Technology and the boardroom: A CIO’s guide to engaging the board

CIO Insider

​Because technology is a crucial part of business strategy, boards and CIOs may need to elevate their engagement and collaboration with each other. How can CIOs lead and guide the conversation about technology's impact on business trajectory?

TECHNOLOGY is a strategic imperative in nearly every organisation, regardless of industry, sector, or geography. Few companies are immune to the influence of technology-driven disruption, innovation, or value creation. Business strategy is now largely technology strategy and high-performing CIOs are both leading technology deployments and helping the business develop and implement technology-enabled business strategies. “There isn’t a single strategy in any business that isn’t enabled by technology,” affirms Sheila Jordan, SVP and CIO of Symantec. “Technology is the common denominator in every single key strategic imperative in every company.”1

Many board members agree. “As the pace of change quickens, technology now leads and influences business strategy in almost all companies and industries,” says Scott Bonham, board director at Magna, Scotiabank and Loblaw Companies Limited. “It is imperative for board members to understand these disruptive changes as they relate to technology, guide the organisation to go beyond traditional IT conversations and leverage technology to grow the business.2

Yet CIOs—ostensibly the stewards of the organisation’s technology agenda—infrequently appear in the boardroom and when they do, they often find it difficult to engage directors in a strategic dialogue. This CIO Insider aims to help CIOs be more effective in positioning technology on the board’s agenda, providing education and awareness for the board, and communicating strategic concerns. Based on multiple interviews with both CIOs and board members, it presents CIOs with recommendations for engaging with the board on preserving and growing shareholder value.

Technology acumen in boards

A 2017 Deloitte study found that high-performing S&P 500 companies were more likely (31 per cent) to have a tech-savvy board director than other companies (17 per cent). The study also found that less than 10 per cent of S&P 500 companies had a technology subcommittee and less than 5 per cent had appointed a technologist to newly opened board seats.3

Over time, more boards are seeking to appoint directors with technology acumen—but open board seats are few and far between. There are many reasons for this, including board member age, tenure and board refreshment. Among S&P 500 companies, the average age of an independent director is 63,4 and 44 per cent of boards with a mandatory retirement age have set that age at 75 or older.5

Historically, board interactions with technology topics often focussed on operational performance or cyber risk. The Deloitte study found that 48 per cent of board technology conversations centred on cyber risk and privacy topics, while less than a third (32 per cent) were concerned with technology-enabled digital transformation.6

The power of ongoing conversation

Interactions between management and boards have historically been episodic, typically occurring only at quarterly board meetings. The rapidly changing technology and business landscape suggests perhaps that boards and technology leaders should stay connected and engaged outside of board meetings; yet, our interviews showed that when it comes to technology, many boards emphasise “protecting and preserving” at the expense of topics related to technology-enabled business growth and expansion, such as developing new capabilities, business models and revenue streams.

Deloitte’s 2018 global CIO survey found that technology investments reflect this imbalance: In the average organisation, only 18 per cent of the technology budget is spent on developing new business capabilities; the remainder is spent on business operations and incremental business change.7“I don’t want to dismiss cyber, because of course it’s critical. But if you were to ask me what keeps me up at night it’s not cyber—it’s disruptive technologies,” says Mike Toelle, Nationwide board director. “Any company in any industry could be made obsolete very quickly by a small group of people with a computer and a phone.”8

CIOs can initiate an ongoing technology awareness effort that, over time, could help them make strides in communicating with and educating directors. Deloitte’s global CIO survey found that an increase in interactions between CIOs and the board can lead to a more balanced mix of conversations about both risk and strategic opportunities9 (see figure 1).

Another important topic for board discussions is the allocation of technology investments. It can be tempting to continue investing in areas with a proven return; CIOs can help boards resist complacency by having an ongoing dialogue on the allocation of technology investments, the appropriate balance of investments in preserving and growing the business, and the value of sustained technology-enabled business innovation capability that can shape the organisation’s future.

