October 10, 2017
The latest buzzwords to enter the executive lexicon are “digital transformation”. To stay ahead of the curve, businesses must leverage the benefits of the newest technologies. The large-scale integration of new technologies must become part of corporate strategies. Digitization of business helps spur operational efficiency and drives revenues up.
An Enterprise Irregulars article highlights that 78% of executives think that the evolution of technology in their organization is too slow. Less than half of all CEOs prioritize digital transformations. Boards of directors keep executives in line with strategic initiatives as they see fit. If the vast majority of executives think digital transformations are vital to compete in the ever-evolving business landscape, then boards of directors should maintain oversight over CEOs in these efforts.
According to a McKinsey survey, boards of directors fall behind other executive titles in the C-suite when it comes to the support of digital. Only 14% of boards surveyed are directly engaged in these initiatives. Unsurprisingly, CIOs rank the highest in supporting and sponsoring digital initiatives.
Companies with an active, robust digital portfolio typically outperform their counterparts that don’t. These organizations enjoy nearly 26% higher profitability and 12% higher market valuation.
In order for boards of directors to first prioritize and then support digital transformations, there must be an attitude shift. Many boards believe that digital environments don’t play a key role in the future of the organizations that they govern. Most directors don’t possess enough experience in driving digital change.
According to KPMG, over 80% of board members are in their 60’s. While sitting on a board typically requires years of experience at the executive level, this statistic raises some concerns when it comes to technology. Most board members today probably don’t have much experience working with the latest technologies nor truly understand them.
Among boards of directors, skill and experience gaps may be the issue creating the chasm in support of digital transformations. Business opportunities in the digital world can be difficult to measure and seem opaque to many board members.
Closemindedness or inability to see challengers in the digital space can lead to detrimental misses. The slow-moving pace of many major companies create ripe opportunities for disruption by smaller, burgeoning tech startups.
Take this as a call to action for board members. In order to compete in the coming years, companies must prioritize digital transformations and prepare for a digital marathon. Boards will drive strategy, execution, transformation, and transition in the process. Overall, boards will make or break the companies they govern depending on how they manage digital transformations.