Advisory Board ABCs – Part 2

Defining Leverage

As the CEO of Canada Green ESCO Inc., I raised over $1B+ in project finance linked to solar (utility-scale solar farms and distributed roof-top aggregations), wind, geothermal, Waste-To-Energy (WTE), energy efficiency, green hydrogen, and more. It included: equity, non-recourse debt, balance sheet financing, and tax equity.

All such projects relied heavily on Leveraged Finance - which resulted in the use of the largest amount of debt possible, as opposed to equity or cash. And I’m talking about serious leverage generating a Debt to Equity (D/E) ratio of 80/20, or even 90/10. And using as much leverage as 90% of the entire project cost – significantly enhances the investment’s Internal Rate of Return (IRR).

But the word “Leverage” has many additional meanings. The one I like the most boils down to this:

“To use something that you already have in order to achieve the desired result”

And the only limitation to how much a CEO can leverage outside Advice – is his/her ATTITUDE… 

As mentioned in my LinkedIn post To Do What It Takes: “Years ago, I coined a simple tag line that gradually became a part of my email signature: BODs Serve Investors, Competent Advisory Boards Are CEOs’ Best Friends. And I truly believe in what I say! Bringing competent advisers on board is a smart move!

A good adviser will help reconsider the validity of the CEO’s assumptions and a good Advisory Board (AB) improves the decision-making process and helps the CEO considering different perspectives. Besides, many advisers become the proverbial Sounding Boards to the CEO. So, every CEO should have one!”. For such a reason, I always recommend that BODs insist and mandate CEOs to establish an outstanding Advisory Board of their choosing!

My message is equally important to CEOs and their financial backers. In fact, those who are truly open to guidance end up solving their problems much better than they would have on their own. Having an open mind may help companies clarify and sharpen their thinking. From experience, I find that even two opinions are often enough to make a better decision, especially for complex & ambiguous problems.

Leveraging Positive Attitude

Recently, I came across Darren Gold’s great post: “Thriving in Uncertain Times: Lessons from Marcus Aurelius”. Well, just the title itself already sparked my attention. After all, who can resist a good stoic quote from Marcus Aurelius?

But it also led me to explore his powerful and highly recommended TED Talk: “The Secret To An Extraordinary Life”. I like a great story and Darren certainly doesn’t disappoint on that account. And although the proverbial glass half-full/half-empty analogy drives the same message across, the story about the shoe salesmen takes the cake… It goes like this: 

“Once upon a time, a shoe company sent two salesmen to Africa to determine the market potential for their products. One salesman was sent to the east coast of Africa, while the other salesman was sent to the west coast of Africa. Both the salesmen completed a basic survey of the target market and called back to the office. The salesman sent to the east coast of Africa reported: “No one here wears any shoes, there is no market for us here!”. The other salesman sent a message “No one here wears any shoes, there is a huge market for us, send inventory fast!”.

As Darren Gold says: “There is no better (and perhaps more relevant) example than the Roman emperor and philosopher Marcus Aurelius. Marcus was trained in Stoicism. He understood the critical distinction between what was in his control and what wasn’t. He didn’t waste any energy on those things he couldn’t control. And he realized that it wasn’t his circumstances that mattered but how he interpreted his circumstances”.

Leveraging The Ability To Change

Granted, it all starts with the right attitude toward the change but not all CEOs can overnight become the Chief Reinvention Officers of their companies. Yet, as I mentioned in my post World's Best Reinvention Officer - there are plenty of competent advisors who can!

Regardless of where exactly the CEO can estimate his/her company’s location on the corporate life cycle chart, the whole life cycle is shrinking faster than Greenland’s ice sheet…

Gone are the days when S&P 500 companies lasted 75, 50, or even 15 years - before permanently disappearing into the abyss of a competitive cut-throat reality. Nadya Zhexembayeva will tell you that the cycle is now closer to 6 years altogether and that if you don’t reinvent yourself during the first half-time of the curve (i.e. after 3 years or less) – you’re toast!