Metrics presented in dashboard or scorecard format can be invaluable. To provide clear and consistent messaging and show progress in board conversations, David Markwell, SVP of information technology at Canadian food retailer Loblaw Companies Limited, says his team created a framework for a balanced scorecard across certain key indicators. “We aligned the scorecard with tolerance levels of enterprise risk, which align to the board’s appetite for risk” he explains. “We include the scorecard in the pre-read and in the meeting, we talk about anything that’s out of tolerance around our risk indicators.”10

Three avenues for having strategic technology conversations

Management teams can engage in ongoing strategic technology conversations via three primary avenues: tech-fluent board members, board subcommittees and management-level technology committees.

Tech-fluent board members. Based on their experience, age, tenure and other factors, directors typically have varying levels of tech fluency, defined as the ability to broadly understand and confidently discuss technology concepts.11

Like language fluency, the need for technology fluency will be different for each board member, depending on their roles. CIOs can aim to increase the overall tech fluency of all board members and build trusted relationships with key directors. They can also orchestrate training and awareness based on the different needs of board members by providing succinct, high-level educational materials about key strategic technology issues and their impact on the business and industry. In interviews, many directors said they do not know where to start and that it can be difficult to find educational resources when they need them (see sidebar, “Sparking ongoing conversations about tech trends”).

Sparking ongoing conversations about tech trends

For the last decade, Deloitte’s annual Tech Trends report15 has identified the trends that are likely to disrupt businesses during the next 18–24 months (see figure 2). Using such research as a basis for discussing business implications can lead to robust conversations between boards and technology leaders.

CIOs can use interactions with directors to spark conversations on how technology trends can enhance business value and reduce costs, leading to a broader dialogue about how these emerging innovations are being used in different industries. CIOs can also raise directors’ awareness of technology risks and challenges, help them assess their organisations’ readiness for these technologies and educate them on how to provide effective oversight of technology adoption.

For example, CIOs can leverage Tech Trends to help engage boards on how the convergence of new technologies and foundational technology forces are enabling organisations to drive disruption while maintaining operational integrity. The report can also help them make a case to the board for developing a systematic approach for identifying and harnessing digital transformation opportunities to replace the traditional model of anchoring digital transformation to a specific technology advancement.

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Many directors rely on the judgement of their more tech-fluent colleagues who may serve as the board’s resident technology experts. CIOs can cultivate these board members to be technology advocates. “CIOs need an advocate for technology sitting on the board who can continue to emphasise that technology strategy is not distinct from business strategy,” notes Owen Williams, insurance CIO at Everest Reinsurance. “And directors need technology leaders to provide elevator pitches that very succinctly describe the value that technology investment will deliver to the business.”12

Conventional wisdom would suggest that younger directors are more tech fluent. However, experience or age is not a proxy for being tech savvy, says Jessica Blume, board director at Centene Corporation and Publix Super Markets. “Many older board members bring relevant experiences in technology to the boardroom through past leadership roles as well as current board positions,” she says. “They are eager to accelerate their understanding of new technology trends and apply insights based on past experiences to help CIOs navigate opportunities and risks.”

Board committee or subcommittee. Boards tend to have a high level of awareness of cybersecurity and cyber risk issues specific to their companies: Cybersecurity is the top risk that boards focus on and the No. 1 topic of education for audit committees.13 As a result, many companies delegate all or part of technology oversight to either the audit or risk committee. Some are forming technology committees or subcommittees, but this is still rare.14 “Not every company needs to have a tech subcommittee,” says Nationwide director Toelle. “But there does need to be some venue or mechanism within the board for a deeper conversation about technology.”

Regardless of board structure, technology discussions should likely be a formal charter for one of the board’s committees. It is important to have in-depth discussions on topics that have to do with protection and preservation of assets with one or more committees (such as the audit or risk committee) but consider lobbying for opportunity- and growth-related technology discussions to be held with the full board.

Vetting technology topics in committees can make presentations to the full board flow more smoothly. When members of the full board ask questions, committee members can give informed answers in alignment with the CIO and management.

