A board member’s guide to digital transformation

by Mark Amin on Apr 29, 2022

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Overseeing a company’s digital transformation requires you to understand the milestones and pitfalls of the journey. What should be on a board of directors’ radar for their organisation’s digital transformation? Where do you plant the red or green flags? In this guide to digital transformation, we highlight the critical areas of concern.

Managing the risks of digital transformation

The risks associated with digital technology are:

  1. Data privacy
  2. Cybersecurity

As more activities go online, it is inevitable for more personal data to enter the public realm. With fraudulent activities a growing menace, it is a matter of when, not if, breaches will occur.

While governments have passed legislation to enhance data privacy, not a week passes without customers’ data being put on sale on the dark web. The technology to facilitate this is growing more sophisticated too. Hence, regular policing of the fences erected to prevent breaches must be on the directors’ agenda. The ability to respond swiftly to new threats keeps transgressors at bay.

Another growing menace in the digital age is cybersecurity. Cyber-attacks have brought organisations, governments, and big businesses to a grinding halt. They are disruptive and destructive. A moment of cyber-madness can bring an organisation down.

Cybersecurity has inched its way to the agenda of board meetings. As the damage cyberattacks can cause is far-reaching, keeping a close watch on the threat is vital. Helping the management team balance the benefits and risks of digital technology is a prerogative now of the board.

Take the certificate: Digital Transformation for Directors

Competing effectively and efficiently

While the speed of delivery and business continuity has always been part of the competitiveness narrative, two other issues have surfaced with digital technology. They are:

  1. Does it add value to the business?
  2. Does it change the core of the business?

It’s not unusual for businesses to change course or morph into something completely different over time. Think of Apple: from a maker of computers; it has become the largest producer of handheld and wearable technologies.

Today, a business is only limited by its imagination and creativity. Technology —specifically, digital technology — makes all things possible. Taking the business entirely online was a big decision for some companies, but it has enabled them to survive and thrive during the pandemic.

However, without the relevant digital technology knowledge, a board member’s contribution to the decision-making process will be limited or nonexistent. Not having this knowledge reflects poorly on your effectiveness as a board member in the digital age.

A guide to digital transformation and investment decisions

In 2018, it was reported that companies stand to lose up to $28 million over 12 months in poorly conceived digital technology investments. That was four years ago. It would have ballooned to a more astronomical figure by now.

Mistakes may follow if the business anchors its digital technology decisions on the urgency of the transformation needed. To make deliberated and discerned decisions, both the board of directors and the management team need to be on top of digital trends that matter to the company and its industry.

Digital literacy and boards

A company’s board of directors isn’t expected to possess intimate or professional knowledge of every aspect of its operations, be they accounting, legal, or human resource management. Instead, it is their experience and wisdom that the management team seeks. Of greater importance is the board’s ability to see the bigger picture.

When it comes to digital technology, the rules have somewhat changed in this regard. Board members are expected to have some level of digital literacy.

Ostensibly, it has to be more in-depth than, for example, people management or sales and marketing. The depth is contingent on the stage of digital transformation the company is in or aims to reach.

The call to have younger directors on a board underscores this point. They are digital natives. All things digital is their social currency. Where they lack experience and wisdom, their intimate knowledge of digital technology more than makes up for it.

Hiring and appointing C-suite executives is a critical responsibility of the board. The right talent will help the company realise its full potential and bring the returns investors want.

At present, there is a shortage of talent in the digital sphere. In almost every country, the education system isn’t producing the digital talent the economy needs. The pace at which digital technology evolves is a significant contributor to this problem.

The competition for digital talent is keen. Not surprisingly, the best talent will gravitate toward companies with a clear, comprehensive, and exciting digital transformation strategy.

As part of its corporate governance role, the board needs to have a policy that tracks, hunts and hires talent the company needs to take it to the following stages of its digital transformation. Ensuring board members keep themselves abreast of the required skills is essential.

The rules of effectiveness in the boardroom are changing in the digital age. New elements are being added in, for example, cybersecurity.

