Industries, businesses and business models are being radically changed as a consequence of all the technological developments sweeping the world. I am writing a series of papers that cover the implications of all of this for how boards go about doing their work. The first paper is a general overview of these developments.

1. Colvin Thoughts
The implications of
digital disruption for boards
It is clear to most of us that we are at the early stages of the greatest
transformation of industry structures, business models and the nature of work
that the world has ever seen. These changes have the potential to impact all
businesses and most categories of work.
The opportunities are exciting, and the threats are potentially severe.
In 1962 the average lifespan of an S&P 500 company was 62 years. Today it is 18
years, and could be 15 years by 2025.
It is estimated that business models may only have a lifespan of three to four
years, given the pace of technological change. About the same lifespan as
average CEO tenure.
This paper aims to summarise some of these major changes, and suggests that
many boards need to rethink how they respond to these forces sweeping the
world, in terms of how best to discharge their responsibilities.
Consider the following:
 World’s largest taxi company owns no taxis – Uber
 World’s largest accommodation provider owns no real estate – Airbnb
 World’s largest phone companies own no telco infrastructure – Microsoft
Skype, Apple FaceTime, Google Hangouts and WeChat
 World’s most valuable retailer has no inventory – Alibaba
 Most popular media owner creates no content – Facebook
 World’s largest movie house owns no cinemas – Netflix
 Largest software vendors don’t write the apps – Apple & Google
 The Internet of Things will reshape logistics and supply chain processes
 Quantum computing will dramatically accelerate the power of Artificial
Intelligence (‘AI’)
 The continuing development of IBM Watson type AI systems offers
considerable productivity improvements
 By 2025 a significant proportion of cars are likely to be driverless and/or
electric – our current car is likely to be one of the last many of us buy
John Colvin is the Principal
of Colvin Consulting Group

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 A combination of inexpensive alternative energy sources with smart
batteries – like those offered by Tesla – will change many industries
 The blockchain platform has the potential to revolutionise various kinds of
financial services and commercial transactions
 47% of today’s jobs could be automated by 2030. When we emerged
from the industrial revolution of the 19th
century, we were left with entire
workforces untrained and unskilled for what was needed next. The same
is happening today.
Extraordinary changes have, are and will continue to happen
It is clear that extraordinary changes have already occurred, and many more are
waiting in the wings.
A recent Deloitte study has identified that there are five industries in Australia,
representing a third of the economy, where major disruption is expected within a
three-year time horizon:
 Retail
 ICT & Media
 Finance
 Professional Services
 Real Estate
Six industries, representing another third of the economy, will also experience
major disruption, but over a longer time period, according to the Deloitte study:
 Education
 Government Services
 Health
 Transport
 Utilities
 Agriculture
A survey of 941 business leaders in 12 countries also estimated that four out of
the 10 biggest players in most industries would be displaced by digital disruption
before the end of this decade.
Informed observers comment on the transformational impact on specific sectors:
Unless financial institutions undergo major transformation, they will become
‘capital-providing utilities’ in a highly regulated, ever less profitable, environment:
 In the near future, it’s predicted that 20-50% of branches will close and
20-50% of bankers will lose their jobs.
The last two years have been extraordinary, in the sense that technology has
deconstructed the retail industry. Now, every merchant, every retailer must have

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an omnichannel strategy, or they won’t survive. That’s very different from even
just 24 months ago.
The big picture for commercial real estate: more change than any time since the
industrial revolution:
 Office
o Employees work anywhere, anytime
o Changing the workspace delivers a more connected place
o Workplace is a business-enabler, to collaborate and drive
productivity.
 Retail
o Consumers can shop anywhere, anytime
o Store networks are at the beginning of a major shift
o Empowered consumer driving new business models.
 Many start-ups are leveraging the combined GAAF capability – Google,
Apple, Amazon and Facebook.
These technologies also offer incredible opportunities for companies to reduce
radically their operating and overhead cost structures.
There are a range of other technologies that are transforming the world as well –
nano, materials and biotech to name just a few.
This overall technological revolution is driven by three things:
 All the world’s media and information has or is being digitised, and new
information is being added at an accelerated pace from sensor data from
‘smart devices’, sometimes referred to as the Internet of Things
 Mobile devices can access this information and anyone anywhere at
anytime
 Cloud computing puts a super computer in your pocket – it’s like Moore’s
Law has gone berserk. Barriers to entry have been demolished.
As a consequence, the world is far more unpredictable, and change is happening
far faster than ever before, making the jobs of boards and management much
more difficult than in the past.
Most of the chairs and directors I speak to across most of Australia’s key sectors
believe that every business needs to embrace these fundamental forces sweeping
across their markets, to ensure the long-term survival of the businesses under
their stewardship.

