24 August 2017 by Stephen Page
Boards need new attitudes and competencies to adapt for the digital age.
For the past 30 years, technology has been considered as an operational matter, best delegated well below boardroom level. Boards often struggled to engage meaningfully with digital and IT topics; instead, they are ‘updated’ by technical experts in an unsatisfying, disconnected way.
In a fog of technical jargon, boards cannot work out what business choices they are being asked to make. Now the world has changed and boards need to change too.
This is the digital age: society is different, business is different, and risks are different. It is time to fundamentally rethink how technology questions are addressed at board level.
This is not about arguing the case for a functional line to be represented at the table. It is about building a board that has empathy for how society has changed, that can find the critical questions to fuel innovation, and that is able to handle the new and complex risks accelerated by technology.
Ultimately, it is about strengthening the whole board’s ability to lead in the digital age. Let us look at what has changed, what conversations need to take place in the boardroom, and what non-executive profiles could deliver better digital-age leadership.
Social media, mobile, cloud, artificial intelligence, robotics and other innovations have enabled and accelerated fundamental change in society. The consumer now has extraordinary power and global reach, and exerts new demands on businesses.
Growing slices of society distrust governments and ‘authority’; they would rather consult an aggregation of peer views than an expert. Rich data is used and abused in an ethics vacuum.
“This is not the world many conventional businesses were designed for”
Individuals have a new fear of loss of privacy, yet also overshare openly on social media. Work and home blend together, mobile transactions are preferred and attention spans are tiny.
This is not the world many conventional businesses were designed for. To navigate this new environment, boards need the necessary skills, as well as empathy with the new forces shaping society.
They should also be able to pinpoint the future direction for their brand, products, sales, delivery, employee proposition and commercial partnerships.
New technologies have enabled business propositions that were previously unimaginable. No longer do you just have to take a sample of data – you can take it all and get unprecedented insight.
You can bring vast processing power from remote servers to your customers’ and employees’ mobile devices, deploy huge quantities of sensors, and monitor locations and habits. You can also automate not just physical processes but analytical ones.
There is no shortage of novel ideas, but boards and executive teams need the knowledge, experience, and mindset to exploit them. Otherwise good ideas can get killed off by corporate culture, leaving the start-ups free to enjoy all the fun and success.
Meanwhile, bold new criminal enterprises, such as ransomware, are evolving rapidly – threatening to inflict devastating damage on companies and individuals.
Agile competitors can assemble new businesses quickly and attack parts of a rival’s value chains globally, and new intermediary platforms can poach a company’s customers. Legacy systems are finally reaching breaking point, carrying such complexity and fragility that just a tiny failure can have a catastrophic effect.
Boards must understand the threats, vulnerabilities, and the business choices that mitigate these new risks. They need adequate, instinctive understanding of technology risk. They should be weaving digital risk into their conversations, not just inviting in experts for infrequent ‘updates’.
Boards need to have conversations around these areas of innovation and risk, with discussion of data underpinning them. Data is now one of an organisation’s most critical assets and it should be discussed with as much comfort as the board considers the workforce, supply chain, products and customers.
This means information such as the corporate data model should be included in NED induction and everyone on the board must have a robust and thorough understanding of the company’s data.
“A board needs to look at the data it already has and how that can be best harnessed at scale”
Data needs to be considered in business strategy, planning and objective-setting work. For example, the board needs to consider how the company brings in new customers, and how it engages with and stays connected to customers.
It needs to look at the data it already has and how that can be best harnessed at scale. It should also consider how the company fits in with the industry’s digital ecosystem. For example, does it own a digital platform or is it reliant upon another organisation’s.
The culture within the organisation is also a key consideration, whether it encourages innovation to keep ahead of competitors, and if the company has the requisite skills and tools to implement that innovation.
In risk and control work there should also be discussions about the ethics and values that will guide the company’s approach to personal data. Protection of information assets is an important consideration; the company also needs to ask if it trusts its connected suppliers, staff, and customers, and whether sufficient controls are in place.
Thought also needs to be given about what to do with legacy IT systems to reduce their ‘drag’ on innovation. The company must ready itself for potential catastrophic failures, such as cyber attacks or system failures, and know in advance what values will drive its response.
Building the board’s fitness for the digital age is an urgent task for many chairmen and nomination committees. For many companies, reliance on experts from outside the boardroom, such as technology consultants, marketing consultants, CIOs, and chief digital officers is simply not enough. Nor is it sufficient to corral technology topics into quarterly updates that are detached from other business.
Digital and IT should be weaved seamlessly throughout the whole board agenda. But fully embracing digital and IT means creating a different mix around the boardroom table, something that must be done with great care.
Many boards have begun to look for a non-executive director with deep experience in digital matters, as a step on the road to the whole board embracing the digital age. However, in drawing up a specification, it is important to mitigate a number of risks.
It has to be remembered that a board of specialists is unlikely to work. A digital/technology NED must first and foremost be a good board director, and be a credible, strong contributor across the whole board agenda, not one who dozes off during the audit committee’s report.
“It has to be remembered that a board of specialists is unlikely to work”
A narrow contribution on technology, however, is not enough. The digital or technology NED must have depth in a wide range of digital matters. A consumer marketing expert, for example, could be hugely helpful in social media, but unlikely to focus the board’s attention on back office big-data opportunities, technology risks or cyber protection.
As mentioned, the ultimate goal is to strengthen the whole board’s understanding. Thus a digital or technology specialist NED must have the skills to educate, to enhance board conversations and to build confidence in other directors.
Some businesses may need dramatic change but some will need steady, incremental improvement. So the answer is not always disruption. A digital/technology NED must have the sensitivity, judgment and integrity required to work with board colleagues and choose the right strategic path.
On top of this revolution of the business environment, the pace of change continues to accelerate. Boards urgently need to understand how society is changing and have the courage and insight to innovate.
A deep understanding of data, being able to spot legacy risks and possessing the skills to face cyber adversaries are all now essential. The 30-year heritage of leaving IT outside the boardroom must come to an end and we need the skills around the board table to engage with digital age issues effectively.