The pace of digital change is accelerating at an incredible rate. Chances are, you've heard or read this statement countless times over the past couple of decades. But, it's just as true today as it was at the beginning of the digital era. Arguably even more so now that the so-called "burning platform" of digital transformation has quickly become a "burnt platform."
Digital change isn't a looming threat or shift that's on the horizon. It's here. It's happening right now. And it's up to you to adapt to it, drive it and turn it to your advantage. Whether you're talking about changing customer demands, agile new competitors entering the market or employees demanding greater flexibility in where and how they work, the immense cost of failing to adapt means standing still isn't an option.
But, despite how long digital change and transformation have held their place near the top of most organizations’ strategic agendas, just 16 percent of executives say their company’s digital transformations are succeeding. Plus, 72 percent of strategists say their company’s digital efforts are failing to meet revenue expectations.
To better understand why that might be and identify the underlying causes of unsuccessful digital change projects, Thoughtworks recently conducted a major Technology Proficiency study.
Among the findings, we learned that growing businesses are far more likely to make technology decisions at the board level compared to organizations seeing low or zero growth. But we also discovered a significant skills gap at the board level of many businesses.
Many of the enterprises we surveyed display a gap between the technology areas where directors are the most proficient and the technology areas that are a business priority. The board has digital skills, just not necessarily the right ones to enable growth.
It's a finding highlighted by other researchers too. For example, a global study by the MIT Center for Information Systems Research found that, among larger companies, just 7 percent have a top management team where more than half of members are digitally proficient. Plus, those companies outperformed the rest on growth and valuation by more than 48 percent.
The need for a digital-ready board is clear. But what does it take to increase digital readiness at the board level, and what does a digitally-proficient board look like?
There are many ways to define digital-readiness. But, at the board level, it means being informed, proficient and empowered enough to advise the C-suite in continuously making strategically solid technology decisions. It involves understanding where specific technologies could support a particular strategy or help the organization react to changing conditions or achieve strategic goals.
Crucially, it doesn’t mean that every member of the board has to be a well-versed expert in every emerging or strategically important digital trend. That’s still something the organization gets from its CIO, digital experts and advisors. However, every board member needs to understand how these technology trends can empower their organization while helping them achieve their strategic goals.
The key to digital success at the board level is developing not only understanding digital trends, but also bringing diversity of perspective to the discussion. The board is a team just like any other in the business, where no single person needs to be an expert at everything and diversity of experience, background and perspective can be a huge benefit. This diversity of talent and perspective can help boards gain a better balance between their fiduciary responsibilities and the need to shape the long-term strategies of their companies.
Being knowledgeable about the latest digital trends is essential for boards, but it’s also vital that the board adapts its governance and pace of decision-making to the current business climate — one characterized by frequent disruption and capital allocation shifting rapidly toward technology. While the board’s traditional role won’t change — to support and challenge management with a focus on strategy, risk and performance — they must simultaneously adopt a more entrepreneurial approach to help the C-suite stay ahead of this level of disruption and innovation.
In many of our clients, we see a new generation of boards emerging. These boards proactively embrace the opportunity to be the disruptor versus simply managing the risk of being disrupted. These emerging boards make sure that board composition is digital-ready and frequently review their ways of working while adapting their board agendas, processes and tools to enable leaner governance and faster decision-making. In addition, these boards make frequent collaboration and interaction with the C-suite a priority, always staying within the guardrails of the original remit of the board as non-executive directors.
At Thoughtworks, we’ve helped boards with different levels of digital readiness and agility to plan, navigate and execute digital transformation strategies and initiatives. While every board’s journey is unique, we’ve identified five macro-steps that can help any board achieve a higher level of digital proficiency and agility:
Proactively conduct sessions to help the board keep up with relevant digital trends and identify which ones are applicable across the business. For example, we often facilitate sessions with board members and executives where we share the most recent technology trends and contextualize them to help the team understand how those trends could become a driver in value creation. In some cases, we take them to visit some of our digital native clients and partners so they can interact with key stakeholders in businesses where digital technologies are at the core of their business model. The hands-on experience enables them to envision the different aspects needed to transform their organizations, besides technology.
Support board and C-suite members to crystalize their digital aspirations, expected business outcomes and contextualized implications while identifying the challenges and opportunities for adopting relevant digital trends. This is an excellent opportunity to have executives and non-executive directors exploring and discussing new technology trends and their ability to enable new customer experiences, services and revenue streams. It also opens the door to visualize critical capability gaps in the organization like technology, culture, talent, operating models and governance structures that might need transformation to sustainably drive digital innovation.
Engage board members in reinforcing the broader, long-term benefits of adopting these digital trends while developing a shared understanding of the capability investments needed across talent, culture, technology, governance and operating models. By following the principles of value-driven transformation, every board member should understand the value of adopting digital trends to their business as we can align with management on the metrics of success.
Driving digital transformation across operations and business ecosystems challenges the effectiveness of traditional board governance, regular committees and formal l engagement with management and staff. Therefore, board and C-suite members must discuss how to leverage lean and agile governance practices and tools to steer digital transformation in ways that deliver the most value for everyone, examine options such as co-creating governance principles for new digital capabilities like artificial intelligence, machine learning and autonomous machines. Lastly, boards should also explore their role in unlocking continuous human learning capabilities within the organization and its partner ecosystem, to help ensure that the organization can adapt to the changes brought about by digital transformation.
Use the above to maintain an updated view of emerging technology, its implications for the business and how it could be implemented and properly governed. Digital transformation is ever-evolving — a quarterly cadence will ensure that the board and C-suite know how technology trends enable both short- and long-term business strategies. In addition, it’ll help ensure close, ongoing collaboration between executives and non-executive directors.
Digital trends and emerging technologies are strategically important to businesses in all industries — and every board needs to become digital proficient to make informed, timely decisions about those trends. For some, the idea of having to improve or gain digital proficiency can be daunting. But, in practice, it’s far easier than most believe. Experienced business leaders don’t need to become highly-skilled tech experts overnight. Instead, they need to understand critical emerging tech trends and their potential impact on the business.
Boards are experiencing a seismic shift in which they must balance long-term business model changes driven by digital technologies and customer expectations with operational governance, compliance and short-term costs reductions. At the center of this seismic shift, there is an opportunity to rethink how boards work and adopt agile and lean practices — within the guardrails of their remits — to collaborate with the C-suite and stay ahead of disruption by leading digital transformation. Those who embrace this shift will become catalysts for digital transformation, enabling C-suite executives to build resilience into their organizations and adapt to constant digitally-driven changes across marketplaces, customer groups and society at large.
If you’re articulating your own digital transformation journey and want support to help guide your strategic decisions while delivering the best results for your business, contact us today.