Management-level technology committee. To help manage the supply and demand of IT resources, one CIO holds several review sessions with key members of the management team. A management-level technology committee can help business leaders align on strategy, priorities and investments before interacting with the board or its subcommittees.

It is important that discussions in such management structures not become mired in operational details. Management-level technology committees should not stifle direct engagement between the board and technology leaders; rather, they should bridge any gaps between technology leadership and the board and help align technology and business strategy.

These three avenues are not mutually exclusive. Many companies employ all three to better engage the board on technology topics. These approaches do not lessen the need for independent advice. Because technology is changing so fast, many boards and management teams rely on periodic advice from independent advisors who can help boards assess technology-related factors that affect company performance and educate them on technology topics, strategies and risks.

Balancing defence and offence

Interactions between management and boards can be categorised as either defensive—focussed on protecting, preserving and enhancing corporate assets—or offensive—focussed on ways to increase shareholder value through business growth and expansion, such as developing new capabilities, business models and revenue streams. However, interviews revealed that boardroom discussions often are not balanced across both safeguarding the company and using technology to achieve growth.

“Boards expect CIOs to do more than provide operational excellence in managing risk and security,” says Peggy Foran, chief governance officer, SV and corporate secretary of Prudential Financial Inc. “Boards tend to look at technology from the perspective of risks rather than opportunity, but they also expect CIOs to focus on innovation, products, solutions and trends that transform businesses. If I were CIO, I would make it my mission to play not only defence but offence.”16

CIOs can support board oversight of technology issues and investments by balancing engagement across both the protection and growth aspects of technology. To cover the broad scope of technology and board engagement, technology leaders and boards can interact across three major domains: performance, risk and strategy (see figure 3).

Performance

Boards can benefit from understanding how technology can improve or detract from business performance. CIOs can help by gaining consensus and tracking and reporting key performance metrics. Key performance dimensions are:

  • Financial performance. Many CIOs hesitate to link technology investments to financial performance metrics such as EBITDA (earnings before interest, tax, depreciation and amortisation); earnings per share; profitability; margins; and revenue. Articulating the positive impact of technology—even if it can’t be quantitatively attributable—on financial performance can help the board view technology as more than an operational cost. More importantly, CIOs can help boards address how capital is allocated for technology. In the past, many companies spent most of their technology budgets on business operations. 17 Today, the tide is shifting: Some companies now invest more than a quarter of their IT budgets on business innovation and expect to make significant increases in the next few years. 18 With the average investment in technology reaching 3.5 per cent of corporate revenues, 19 it helps for boards and technology leaders to be aligned on investment value and risks and invest across different horizons. Currently, 40 per cent of technology leaders think that investments in emerging technologies will impact their business significantly in the next three years. 20 Do boards have visibility into these emerging technologies investments? Are they helping technology leaders support and fund business transformations? Are they overseeing ROI and holding technology leaders accountable to investment value and returns?
  • Business operations. Given that the cost of running day-to-day business operations is typically more than half (56 per cent) of IT budgets, 21 improving the efficiency of business operations can result in savings that can be spent on innovation and business transformation. Transforming and automating existing business operations, replacing legacy systems and replacing and augmenting current business capabilities with cloud services all contribute to business agility, efficiency and scalability. Boards and CIOs should align on how these changes can create competitive advantage and deliver ongoing value, especially as automation evolves the workplace and workforce. CIOs can help by measuring, reporting, and discussing the value and impact of technology-driven business transformation.
  • Talent. Nearly all directors we interviewed say their organisations are challenged to acquire the talent needed to support business mandates for innovation, growth and business transformation. CIOs understand talent shortages all too well—in the global CIO survey, respondents cited talent issues such as hiring the right skills (60 per cent), training (52 per cent) and motivating employees (48 per cent) among their top challenges. 22 As technology becomes more embedded in the business, other functions could begin to feel the effects of the technology talent crunch. Technology leaders and directors should align on talent strategy and discuss how such factors as diversity and culture impact hiring and retention and how technology can increase productivity and engagement for the workforce.

