The Board’s Role in Navigating Digital Transformations - Joe W. Kelly
With the advent of a wide array of digital technologies driving massive opportunities for value for organizations, many Boards are struggling with how to provide oversight to those efforts. These technologies (artificial intelligence, cognitive and machine learning, blockchain, etc.) provide huge potential in a variety of areas in enabling new business value, improving customer experience, and driving efficiency and safety. In addition, the arrival of these tools is also enabling new competitors to enter traditional markets and push out those who are not investing appropriately.
Many organizations and leadership teams struggle with how to drive these transformational efforts. In some cases, companies are just addressing one area while others are doing long-term strategic efforts to use digital as an enabler to revamp their entire business. All do require some key areas of focus to ensure alignment and progress to capture business value. Three of the key areas are Setting the Strategy, Structuring for Accountability, and Driving the Cultural Change needed to capture and sustain the transformational benefits.
Setting the Strategy
In this phase, management and leadership focus on setting a strategy to drive towards goals that create new business value or models, enhance customer experience, and enhance process effectiveness. Key elements of this effort include:
- Awareness: In many cases senior leaders will not have enough knowledge of the capabilities; raising the level of understanding will be key.
- Competitive landscape: Understand where traditional competitors are on the digital spectrum and, importantly, where disruptive competitors might emerge. The art of the possible is using internal and external analysis to identify opportunities to capture value.
- Ambition: Define the overall goal.
- Roadmap: What order should we follow? Define near term quick wins to fund long-term efforts. Define a process to continually challenge and update the strategy to account for evolving learnings.
- Business models: Determine needs for new business models, particularly in other countries where the company may not be as mature and may need a partner to succeed; determine the need for any ecosystems to deliver market requirements.
Board role: Understand how management has focused on business and customer value in digital initiatives.
Structuring for Accountability
In my experience, many organizations struggle with how to measure success and ensure that the investments they are making are paying actual dividends. I have seen this devolve into “1,000 random acts of digital” in the words of one of my clients, when broad challenges go out to figure out how to use digital. Organizations that are successful will focus on a number of critical areas:
- Structure: Determine the need for a digital function, new organization structures and approach — centers of excellence, federated or unified models.
- Ownership: Define senior (C-suite) ownership; decide on the need for a chief digital officer, and what skills are needed in that role (innovation, customer/market, technology, disruption/change agent); a major organization-wide effort may consider the need for a central management structure, similar to a Transformation Nerve Center (Deloitte concept) to oversee.
- Funding: Define a process for filtering and prioritizing projects/products and the mechanism for providing funding.
- Measurement: Create a well-defined process for measuring the effectiveness and benefits from efforts — many are using approaches similar to M&A synergy capture and results management programs.
- Technology: Define a process for making technology decisions to avoid multiple systems doing similar work to manage costs and complexity.
Board role: Understand how progress and value will be tracked and reviewed on a regular basis.
Driving Cultural Change
From what I have seen, most organizations do struggle with how to embark on this journey, particularly those organizations from more traditional industries and sectors. This new world is one where things evolve quickly, and new approaches and talents are needed to help the company drive value and capture the opportunities. The following are some of the aspects to pay attention to:
- Talent Supply: To achieve success in digital transformation, talent with new skills is frequently needed. Organizations will either need to invest in training and development or acquire new talent through hiring or acquisitions. This talent will often require different ways of thinking and rewarding to keep them engaged and productive.
- Approach: In order to drive digital transformation people and organizations need to adopt agile approaches focused on products and iterative improvements. This is a major change for organizations used to using traditional project management approaches (e.g., waterfall). Managers will need to get comfortable with success being defined by a continually evolving and improving set of products that deliver defined value vs. traditional measures of meeting project timelines and budgets.
Consistency: One of the big challenges for organizations is staying the course of the journey to transformation. Too frequently when times become challenging, organizations will scrap these efforts to save money during times when these efforts are what can set the stage for long term success and business value.
Board role: Review Management’s plans for approaches and policies that drive the behavior change needed to capture and sustain the dividends from digital transformation.
Joe W. Kelly - Steward in Disruptive Times
Challenges are what make life interesting and overcoming them is what makes life meaningful -Joe W. Kelly