According to a Global Survey by McKinsey, COVID-19 has accelerated the adoption of digital technologies by several years. And those changes are here to stay.
Louise Chaplin, Partner and Head of Eton Bridge Partners’ Board Practice, discussed the boardroom challenges created by the speed and scale of this shift with contributions from Rashmi Dube, a lawyer with 25 years’ experience, a serial entrepreneur and certified director in Company Direction & Governance, Tim Hipperson, a strategically minded digital and data driven business leader with specialist knowledge in the Technology, Media, and Telecom (TMT) sector, and thought leader Guy Magrath who has over 20 years at the forefront of digital transformation.
You can listen to the full webinar recording here.
As digital strategy and corporate strategy converge, boards must be able to challenge business leaders on the risks and opportunities of this transformation. To do that effectively, there will have to be changes to the mindset and make-up of the boardroom. It’s time to think differently.
Shorter timeframes and fresh metrics
There’s a real danger that the board looks for a financial return too soon from a digital business. Digital projects using the commercial metrics of the core business for digital models can quickly choke off change and the speed of change.
Success comes from small shifts, not big wins. To this end:
- Ensure the team responsible for transformation or launching game changing products and services has a clear roadmap that sets out what will be achieved by when.
- Understand what ‘agile’ methodology means: test, trial, learn, improve and repeat. It’s a disciplined and incremental process.
- Remember that most successful digital businesses did not start off by making money. They started by building a platform and gaining the confidence of customers.
Data and learning technology’s part is only getting bigger. We have seen a big shift and increase in the use of technology in business decisions. It is incumbent upon the board that they question how the data is collected, who is involved in collecting the data, and what assumptions are being made. Good regulatory governance is key.
Digital expertise for all the board
The question for every board is ‘how can we use digital technology to create a different way to do business, to achieve our company purpose? And what are the risks? A pervasive understanding of technology in the boardroom is essential to answer those questions.
Digital embraces big data, analytics, cybersecurity, AI and machine learning, e-commerce, cloud services, customer experience, data protection legislation and more. No one director can cover all that. The board must be responsible for every decision, be made up of people who can have a deep and informed conversation about every aspect of digital transformation.
The biggest transformational change requires broad-based capability, a boardroom which understands the process of agile product development, market engagement and the commercial model. A boardroom which understands how you’re going to deploy a digital infrastructure, products and services, and the importance of data, legislation and GDPR compliance.
Boards can help bridge the gap between traditional business experience and technology knowhow by:
- Setting up a digital governance board/technology committee
- Appointing digital board advisers
- Finding mentors/buddying up board members with digital specialists in the business
- Creating a shadow board of next generation, digital-native young leaders
- Being bold. Take a leap of faith – try out someone different for six months
Remember there is no point in having an advanced board without the skill set in the wider business to support the company’s digital ambitions.
It doesn’t matter how good your digital capabilities are, it all comes down to talent and culture. You can’t move fast without those two. Repositioning your brand to be more purpose driven can transform your culture and help attract the right talent for your digital business.
More speed, more risk
The pandemic has changed business forever and from a strategic point of view, lots of boards are struggling. A board that is knowledgeable, informed and fluent in technology will help to reduce risk by asking the right questions.
Boards must accept that the pace of change is getting faster and the risks will escalate. Look at how the 2003 SARS outbreak (a much smaller event than the COVID-19 crisis) supercharged the development of digital payments and services in China, where you hardly see cash or card payments now. The overall speed of change is dramatic and it’s easy to be caught out – an example is how hedge funds have been outplayed by retail investors working through social media.
Increasingly, businesses may want a General Counsel in the boardroom. Not for pure legal expertise but organisations will need to address complex issues around how they collect and use data, diversity and unconscious bias in learning technologies and the impact of digital business models on environmental, social and governance (ESG) practice.
Digital needs the right culture
The biggest challenges and risks are often internal. Legacy culture and thinking can be major obstacles to change.
The most successful digital businesses are those that are allowed to grow culturally outside the constraints and distractions of the corporate environment, with their own governance model. The board should ensure power is transitioned to the digital entity, embracing a ‘heads up, hands off’ approach to oversight. For a digital business speed, agility and scale are critical and operating outside the core business is the only way to deliver that.
There’s a strong call for more diversity of background and capability to combat groupthink in the boardroom. Boards must resist the temptation to hire more people like themselves, from the same industry sector. Instead, search out ‘T-shaped people’, who have a deep understanding of one sector and have applied themselves in many places. Divergent voices and experience contribute greatly to innovation. Too many boards have lost opportunities because they asked for candidates outside the usual mould but when presented with options, recoiled and went back to their comfort zone. Moving the board to where the company is going will not always be comfortable.
Over the past 12 months, many businesses have taken the opportunity to restructure. The opportunity now is to set a path for the future. They say it takes six months for new behaviours to stick. That means we can be sure more flexible working, contactless payment and the uplift in online sales are here to stay.
We don’t know how the economy will behave as recovery gets underway. Another Roaring Twenties perhaps? Certainly, there is an appetite for in investing in transformative and disruptive enterprises – witness the Wall Street trend for SPACs (special purpose acquisition companies) set up specifically to buy technology-based business.
Despite challenges around Brexit, currency markets and disruption to global supply chains, it is not a time to hold back if you are a traditional business but to embrace change. The board that unites commercial experience with an ability to understand, discern and challenge new digital business models will be able to act fast and make the most of emerging opportunities.
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