And it doesn’t matter how fast you managed to cross the initial chasm. Be prepared to cross many more chasms on an ongoing basis… So, my advisory engagements are never just about a specific opportunity or project at hand. It’s about setting the process of reinvention in motion for a long haul - and the key is to remain FLEXIBLE and ADAPTABLE. 

Is thinking creatively a lot of work? You bet it is…Hence, some CEOs may be quickly overwhelmed by the new normal and the need for a pro-active approach to face the change, creatively. So, remember this: the best advisors are not just telling you what to do – they do it for you. They know how to recognize the patterns of change and how to plan and design the proper strategy to handle it. Better yet, they can also help you execute such plans with surgical precision.

On the one hand, there is a growing understanding that Advisory Boards play a significant role in managing change. As the life span of the corporations gets so much shorter, many CEOs feel the urgent need to bring additional expertise - beyond that of their BODs and/or functional management.

On the other hand, AB is not a substitute for a statutory BOD. Advisors are not responsible for the governance of the company or represent its shareholders. And it should stay that way…

Not surprisingly, with the growing importance of Advisory Boards, we also see many opposing views on the Advisory Board’s structure. Some will argue that it’s time to FORMALIZE the ABs the same way BODs are defined and organized. I disagree.

The calls for formalization are often emphasizing the need for clarity around ABs’ mandates, placing ABs under BODs’ control, defining the profiles of AB advisors, the terms of their engagement references, compensation levels, contracts’ renewability, as well as the number of annual meetings, agendas, reporting, evaluations, etc., etc.  

As if BODs didn’t have enough on their plates already. They are under ever heavier regulatory and compliance burdens – so, now they also must supervise CEO’s advisory channels? Please…

Pay-It-Forward ABCs?

IMHO, nothing provides more evidence in support of UNSTRUCTURED Advisory Boards than Silicon Valley’s Pay-It-Forward phenomenon. It has been the cornerstone of innovation since the 1970s and helped thousands of entrepreneurs to build great companies – informally.

Objectively, thanks to its pay-it-forward culture among many other attributes, Silicon Valley has achieved the status of the greatest center of innovation and wealth creation in the history of the world.

Dozens of places have tried to replicate Silicon Valley’s success, but none has succeeded in creating a similar scale. These attempts failed despite the best efforts of local, regional, and federal governments to replicate Silicon Valley’s ecosystem components such as academia, skilled workers, the high concentration of technology companies, presence of VC/CVC/PE funds, presence of experienced professional services, and infrastructure.

People in Silicon Valley are willing to help one another – without any of the structural concerns above. People and companies simply support each other as needed - knowing it’s likely that their paths will cross again in the future. And it works…

For years, I’ve been encouraging CEOs to vigorously seek AB Wisdom. And I often brought an example of the most famous knowledge seeker from Silicon Valley – Steve Jobs. My message was short and concise: “Asking for advice is the sign of STRENGTH, not WEAKNESS! Steve Jobs did it, and so can you!”

As Steve Jobs personally recalled in some of his interviews: “Bob Noyce took me under his wing, I was young, in my twenties. He was in his early fifties. He tried to give me the lay of the land, give me a perspective that I could only partially understand. You can’t really understand what is going on now unless you understand what came before”

So, if it worked so well for Steve Jobs, why exactly it wouldn’t work for you?

As BusinessAI? veteran w/ 30-yr hands-on AI expertise, I deliver unbiased AI investment advice to separate the wheat from the chaff. By joining Advisory Boards, I help VC/CVC/PE funds to turn their unicorns into stallions… instead of little ponies.

I am on a single mission: to Reinvent Corporate Prosperity. My goal is to stop the Dreams of Wealth from becoming Nightmares of Poverty.

And it is not about how to score one hit. It’s a process to beat the odds and it needs to be repeated time after time – just as I did w/ Verizon 20 years ago.

I reached the stage in my life where I don’t care about office politics and water-cooler gossips. Nor do I offer fake flatteries to CEOs. All I care about is how to solve problems and deliver results - by managing change and uncertainty, resiliently.

[email protected]; https://canadagreenesco.ca/

Author of: “AI Boogeymen - Dispelling Fake News About Job Losses”