April 28, 2017 admin

THE DIGITAL POWER OF THE BOARD

Digitalization has emerged as a top priority on executive management’s agenda these days. A study published in the Harvard Business Review reveals that two-thirds of companies in the United States and Europe now place a strong focus on digitalization. At the board level, interest is weaker. Just under one-third indicates that digitalization is a priority issue. Previous studies have shown that one-fifth of the board of directors have some sort of digital background, but the 2016 Amrop study shows that except for tech companies, the figure is just 8 percent. We see a gap between Management ambitions and Board priorities —one that poses problems. According to Russell Reynolds, companies that have succeeded in closing the gap between Board and Management to share a common digital agenda and a unified technology approach, show 9 percent higher growth, 27 percent better profitability and 12 percent greater market value.

Corporate digital transformation becomes a crucial decision for the board when existing revenue streams must be deprioritized to create space for tomorrow’s business deals. Take Microsoft, which now focuses on the cloud computing business to the benefit of its traditional software. Similarly, boards must give priority to growth investments as new sustainable digital revenues appear on the horizon, such as when Netflix abandoned its in-store DVD distribution, going from bricks to clicks for a rapid global expansion of live streamed content.

When the world is digitalized, the board must follow. Most boards are used to discussing the fundamental changes in corporate organization and work approaches, but on the other hand we see little innovation in their own work. Today’s board agendas are surprisingly similar to those of a century ago. According to McKinsey, boards spend up to 70 percent of meeting time looking through the rearview mirror and dissecting compliance, quarterly, and audit reports. Digital transformation promises a higher tempo than infrequent board meetings. When the markets become more volatile and the executive team is struggling to resolve its immediate challenges, it’s all the more important for boards to keep looking out toward the horizon. Strategy meetings can’t take place annually — people need real-time information, ongoing strategy discussions and more frequent evaluations.

Solving these increasingly complex issues requires creative problem-solving and a more diversified set of approaches — even in the board room. As the number of technical issues grows, so does the need for continuous skill development for board directors. More experts instead of generalists will need to step up to the plate. External specialists are becoming increasingly important in preparing for tough decisions.

So, what tools do boards have at their disposal for managing digital transformation? More and more US companies are adding a digital transformation committee to prepare for decision-making, involving deep-dives of technological changes as well as analyses of policies and incentive schemes to make sure they are promoting digital development.On the market, digital platforms are also being launched to simplify an agile approach to board activities. The board of the future needs digital control systems, much like a cockpit with a complete overview of relevant real-time data.

As industry after industry faces the challenges of new market conditions, boards have got to future-proof their companies. Most businesses aren’t structured to deal with the unknown, and the pace of change accelerates, an increased intensity is needed also in the board work. Synergies between the outlook of the board and the capacity of the organization are needed, to empower companies to implement courageous and transformational changes of their business models.

Sara Öhrvall

Photo: Trey Ratcliff, Photo Walk on Antarctica

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