Earlier this year, Corporate Board Member partnered with PwC to take the pulse of public company board members on where their organizations were on the path to digital transformation. What we found was that three directors out of five believe their company is behind on the process—a startling revelation, indeed, but one that may stem from the fact that the majority (54 percent) say their companies have only embarked on this journey within the past three years.
“We are late,” conceded a director at a small publicly traded IT corporation. “But there is rapid uptake in the organization now that we have the right leadership in place. The key to digital transformation is having the right leadership.”
Several other directors echoed the sentiment. Mary Beth Vitale, for instance, a director on the boards of Luna Innovations and Pareteum, says her board had to fire the CEO and get a new one “because we knew that this person couldn’t help with the transition,” she says.
Another director, Rite Aid’s Marcy Syms, says her board also experienced a CEO succession and now, “an entire company transformation is underway,” she says.
According to Paula Loop, leader of PwC’s Governance Insights Center, having the right leadership can’t be emphasized enough. “The CEO is instrumental in setting the strategy for the company,” she says. “So, if the board believes that the CEO is not thinking about the company’s strategy using a digital lens, they do need to consider whether or not that particular CEO is the right leader for the next three to five years.”
No doubt, this is a huge challenge for boards. But it, nevertheless, needs to be addressed with a sense of urgency, as it affects the sustainable value and long-term health of the company with which directors have been entrusted. Plus, periodically questioning current leadership is very healthy for boards, who, after all, have a duty to ensure that the management team is equipped to drive the company forward and deliver on strategy.
In a series of conversations we held with directors on this issue, many told us that the board’s role to continually push back and challenge management assumptions, in fact, provides a healthy collegial environment that is beneficial to the company. Yet, when it comes to digital transformation, nine directors out of 10 say they primarily rely on management briefings to stay abreast of trends and innovations, despite the fact that executives are often naturally inclined to have a more positive view of their company’s progress given that they are in the trenches day-to-day and see the effort and work being expended.
According to PwC’s 2020 Global Digital IQ survey of 2,380 global executives, 70 percent of U.S.-based executives believe their company is ahead or substantially ahead of its competitors in encouraging rapid innovation across the business, compared to 35 percent of directors in our board survey. While management may be assessing progress by looking at their ability to deliver on established objectives for the near term, an effective board should be continually pushing the long-term view to make sure the company is set up for sustainable growth over time.
To that effect, boards may want to consider seeking outside education on what’s happening in and outside of their respective sectors in order to bring a fresh perspective to counterbalance management reports. Industry analysts, conferences and tradeshows, as well as external advisers, all provide great opportunities in that regard.
Dr. Jonathan Byrnes, a senior lecturer at MIT and an audit and nom/gov committee member at MSC Industrial Direct Co., says directors should question management’s view of progress and feel the pressure to ramp up. “If you think you’re ahead of the peers, you’re going to get shocked because you’re never ahead enough,” he says. “You go to a really top company, the absolute industry leaders, and they’re desperate to do things better and different.”
This is even truer today, as we emerge from the crisis and businesses reopen, than it was at the onset of 2020. The directors we spoke with in recent months agree the Covid-19 pandemic has acted as a major tailwind for accelerating digital transformation. It has forced companies to move along a more agile and flexible path. And if you’re not there yet, chances are you will struggle to be there by this time next year—if not sooner.
Join us for a complimentary webinar on June 23 at 1 pm ET to dig further into the research and gain insights from directors of ACI Worldwide, Mesa Air Group, Adgile Media Group and Phunware on how their boards prioritize and measure ROI of digital investments and how you too can add value to your company’s digital journey. Visit https://go.boardmember.com/pwcdigitaltransformation/ to learn more and register.
Until then, you can download the complete 2020 Digital Transformation research report at BoardMemberInstitute.com/Digital-Evolution-Report.