Risk

Boards should keep up to speed on how to manage multiple risks, including new disruptive technologies, cyber incidents, ecosystem partners in the extended business enterprise, brand or reputation risk and unhealthy organisational cultures. 23 “Risk management conversations are sometimes happening in a fragmented way because various committees and subcommittees will tend to focus on specific pieces or risk and at different levels of detail or using different risk models,” says Vivek Khindria, VP of cybersecurity and technology risk at Loblaw Companies. “Progressive boards will encourage and engage in holistic risk conversations that include risks, risk trends, risk appetites and mitigation strategies with the full board.” 24

Key risk dimensions are:

  • Cyber risk. The organisation's ability to protect its data, intellectual property and technology assets from cyberattacks protects the existing business environment. CIOs can help align board and management's respective risk appetites, establish risk thresholds and develop guardrails that help prevent the organisation from taking unnecessary risks. Without this agreement, technology leaders could make risk management decisions that are misaligned with the organisation's cyber risk appetite. The board should also have the knowledge to evaluate the organisation's ability to detect and respond to security incidents.
  • Regulatory matters. Technology is both a means to enable compliance with business regulations generally and the subject of regulation itself. This means, for instance, that boards should be aware of and understand how technology can help drive the efficiency and effectiveness of meeting regulatory and compliance mandates and policies, as well as how specific data regulations could require additional investments and potentially change company priorities. This is especially critical for global and multinational operating entities, which may have varying requirements at the country, state and local levels. For example, many organisations made a mad dash for the finish line in their attempt to meet the European Union’s General Data Protection Rule. Board members and CIOs can discuss regulation's potential efficiencies, negative implications, opportunities for rationalisation and other business impacts.
  • Industry disruption. Artificial intelligence (AI), blockchain, cloud and other technologies can upend not only industries but also a company's competitive position and business model. Boards can benefit when CIOs help them understand the risks and potential impact of technology-driven industry disruption. One director says, “As a board member, you’re in a position where you are asking yourself the question, are we going to be disrupted or should we be disrupting someone else? And what new technology development is going to be driving it?” 25

Strategy

Technology leaders can help board members guide business strategy by helping them understand technology's strategic potential. One board director told us that members are often invited to full board meetings one or two hours early to attend education sessions on strategic topics such as use models for emerging technologies. These sessions are sometimes conducted by in-house technology experts, but often the board brings in outside consultants to lead the discussions.

Key strategy dimensions are:

  • Growth and innovation. Disruptive technology innovation—either within IT or through mergers and acquisitions (M&A)—can lead to growth, but CIOs may need to help boards cultivate a bolder mindset and an appetite for risk. Successful and ongoing innovation requires a systematic, industrialised process that allows IT teams to test, experiment and demonstrate value. Boards should feel confident that the technology organisation has the flexibility and agility to serve changing business needs and identify the integration risks and challenges of M&A targets.
  • Data and insights. Cognitive technologies—machine learning, natural language engines, autonomics and broader AI—are poised to reinvent the way businesses work through automation and better decision support. CIOs can help boards understand the organisation's ability to collect, aggregate and monetise data from customers, products and services—and how to employ it for improved decision-making.
  • Customer experience. Businesses will continue to be challenged to leverage technology to proactively anticipate and address customer needs and improve customer experience and satisfaction. Ensuring that the pace of technology change is aligned with customer readiness can be challenging. “It can be difficult to know when your customers are ready for new tech-driven capabilities to be integrated into the business model,” says one board member. “The board has to engage with the CIO and figure out how to oversee that process.” 26
  • Ecosystem engagement. Engaging with business ecosystems—dynamic and coevolving communities of diverse organisations that can create and capture value through both collaboration and competition—are critical for driving sustained profitability. 27 Technology helps ensure that business ecosystems serve markets in ways that can go beyond the abilities of a single organisation and technology-enabled platforms can increasingly provide efficient ways to connect customers with the products and services, cutting out the middleman. Boards and technology leaders should discuss and enable connections across traditional ecosystem partners, such as platform providers and suppliers—and nontraditional ecosystem partners, including venture capital firms, startups, innovation hubs and universities.