In the past, computing technology primarily contributed to getting things done. But with digital technology, it is about how things are done with the potential of changing the operations and delivery models of the business and the company’s business strategy. The speed of change is exhilarating.

But a sound knowledge of the fundamentals of effective leadership in the board room remains essential. Download this brochure to learn how we conduct director training for the new future of doing business.

A digital transformation strategy and examples

Overseeing a company through digital transformation is challenging. It is made more daunting by digital technology’s constant state of evolution. There are three strategic areas company directors must be most mindful of in the digital transformation process.

IT infrastructure management

IT’s share of the annual budget will only rise further from hardware, software, and subscription to the talent to keep the company’s IT infrastructure running.

When everything seems urgent, the risk of a hurried and rash decision is high. At risk are purchases that yield little value. Unless the board begins to treat digital investments as long-term assets, its IT infrastructure management will be disorganised.

A simple example is CRM systems. It is the poster boy of marketing in the digital age. Over the years, CRM has transformed from being a contact register to a personalised marketing tool. Its capabilities continue to evolve.

Without proper planning and management, companies risk more features and functions without doing the due diligence on their need for them. The board needs to provide senior business executives with parameters to guide future investments.

Innovation management

Just a few years ago, living in someone’s home instead of a hotel while on holiday was unthinkable. Today, Airbnb is the largest hotel chain globally, without owning or leasing a building! Thanks to technology, nothing is impossible.

Innovation is the lifeline of every business. In the knowledge age we live in, people are constantly exposed to better, newer, and different ways of getting things done. And they expect the brands or businesses they use to research, develop, and introduce new ideas.

In the past, it was differentiate or die; now, it is innovate or die. Digital technology has the exponential capability to take businesses to new frontiers.

A potent concoction of vision, courage, and technology is intoxicating. But without proper oversight and governance, it transforms dreams into nightmares.

Both the innovation process and outcome need to be monitored and evaluated. It may be impractical for the board to hold the management team accountable when it doesn’t have sufficient knowledge.

Data management

What are the critical areas here?

  • Capture
  • Quality
  • Management and protection

Data privacy is a dominant issue. While there is universal acceptance of its importance in promoting wide usage of IoT, there have been occasions when it has been compromised for good reasons.

For example, a contact tracing and tracking app is a powerful tool used by health authorities to combat the spread of COVID-19. Unfortunately, there were occasions when the data collected was used by the police for investigative work. It rattled public confidence.

The board’s responsibility is to ensure the company’s data privacy practices aren’t compromised. Regular audits of the system in use should be conducted as technology evolves, and so should systems that protect the company’s data bank.

Next, while capturing data is easy, ensuring its quality and integrity is a separate matter altogether. Let’s take customer information, especially that of a prospect, as an example. Unless the trust is apparent, it is unlikely the exchange of valuable information will occur.

When the bonds of trust exist, the exchange of personal data, or any other relevant data, will have fewer hoops and loops to cross. There will be a greater assurance of the quality of the data.

Finally, data needs to be looked after well. Until recently, cybersecurity wasn’t something that companies envisioned would happen to them. Now, it can happen to anyone at any time.

Cybersecurity is serious and challenging work. Staying vigilant and responsive is a policy the board needs to enforce.

Transformation management

Digital transformation is a fluid and ongoing activity without an end. Every discovery and application is a window to the next and more. Indeed, it is a marathon.

But it can get unwieldy without proper oversight. There is always something better that can derail the best of strategies.

In addition, with personnel changes an inevitable fact of corporate life, new personnel may bring about a change in focus. These can change the direction the digital transformation takes.

To avoid chaos, the board needs to be involved in developing the roadmap for the digital transformation. On this note, it must possess relevant digital technology knowledge.

The best digital transformation course

As a board member or company director, you need to get up to speed with digital transformation. Do you study recent case studies and examples of digital transformation in business? Have you considered taking a digital transformation course?

It’s easy to get carried away with the infinite possibilities digital technology brings. But unless it increases shareholder value, it matters little or nothing. As a member of the board, you are responsible for overseeing the value of the company’s digital investment.

