Over the last few months I have had many conversations about technology and digital transformation with directors and leaders across diverse sectors and organisations. Irrespective of the differences between organisations and leaders, a common theme has emerged: the desire for relevance. Directors are worried about the pace of technology change, concerned about their organisations remaining relevant for their customers, and worried about their relevance as directors and leaders.
Remaining relevant for customers requires a transformation journey.
Directors want their organisation to embrace the step change that has happened in customer and staff digital engagement, and in doing so, to maintain, or increase relevance with their customers and stakeholders. At the heart of this is the sustainability of the organisation, and as stewards, this is of paramount importance to directors. And so, the strategy evolves against this backdrop and the Board “jumps on board” with transformation as a strategic objective and the detailed work to bring it to life starts. So far, so good.
Truth telling: Technology can be overwhelming and seem impenetrable
Embracing the strategic intent of transformation is one thing, but actual transformation requires technology investment and business transformation and this is where things can get complicated for directors. Business cases are done, papers are produced, management presents, experts advise, and directors are then asked to decide. We all know the horror stories of project failures and the painful flow-on impacts, so how does an effective director engage with complex technology topics, lots of jargon and papers that seem incomprehensible? Especially when asking questions may expose that I really don’t understand? Or when I’ve asked several questions but I still don’t understand? And what if asking questions makes me seem less relevant in this digital age? What does that mean for my future as a director? There is a lot at stake here individually, and organisationally.
Australian Boards are underestimating disruption risks with many avoiding the topic
There has been a massive increase in the risk focus of Boards in recent years and this trend is unlikely to go away. But arguably the most significant risk of all is not being adequately considered by Australian boards. AICD 2019 (1) research on innovation and boards (in conjunction with University of Sydney Business School) suggests that Australian boards have underestimated disruption risks relative to international organisations. This research also highlights a lack of focus on innovation by Boards with 57% of respondents indicating that Boards have never or only occasionally discussed innovation. Boards are increasingly overwhelmed with their risk and compliance responsibilities while the need for innovation grows more urgent. Hiding from the problem is not helping, so what then to do?
Experts can help, but all directors have a responsibility to engage and learn
The pace of technological change around us is accelerating, and while experts can and should be engaged to assist, it is no substitute for individual directors building their own capability. Just as individual directors can’t rely on a single expert when it comes to financial governance, relying on digital and technology experts on the Board is insufficient.
Directors don’t need to become Technology experts to be relevant and effective
For years most directors have been comfortable not being experts in the industry their director roles are in, or not having specialist expertise in finance, or marketing, or other areas. Yet they have been able to draw on deep, broad experience and find ways to build competency in key areas and to be effective and ask probing questions. Seeking out reliable and independent sources of information is a skill that capable directors have always built. Why is technology different? Why does technology seem to trigger fear? It doesn’t have to be this way.
Step 1: Believe that you do not understand digital technology……yet.
Transforming the organisation requires the transformation of its leaders. This may be confronting for experienced directors with a long track record of success, however gaining a working knowledge of digital and technology and its implications for the future is like any other skill, and is able to be developed. Carol Dweck conducted groundbreaking research into the Growth Mindset and has proven the power of a growth mindset over a fixed mindset: “there are two ways to think about a problem that seems too hard to solve: Are you not smart enough to solve it…or have you just not solved it yet?” (2)
The gap between the digital knowledge you have (or don’t have), and the knowledge you need to effectively steward your organisation into a digital future, is not as wide as you might think.
If you are feeling left behind with rapid technology change, are you irrelevant, or just not up to date yet?
Step 2: Choose to adopt and develop a digital mindset
Choosing to adopt and develop a digital mindset can help directors and their organisations navigate through the complexity of this digital world. As articulated in the most recent AICD magazine (3): Directors, Here’s how to develop your digital mindset, it is more important that directors understand how digital can add value, than knowing how the technology works. Straightforward questions that probe how value is created by technology investments, and how they align and enable strategy will help directors understand the intended purpose of investments as well as aiding in alignment and transparency.
A key foundation for developing a digital mindset is understanding how business models are evolving. Technology is enabling many new ways to generate revenue and lowering the barriers to entry across almost all sectors. A session on this at a board strategy day will help directors gain insights into both the opportunities and risks that these business model changes bring.
Another foundation for a digital mindset is understanding that digital transformation is not a project that digitises analogue business processes, but an end to end business transformation. It encompasses everything an organisation does and how it does it.
Last week I was speaking to the former CEO of a publishing company. When this organisation started to make the shift towards digital, the Board’s expectation was that it would simply involve publishing the books online, and it would therefore be a relatively fast process (this is generally referred to as digitisation). The Board took time to understand that moving online changed everything. It changed how much content could be provided (previously constrained by the size of a book, but unconstrained in an online world), how current the information could be (print content has a relatively long shelf life, but tolerance for old content online is low), and that led to how the content was sourced, how partnerships were established and managed and the list goes on. Digital transformation is an ongoing investment into the underlying capability of an organisation, and how it creates and delivers value to its customers.
Step 3: Prioritise time to talk about innovation.
Schedule regular conversations, jointly with management, about technology trends relevant to your sector, utilising independent experts. Informal conversations provide lower barriers to engagement and are a good place to start. Some boards approach this by inviting guest speakers to board/management dinners and evolve from that into more formal strategic conversations.
You have a roadmap, now get started.
Whether you’re a director or a senior leader it is possible to overcome overwhelm. The key is to have a roadmap to learning, and just to get started.
I hope you find these tips useful. I love to chat about all things transformation so please don’t hesitate to reach out and connect if you would like to continue the conversation.
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If you would like to know the bigger picture of how I think about digital transformation from a Director’s perspective, I’ve prepared a comprehensive Checklist for Boards on Digital Transformation.
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1 https://aicd.companydirectors.com.au/advocacy/research/driving-innovation-the-boardroom-gap
2 https://www.ted.com/talks/carol_dweck_the_power_of_believing_that_you_can_improve
3 https://aicd.companydirectors.com.au/membership/company-director-magazine/2021-back-editions/march/directors-heres-how-to-develop-your-digital-mindset
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