Key recommendations: Advice from the boardroom

Rapidly changing business and technology environments require boards and CIOs to evolve their engagement with each other. CIOs can support boards’ oversight of technology issues and investments by engaging them in continuous dialogue about using technology to address the key board mandates of protecting the business and driving shareholder value.

Through “the art of ongoing engagement,” CIOs can help boards elevate their technology expertise and partner with them to provide more informed oversight of technology-driven strategy and initiatives in areas related to performance, risk and strategy. Here are some specific suggestions compiled from our interviews.

  • Present a unified front. It’s important for management to present a unified front to the board in terms of technology messaging and content. A management-level technology committee can help align business leaders so that the board and its committees and subcommittees only review materials that have been vetted internally.
  • Metrics are good, discussions are better and elevator pitches are a plus. Include balanced scorecards and consistent operational metrics with established thresholds and risk markers in meeting pre-reads to allow for more discussion time. Some board members suggest creating a slide, handout, or chart to boil down a complex idea when discussing it. To help keep conversations at the highest level, consider developing elevator pitches for key issues. An elevator pitch can condense a large amount of technical information into a few succinct, salient points.
  • Boards cannot afford to be risk-averse and neither can CIOs. Many board members acknowledge that the rapidly changing technology and business landscape mean that every organisation will need to make some calculated technology bets on the future. Avoiding large technology investments for the fear of failure can lead to obsolescence. CIOs can engage with the board to discuss potential large investments and their impact on the business.
  • Stay ahead of the talent game. “A-players” will not work for “B-leaders.” Many directors describe using detailed talent-related conversations with technology leaders as a barometer for leadership capabilities. A technology leader’s ability—or inability—to attract top talent could be viewed as an indication of his or her leadership skills.
  • Seek the board’s counsel on growth strategy. Many board members are current or former high-level executives who are comfortable with strategy conversations and can provide valuable feedback and suggestions. Many have industry experience and a good understanding of the customer and can be the conduit to industry and ecosystem partners. When shaping the organisation’s technology-driven growth strategy, leverage their knowledge and experience. To give board members this opportunity, one CIO says he and his team schedule offensive and defensive technology discussions at different times and deliberately keep the two conversations separate.
  • Provide ongoing board development opportunities. Many board members have access to basic training and awareness around technology topics but lack an understanding of their practical application to the business and industry. Many appreciate the topical technology-related board development activities they get from management, especially in the context of an existing technology experiment. Also popular with directors is the three- to five-year outlook for technology trends and their business implications.
  • Communicate consistently and achieve balance between protection and growth. Some directors complained about the ad hoc nature of the interactions with the technology leadership. Having a consistent presentation framework or scorecards and showing quarterly progress on agreed-upon key metrics can allow the board to quickly digest and react to technology topics and changes, especially during a jam-packed board meeting.
  • Build a narrative using the “zoom out, zoom in” approach. This approach 28 challenges the conventional strategic planning horizon of one to five years and instead focuses on two very different horizons: 10 to 20 years (zoom out) and six to 12 months (zoom in). The zoom-out horizon focuses on powerful and predictable trends likely to affect the business and industry, allowing CIOs to engage board members on long-term opportunities and the future business trajectory. The zoom-in perspective focuses on two to three business initiatives that could drive significant short-term business impact. CIOs and boards can work together on an ongoing strategy for balancing the business objectives and resources across both dimensions.