Digital technology is an asset, not just an enabler or tool

Ostensibly, the most significant mindset shift of the last 25 years is seeing digital technology as an asset, not just an enabler or tool. From a physical presence on the desk in the form of a computer, it is now in the clouds.

With the capabilities digital technology brings to the business, to label it as an enabler or tool is doing them an injustice. The way we live, work, study and play have changed dramatically in a relatively short period because of the possibilities digital technology has created and will continue to create. It is a game-changer.

At all levels of society, digital technology adds value. Those who were not convinced of the wide-ranging impact digital brings have probably changed their minds in the course of living with COVID-19.

Had digital technology not permeated homes, workplaces, and schools, life would have come to a complete standstill. But it did not because we could hold virtual seminars, sit for exams remotely, and even attend worship services with life-streaming.

How far can it go?

Moving around in an autonomous vehicle, it might be hard to imagine digital technology is still in its infancy. Perhaps it will never grow mature or old. Its possibilities are infinite.

To illustrate, discussions around the end of cash and banks are gaining momentum. Despite the hiccups, the evolution of digital currencies is closely watched by central banks. Mainstream or traditional banks have either looked into or experimented with digital currencies.

Indeed, the future is digital. How it will shape lives — work, study, and play — is the topic dominating the hallways of power in government and business.

On account of this, companies must seriously look into having digitally aware or digital-savvy members on the board. Without them, your company may fly blindly into the digital age. It may not crash and burn, but as the pandemic has shown, the digitally savvy business found the pain of lockdowns less excruciating as they turned to digital technologies to leave the sign ‘Open for Business’ hanging on the front door.

Digital transformation roadmap and journey

At home in the office or gym, the digitally savvy director is connected to what’s in or upgrading in the digital world. While they may not be digital natives, they are wired to note what is happening and understand what a digital transformation roadmap looks like.

Whether it is passion or critical to their professional career/business, staying on the edge of digital technology means they have early insights into the next big thing. Their digital antennae are constantly in motion to detect movements in the digital space.

Given their intimacy with all things digital, they are more likely to be early adopters. This disposition will be carried into the boardroom too. The day-to-day running of the business takes up senior business executives’ time and energy. Hence, it may take a while before they learn what’s in and hot. The digital-savvy director can perform this role.

Digital transformation failures

Digital technology is fascinating. Sometimes it can be hard to imagine why it can’t work. When supported by empirical evidence of how it has worked for others, the temptation to sign the deal can be too hard to resist. After all, the first-mover advantage remains as relevant today.

Having said that, not every company has tasted success in its digital transformation effort. Some have failed. One of the reasons cited is the hope digital technology can mend a broken system. To illustrate, if the sales team is riddled with poor morale, adding a digital technology stack will not boost sales and revenue; it may worsen it.

The guidance and insight of a digital-savvy board member with real-world experience are invaluable. They will take senior business executives beyond the immediate realm of technology. Other peripheral issues of importance they have experienced should be considered that are not in the user or setup manual.
The digitally savvy company director
Not everything is plug-and-play in digital technology. There can be complex structures that need to be pieced together over time. They may need someone to see the big picture like a jigsaw puzzle.

The ability to see the big picture helps the management team conceptualise and lay the roadmap for the transformation. Keeping in mind that it will impact a broad spectrum of stakeholders, it has to be well-orchestrated. This includes preempting possible hiccups.

The digitally savvy company director knows only too well what can go wrong. Their ability to demonstrate leadership can make a difference in the success or failure of the transformation.

Digital technology has thrown new challenges into the ring for board members. From data breaches and cybersecurity to the working styles of digital-savvy employees, they will lack the capacity to contribute effectively in the boardroom unless board members have a good grasp of digital technology.

With digital-savvy directors, the board has a resource to turn to engage meaningfully and effectively with senior business executives tasked with taking the company to new digital heights. Many of the decisions and actions they have to take will be of interest and concern to shareholders. As such, board members cannot afford to be ignorant of digital technology.

The runway to digital success is very long. It can be bumpy, too, with unpredictable wind conditions. But with sound knowledge, company directors can play a part in guiding this transformation.

Take the certificate: Digital Transformation for Directors
Digital transformation

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