Every board member a digital director
By Robert Chew
The Business Times, 8 October 2018
Today’s boards are starting to get the message: from every front, digital players are threatening their businesses. This explains why, increasingly, listed companies are adding digitally experienced directors to their boards to provide strategic insight, look out for emerging tech trends and threats, as well as open doors to new opportunities.
This emerging trend follows the current practice of appointing directors from the audit, legal, tax and banking professions, to tap on their expertise in accounting, compliance and financing.
While the numbers associated with this trend towards digital boards remain small, they foreshadow an even broader shift that can be tracked through several phases of boards going digital.
The “As Is” Phase
Establishing some information technology (IT) and digital competency on boards has, to date, meant appointing a single digital director.
At board meetings, the chairman and board directors will defer to this one director with IT background for feedback, direction and endorsement of IT projects. Often, this digital director is the sole resource the board has for checking and assessing these projects.
The reality, of course, is that, at best, these digital directors, by the very nature of their experience and qualifications, serve only a limited compliance and maintenance function.
The “Transformative” Phase
Having only a single digital director, one on whom other board members solely rely, does not work.
No matter how digitally savvy he or she might be, a single person cannot effectively help the company sift through the overwhelming volume of digitally-based decisions that a millennial company must make, let alone create and guide a company-wide digital transformation.
Instead, all directors need to become digitally literate and engaged.
This is because all directors, especially those with no technology qualifications or experience, need to be as comfortable questioning and reviewing the company’s digital strategy as they are with business strategies, performance and plans.
The far-reaching nature of today’s digital disruptions requires boards to recast their roles as the ultimate catalysts for digital initiatives. Board members are key to stimulating and triggering management action, so that they can respond quickly to digital trends and threats.
Correspondingly, management teams need their boards to serve as strong digital sparring partners when they consider difficult questions such as investments in experimental initiatives to develop new products and services, the redesign of vital supply chains, or even questioning whether the company is in the right business in this digital age.
The “Transformed” Phase
With the right training and support to build experience and greater confidence, all directors should be able to fulfil these digital roles – especially to ask the right questions and to constructively challenge management on issues such as how technology enables or limits the business, the effectiveness of rolling out new technologies, and their return on investment.
According to Russell Reynolds Associates which has researched substantively into digital directors (Rickards and Grossman, “The board directors you need for a digital transformation”, 13 July 2017, Harvard Business Review), boards will evolve to include members who fit one of four categories of digital board roles:
Digital thinker – This director may have little direct interaction
with digital as an operator. Conceptually, however, he understands the
digital environment and its implications for the business.
disruptor – This director has been deeply embedded in the digital world,
often with experience gained from a digital company. He makes up for
the relative lack of general management breadth, with depth in the
Digital leader – This director has substantial
experience running a traditional business that leverages digital
technology in a significant way. While it is likely that he has less
hands-on digital experience, he has led disruption as a senior business
Digital transformer – This director has led or
participated in the transformation of a traditional business. Typically,
he does not have the seniority of a digital leader, but is familiar
with the levers to make change happen successfully.
These roles represent the key appointments a board needs to address the demands of digital thought leadership, strategy formulation and strategy execution in order to cement its leadership in the broader digital and tech landscape. Applied appropriately, they will re-define the diversity of board competencies and roles beyond a single digital director.
The New Normal
This is the new imperative – for boards to embrace a digital transformation across the board.
More than two decades after the birth of the dot com era, executives across all industries are being forced to become digitally literate, if not fluent. The level of fluency will continue to rise as smart phones, smart devices and consumer apps become more pervasive.
And in the same way that it’s been said that every company is now a tech company, in time, every director will be a bona fide digital director. So much so, that the day approaches when there will no longer be a separation between a digital and a non-digital board.
Robert Chew is a member of the Governing Council of the Singapore Institute of Directors.