoidance, internal procedures, double-checks, fear of failure… The worst case is when the team in charge of the core business is also responsible for catching new ventures, and stumble on the podium of the success of the core activities! In an integrated structure, any new opportunity must have significant potential, leading to withdraw all cases that are not sized to compete on equal terms with the core activities.
One solution to go ahead is to allocate specific resources (human and financial) for sourcing innovation and new ventures. A smaller and/or independent organizational structure might work in taking some risks, in being reactive and creative and in having a different outlook and perspective, operating in a kind of start-up environment, where the structure aims to develop innovation in a dedicated environment, convenient both for improving the offering, and for growing the business. This approach reproduces what a start-up does in its typical life cycle, with its early-stage (focus on product) and later stage (focus on process and market growth).
Doing that professionally, with significant contributions, requires external guidance, outlook, and essential operational advice. What a well-balanced Board of Directors (BOD) generally brings to a CEO or Executive Board at the corporate level, cannot be used here, as the structure is not always independent. Moreover, the best talents are not often motivated to serve as a director, given the legal duties of that position.
In that case, an Advisory Board is the best choice. While the Executive Board, composed of professionals and group Executives, brings their competences and is in charge of supervision and all operational matters, the Advisory Board can work outside the box, being more flexible and reactive. It allows the gathering of data, iterating the ideas, and selecting the most promising and most robust projects. With its extended network, it provides guidance and helps new projects succeed where a large organizational structure could fail. When a project becomes more mature, part of the scope of the Advisory Board might be transferred to the operational team, as soon as the shift occurs from developing the idea of scaling it.
An Advisory Board is a valuable tool for the Executive Board because it is forward-looking, action-oriented, and free to focus on any relevant issue, far from statutory duties of a “classic” BOD. Composed of the best Talents, with no tactical considerations imposed by shareholders, Advisory Board members are selected for their own competences or expertise. They advise and provide guidance, while the decision-making power must stay in the hands of the company representatives and/or BOD.
It would be irrelevant to pit the Advisory Board against the Board of Directors, as they are complementary: the Advisory Board makes recommendations and supplies guidance to the Board of Directors which finally makes the decision, allocates resources and controls the execution.
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