The MIT study looked at what fast-moving digital innovation means for large traditional companies. In the two year study, they covered more than 400 large firms. They found that most large firms are already taking action. They are using technologies like social media, mobile, analytics and embedded devices to change their customer engagement, internal operations and even their business models. But few firms have positioned themselves to capture the real business benefits. The research points to a "real digital advantage to those that do".
"Boards can no longer duck the responsibility for the company's digital transformation," wrote Chunka Mui, Toby Redshaw and Olof Pripp, in Your Next Board Member Should be a Geek. "They must take real ownership of ensuring that they are equipped to fully understand this part of the board agenda. Otherwise, how can they adequately oversee their company's strategy, investment and expense base?"
High-performing New Zealand and Australian boards are aware of the risks and opportunity of digital disruption to their organisation's business model, and are taking steps to improve technology skills in board composition. Some are recruiting directors with technology management experience; others are forming technology advisory boards or committees, or sending their directors on study visits to Silicon Valley or other technology clusters.
"There is a view that boards should resist recruiting too many specialists, in technology or other areas, who can only govern in their area. Top directors are capable of governing across multiple areas and joining the dots between complex issues. The impact of technology on strategy should be the domain of every director, not only those with an IT background".
Instead, the authors make three suggestions for boards to meet technology challenges.
First, "companies should open up multiple board seats for directors with deep technology expertise. Seek directors with fresh technology experience who are abreast of fast-moving trends".
Second, "develop formal board structures to address technology issues, through sub-committees or advisory committees. The authors say: "It is important for this group to address topics that go beyond technology strategy and IT governance. The most important priority may be enterprise strategy and the ways in which technology makes new value propositions possible."
Their third suggestion is "developing the right context for technology discussions at board level. "Boards must have a clear view of their own company's IT landscape. It falls to the board to ensure that the company has a multi-year plan to address technology needs while reducing costs and risk."
The authors say technology governance is an opportunity. "Every board of directors has a once-in-a-generation chance to leapfrog the competition through technology competency. The opportunity is great because the task is difficult, and there is no large pool of talent waiting to be recruited. Those companies that meet this challenge successfully will capture the markets of the future."
Henri Eliot is CEO of Board Dynamics.
Henri Eliot is CEO of Board Dynamics.