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In my opinion, boards have two key responsibilities among a large number of
requirements mandated by various regulators:
 Ensure the long-term survival, value and strength of the business
o Includes ensuring that the company complies with its legal
obligations and therefore sustains its right to operate, and
protects its assets through appropriate risk management
 Ensure that expected performance is delivered to key stakeholders
continuously.
Boards discharge these key responsibilities by focusing on the following:
 Making sure the leadership of the business is competent to deal with the
many issues facing the business and deliver on performance expectations
 Making sure that succession processes are in place, to allow relevant
leaders to be in place to lead the future business
 Ensure that the leaders of the business, including the board itself, build
and sustain a culture that is necessary to underpin success
 Testing the adequacy of the business’s vision, strategy, business and
operating models and cost structures
 Ensuring that appropriate risk management processes are in place.
Boards need to spend more time on strategy and the impacts of digital
transformation on their businesses
The fourth point – testing strategy and business models – is where many boards
need to spend more time, given the dramatic changes likely to affect every part
of their businesses.
Many public company boards need at least two directors with deep technology
knowledge and experience
In my opinion, many boards in the public arena can only truly discharge this key
fourth responsibility if they have some directors on the board who have a deep
understanding of the technology forces at work relevant to their industry.
I believe that many boards need at least two directors with strong and relevant
technology knowledge and experience. This knowledge and experience is
required to provide the board with deep understanding of the relevant forces
that produce significant new opportunities and major threats to the sustainability
of the business.

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The entire board needs to have a mindset that embraces the challenges and
opportunities of digital disruption
The entire board needs to have a mindset that believes that their business will
look quite different in a few years’ time, and enthusiastically embraces the work
required to ensure the ongoing relevance of their business.
This mindset can be created and sustained by a range of possible initiatives, some
of which will be embraced by individual companies:
 A chair who is passionate about keeping abreast of these changes, and
actively engages in the process of learning about new opportunities and
threats. I believe that this is a key factor
 Overseas visits by the board and senior executives, to learn about relevant
transformational changes at close quarters
 The technology directors helping the board appreciate the range of
opportunities and challenges generated by new technologies at a detailed
level
 Many businesses have created the role of Chief Digital Officer, who will
have an important job in keeping the board up to date with all relevant
technology developments
 The creation of a new board committee – The Digital Committee – with a
charter to evaluate all possible opportunities and threats and develop
appropriate strategies
 Many businesses have set up labs in Silicon Valley or in Sydney to explore
these opportunities
 The creation of an Advisory Board of eminent technologists, to advise the
major board on these matters.
Using technology to disrupt board processes and work
One way for directors to prepare themselves to be a good digital director is to use
technology to disrupt the way the board does its work. Technology can help
directors automate the compliance factors for internal and external audit and, as
a result, give greater insight to both compliance and culture. The time saved can
be invested in strategy discussions.
I look forward to discussing these exciting developments with you over the
coming months.
John Colvin
Principal
Colvin Consulting Group
April 2016

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“First they ignore you; then they laugh at you; then they fight you; then you win.”
The quote is from Mahatma Gandhi, explaining the process by which non-violent
protest can prevail. It can just as easily be applied to disruptors and the response
from the incumbent firms.
Appendix 1 contains some ‘what ifs’ penned by myself

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Appendix 1
What would happen to … if …
Driverless cars take off
 What will happen to the car insurance industry?
 What will happen to the crash repairs and spare parts businesses?
 What will happen to the car parking industry?
 What will happen to the sporting stadiums’ car parks?
 What will happen to the public transport system?
 What will happen to the automotive industry if Uber provides a driverless service that allows
people to dispense with their cars?
 What will happen to the petroleum industry if electric cars become the norm, and are powered
by solar energy or using stored energy from Tesla batteries?
AI systems learn how to do routine work in the professions
 What will happen to law firms’ due diligence work?
 What will happen to discovery work?
 What will happen to straight audit work?
 What will happen to routine design work in engineering companies?
 What will happen to Professional Services firm economics, if leverage ratios are significantly
reduced?
Office workers only spend 50% of their time at the office 10 years from now, because of virtual
reality systems
 What will happen to the surplus office space in major cities?
 Will we need the same level of public transport?
 What will happen to all the services provided in cities, if only half the people are spending their
time in the cities?
Shoppers only spend half of their time in shopping malls
 What will happen to shopping malls, if people can get their needs satisfied online and using
virtual reality systems?
 What will happen to all the parking space built around shopping malls?
Connected sensors are everywhere
 Imagine if every asset, person, document, employee and product had a sensor transmitting data
so you could track movements/status and condition. This would give the board, CEO and
executive team an insight to the inner workings of the business that they have never had before