The Board’s Role In Digital Strategy

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The constant emergence of disruptive innovations is challenging business leaders to continuously rethink their game plan. Armed with a seemingly endless world of technological possibilities, the challenge, directors say, is not the how but the what.

Emerging technologies, increasing competition and shifting consumer dynamics are changing industries at a rapid click. Companies have been spending lavishly and continuously to bring their operations into the age of Amazon. But a survey of 227 public company board members conducted by Corporate Board Member in partnership with RSM US finds that the road for getting there remains rocky. The challenge, directors say, isn’t so much execution but identifying what needs to be done.

“The biggest roadblock that we worry about is probably what’s going to be out there in nine months that we’re not thinking about that will be a disruptor to the industry,” said Ed Glotzbach, chair of NYSE-traded gas company Spire. “The biggest roadblock isn’t execution; it’s knowing exactly what needs to happen and then being able to bend and modify as you move toward it with what changes.”

Knowing how to gather the right insight is extremely important in steering digital decision-making in a constantly disrupted world. For boards, this means making sure the focus is on innovation. Chances are, the company is not going to come up with new ideas from the same people who have been looking at the same things for years. The board therefore plays an important role in challenging management by asking the right questions. For instance:

  • Is leadership bringing in the right talent?
  • Are they dedicating enough resources to new products and services?
  • Are they getting the right perspectives to define and implement successful innovations?

The board must also play a role in overseeing the risk in innovation. Just recently, the SEC proposed a rule that would require companies to disclose board members’ cybersecurity expertise, the frequency of cyber discussions and the type of oversight provided. The proposal even mentions a requirement whereby boards would need to approve cybersecurity policies—all for the sake of accountability and, hopefully, a reduced number of material incidents.

This development puts increased focus on board members’ role in overseeing technology. It also highlights the importance for directors to be continuously learning to understand what’s affecting the industry—good and bad. Taking the time to evaluate new strategies and solutions in board meetings is critical to both remaining relevant in the future and safeguarding the company’s assets.

Interestingly, only 17 percent of directors surveyed cited risk as a barrier to growth over the past 18 months. Major General Suzanne “Zan” Vautrinot (Ret.) said, in an interview with Corporate Board Member on the research, that boards who want to ensure no uncalculated risks are taken may want to start by asking, “how do we make sure that management has looked every which way?”

“The board can’t do management’s job,” she said, adding that the first step is therefore to get management to recognize that they need to leverage expertise, have this conversation and bring it into the strategy and into their operational sessions. “When they’re ready to do that, then you need board members or advisors to the board members to help them on that journey. That lets you ask better questions so that you don’t go down Alice’s rabbit hole and distract but rather move with the company on this journey.”

Sometimes, finding the right technology to connect with a customer requires experimentation, and those decisions often require trust. On the board, it’s all about trusting people to show what they are going to do. Initiating a pilot program or similar experimentation to understand how it can change the business may be a great way to proceed. However, it’s the data that will show whether an idea is worth moving forward with or not.

The Problem With Data 

According to the survey, companies leverage new technologies primarily to improve the customer experience (65 percent) and collect better data (54 percent). The two objectives go hand in hand because to enhance the customer experience, companies need data. For board members, this means understanding who the customer is, the path to purchase, the pain points, etc.—and a lot of that is dependent on data.

There’s no doubt, data is central to the digital theme. In fact, 54 percent of the directors surveyed say among all technological capabilities available today, from AI to automation to IoT, “data analytics” is most important to their organization. But data can also be the source of digitalization gone wrong. Without the right sets of skills or the right technology, data can bring about even greater challenges for many companies, especially those that have been around for a long time, says George Corbin, who serves on the board of Edgewell Personal Care Company and as Mars’ chief digital demand officer.

“You’ve got data that is in puddles, all over the company and often in proprietary systems and crusty, old infrastructure,” Corbin said. “There’s always been a lot of effort around saying, ‘Well, first, we’ve gotta clean it up,’ and then there are all these operations that need to take place before it’s even usable.” Instead of attempting to glean every possible insight from the data, he says, companies should be clear and purposeful in the questions they want answered. “What are the three things that will move the needle on the business—focus there,” he said.

To learn more about the state of digital oversight across boardrooms, download a copy of “The Transformation Imperative,” a new report produced by Corporate Board Member and RSM US LLP on the research findings.

To access more digital transformation insights, visit RSM’s additional content.

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