A director's letter to his chairman: here is how we board members can better help you.

• Author: Anthony, Scott D.
• Position: ENDNOTE

In April 2009 I joined the board of Media General, an $800 million diversified media company based in Richmond, Va. The following is a letter I wrote--with input from Innosight board member Richard N. Foster and innosight partner Andrew Waldeck--to Media General Chairman J. Stewart Bryan III after attending my first board meeting.

YOU DON'T NEED ME to tell you the world has changed. Many of us feel like Alan Greenspan, who told Congress last October that he had found a "flaw" in models that had served him well for 40 years--but he wasn't sure how significant or permanent the flaw was. I don't know either, but I do know today's changing world has significant implications for the board.

Let me start with some sobering news: You and the rest of the board are going to have to work hard to develop the right skills to govern in the new era of "creative destruction."

What are the hallmarks of this era? Competitive advantage disappearing in the blink of an eye. Worrying the most about the competitors that don't yet exist. And making decisions before data are anywhere close to clear.

What do we have to do differently?

First, we must recognize that optimizing today's business is insufficient for the challenge at hand. Research by my colleague Richard Foster found that over the long run "survivors" tend to under-perform market indices. The only way to outperform the market is to change at the pace and scale of the market, without losing control. That means companies have to master the ability to create businesses that don't exist, operate existing businesses, and trade businesses that are in danger of passing the corporate equivalent of the "sell-by" date--ideally before they need to. Sadly these three requirements conflict with one another. Control requires stability; creativity requires change; trading requires shedding once-core skills.

Eyeing the corporate portfolio

We have to look at our corporate portfolio in new ways. The financial meltdown in late 2008 showed how seemingly non-correlated assets can carry hidden systemic risk. After all, what sane board member of a German manufacturing company would think he or she needed to worry about the creditworthiness of consumers in southern California?

Many corporate portfolios suffer from similar systemic risk. For example, what would happen to Procter & Gamble if Wal-Mart decided to stop selling branded products? It seems like a ludicrous notion, until it happens. Fortunately for P&G shareholders, the...