Digital transformation guide for boards

Digital transformation guide for boards: here are five areas that company directors must be aware of as part of their governance training. 

If you’re wondering what should be on the board of directors’ radar when it comes to the company’s digital transformation, you’re not alone. 

What do you focus on? Where do you plant the red or green flags? Overseeing the company’s digital transformation requires relevant knowledge of the journey’s milestones and pitfalls. This guide will take you through the critical areas of concern. 

The risks associated with digital technology are:

• Data privacy
• Cybersecurity

As more activities go online, more personal data will undoubtedly 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 sold on the dark web. The technology to facilitate this is also growing more sophisticated. 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 bad actors at bay. 

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

Cybersecurity has inched its way onto 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 now a prerogative of the board.

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

• Does it add value to the business?
• 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 in the world. 

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

However, without the relevant digital technology knowledge, a board member’s contribution to this morphing process will be limited or nonexistent. Not having this knowledge means any digital transformation guide for boards is worthless; your efforts become far more difficult, time-consuming, and harmful to revenue. 

In 2018, it was reported that companies stood to lose up to $28 million over twelve months in poorly conceived digital technology investments. That was six years ago – before the world was radically altered by a pandemic, inflation, and consistent geopolitical strains. You can bet that this figure is far more severe by now.

Mistakes may follow if the business anchors its digital technology decisions on the urgency of the transformation needed. To make deliberate 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 industry they are in.

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. 

Having said that, the rules regarding digital technology are a little bit different. Board members are expected to have some level of digital literacy, especially because digital advancements are so interwoven into how we live our daily lives – both inside and outside the office. 

Ostensibly, a director’s digital knowledge 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 are their social currency. Where they lack experience and wisdom, their intimate knowledge of digital technology more than makes up for it.

The board’s critical responsibility is hiring and appointing C-suite executives. The right talent will help the company realise its full potential and bring investors the returns they are looking for. 

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

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 the talent the company needs to take it to the next stages of its digital transformation. It is important that board members keep themselves abreast of the required skills.

The rules of effectiveness in the boardroom are changing in the digital age. New elements are being added in, centring on how much we depend on technology. 

In the past, computing technology primarily contributed to getting things done. But digital technology means we now focus on how things are done, and tech’s potential to change a business’s operations. The speed of that change is exhilarating.