Industry expertise: you gotta know the territory.

THERE WILL ALWAYS REMAIN a place in the composition of boards for persons qualified only by what Alfred P. Sloan once called "intelligent ignorance." On the plus side, such directors bring an outsider's point of view to the sometimes clubby atmosphere of the boardroom. If they are self-confident and independent, they are most apt to ask the very critical question, "Why do you do it that way?" Or, better yet, "Why do you do it at all?" -- and then push management for clarity and focus if the answer seems fuzzy.

Yet, such appointments buck a trend toward selecting board members for the traits that are the hardest to duplicate in business: hard-won industry experience and knowledge.

This has become increasingly necessary as the pace of business change accelerates. With "bet-your-business"-type decisions looming ever more frequently, CEOs are relying more and more on the in-depth industry savvy gained from experienced executives. There simply is not the time to get a full board up to speed for multiple annual product launches or strategy revisions.

This conclusion was recently confirmed by a Korn/Ferry survey of 1,000 directors. Under "criteria for good board performance,' 48% of respondents cited as most important, understanding the company's mission and strategic plans. Among respondents from the largest industrial concerns, fully 52% said that understanding the company's business is the number-one criterion in determining good board performance.

But, sometimes, even understanding the business won't be good enough. The composition of whole industries is changing -- in publishing, health care, and energy, for example. The players are shifting. Their roles are being radically reshaped. And, the very basis for making profits can be up for grabs.

This is particularly true in the computer industry, where "learning experiences" can be deadly. For example, software companies, including giant Microsoft, once issued new versions of their programs every two years. These days, they send out untested software three to four times a year via the Internet, just to keep pace. On the hardware side, Hewlett-Packard, for example, estimates that 20% of its in-house technical knowledge is outdated each year. And, by the way, look who is in this industry today: media giants, telecommunications companies, even banks.

Nowhere did the need for relevant business and industry experience become more obvious than at IBM, when in 1988-89 its market for large mainframe computers began to dissolve after 25 uninterrupted years of spectacular profitability. Powerful, smaller computing devices -- connected by vast networks -- would replace much of this technology. But, as was observed by Jim Burke (a highly respected manager, former chairman of Johnson & Johnson, and an IBM board member at the time), IBM's directors simply missed what was going on in the industry. No one knew enough about technology to challenge the entrenched management.