In many companies, technology leaders and board members have rarely had ongoing conversations about key technology dimensions, metrics, or thresholds or discussed the target allocation of technology investments in defensive vs. offensive areas. The leaders we interviewed suggest it is time to start. A CIO’s best ally in this effort can be an open mind and a willingness to be inclusive of all viewpoints. “CIOs can help by not being too protective and controlling of the technology domain, which could allow bias to taint or influence decision-making,” says one board member. “It’s better to think about tech in a more inclusive way. No one has a monopoly on good ideas, and board members have a lot of valuable expertise and insights they can bring to the mix.” 29

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Acknowlegements

The authors would like to acknowledge the following individuals for their contributions and insights in shaping this research report:

Jessica Blume, Scott Bonham, Peggy Foran, Sheila Jordan, Vivek Khindria, David Markwell, Mike Toelle, Owen Williams, and the many other CIOs and board directors who shared their valuable time and insights

Banknote Briggs, Deloitte global and US CTO and executive sponsor, Deloitte US CIO Programme; Kristi Lamar, managing director, Deloitte US CIO Programme; and Deb DeHaas, vice chairman and national managing partner, Deloitte Center for Board Effectiveness

Teresa Briggs, Deloitte board member; and Bob Lamm, independent senior advisor, Deloitte Center for Board Effectiveness

Lead writer: Caroline Brown

Support team: Mark Baylis, Jeremy Arnold, Eliz Moore, Allen Qiu, Liz Sarno, and Tiffany Stronsky

Junko Kaji, Rithu Thomas, Preetha Devan, Mike Boone, Sonya Vasilieff, Blythe Hurley, and the entire Deloitte Insights team

Cover image by: Emily Koteff-Moreano

Endnotes
  1. Phone interview with Sheila Jordan, conducted 7 December 2018.

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  2. Phone interview with Scott Bonham, conducted on 18 January 2019.

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  3. Khalid Kark, Jason Lewris, and Caroline Brown, Bridging the boardroom’s technology gap, Deloitte Insights, 29 June 2017.

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  4. Spencer Stuart, 2018 United States Spencer Stuart Board Index, p. 18, 2018.

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  5. Ibid., p. 4.

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  6. Kark, Lewris, and Brown, Bridging the boardroom’s technology gap.

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  7. Bill Briggs et al., Manifesting legacy: Looking beyond the digital era, Deloitte Insights, 8 August 2018.

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  8. Phone interview with Michael Toelle, conducted on 8 January 2019.

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  9. Bill Briggs et al., “We need to talk”, Deloitte Insights, 8 August 2018.

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  10. Phone interview with David Markwell and Vivek Khindria, conducted on 18 January 2019.

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  11. Anthony Stephan, Martin Kamen, and Catherine Bannister, “Tech fluency: A foundation of future careers,” Deloitte Review 21, 31 July 2017.

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  12. Phone interview with Owen Williams, conducted on 20 December 2018.

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  13. Deloitte, 2016 Board Practices Report, 2017.

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  14. Kark, Lewris, and Brown, Bridging the boardroom’s technology gap.

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  15. Deloitte Insights, Tech Trends 2019, 16 January 2019.

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  16. Briggs et al., “We need to talk.”

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  17. Khalid Kark, Bill Briggs, and Mark White, 2015 global CIO survey, Deloitte University Press, 3 November 2015.

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  18. Briggs et al., Manifesting legacy.

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  19. Unpublished data from Deloitte’s 2018 global CIO survey.

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  20. Briggs et al., Manifesting legacy.

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  21. Ibid.

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  22. Ibid.

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  23. Deloitte, 2018 CEO and board risk management survey, 2018.

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  24. Phone interview with David Markwell and Vivek Khindria, conducted on 18 January 2019.

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  25. Interview with anonymous board director, conducted on 14 January 2018.

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  26. Interview with anonymous board director, conducted on 14 January 2018.

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  27. Eamonn Kelly, Introduction: Business ecosystems come of age, Deloitte University Press, 15 April 2015.

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  28. John Hagel, “Crafting corporate narratives: Zoom out, zoom in,” Wall Street Journal, 6 November 2017.

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  29. Interview with anonymous board director conducted on 18 January 2019.

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