So much public attention on digital disruption is about management challenges. There is a bombardment of material on issues like meeting customer expectations, enabling a digital workforce, and required leadership traits just to name a few. But very little attention is paid to company boards and their corresponding role. Why is that, and why does it matter?
Board fundamentals
A company board may indeed keep a low profile but has, after-all, ultimate accountability for the organisation and therefore sits at the top of the organisation. It is also the single place where all critical decisions are made and recorded about the organisation’s pace of growth as well as ensuring that it meets required obligations – sometimes referred to as the performance versus conformance set of duties. Performance is achieved through implementation of strategy and conformance is achieved through meeting various compliance measures.
Risk management is also an important director duty. Risk can be grouped into three types, all of which relate to the effectiveness in driving strategy:
- risk that directly affects the organisation’s growth,
- risk that is normally off the radar where there is low probability but high impact to the organisation, or change risk, and
- operational, or business-as-usual risk
Many boards have adequate risk controls for 3 as this tends to be more conformance in nature. When all are taken together, the director duties of performance, conformance and risk management ultimately require effective board governance measures which I discuss later.
From a generational point of view many of today’s boards comprise primarily of baby boomers along with a smattering of Gen X’s thrown in for good measure. That said, one’s age and level of experience should not, and does not abdicate any member’s responsibility. What is interesting to note here is the subtle yet powerful effect generational leanings can have on the performance of an organisation.
More focus on strategy please
Popular board literature these days usually covers topics such as board diversity, remuneration concerns, and newsworthy instances where directors were derelict in their responsibilities. We rarely receive insights about how they intend to support the organisation in its own digital transformation journey, or yet alone, if they even care.
Consider for the moment the impact digital disruption is having on all businesses both great and small. No industry is immune. Need proof? More new C-level roles (such as Chief Data Officer, Chief Digital Officer, Chief Security Officer, Chief Customer Officer, and Chief Disruptor Officer) have been created during the past ten years than all throughout the history of capitalism! This is a strong indicator we are living in disruptive times. I would argue that nearly every business’s strategic plan contains reference to, and approaches for, their role in the new digital age.
If we peel away a layer from our strategy onion, we find strategic intent. Today’s business focus is quite different from yesteryears. It is more aligned to finding market differentiation (what we call innovation) than on its better-known cousin, price discrimination. This particular intent is based on creating greater efficiencies from existing good and services.
That is not to say a company can do both in parallel. But to leap frog the competition today will require new, innovative approaches to running one’s business. This global switch in strategic intent, where market differentiation now leads the strategy discussion, has become the biggest strategic switch in arguably thirty years of running businesses. In my book, Flipping for Success: Rewiring Business Strategy to the New Consumer Age, I examine this business strategy switch in greater detail.
This switch is a business megatrend and is driven by a differing set of consumer forces and competitive approaches than what existed earlier. To out-fox the competition requires a different strategic mindset than many board members have been exposed to from their former management careers.
So, if boards have not become immersed in understanding this megatrend, yet alone experiencing it for themselves, then how can they appreciate management’s delivery options for transforming the organisation? And if the board is not actively involved in the strategic conservation beyond what is presented from a board paper, how can they contribute to discussions that are beyond their level of comfort? Are they truly meeting their performance responsibilities to shareholders and other interested parties?
(As an aside, I rarely see a ‘strategic director’ board position advertised. Given the titanic shift in the art of strategic management, why not enlist a strategy expert onto the board to help augment the board’s performance capability?)
For an organisation to remain competitive today, it must have a board that is actively engaged in the performance side of their duties. If a passive approach is taken by the board (aka leaving it to their management team and/or consultants to drive forward the thought leadership), the results can be detrimental including:
- Inability to engender effective risk management (upon the growth side of the equation)
- Lower levels of board confidence and support for their management team’s ability to execute their strategy successfully (a classic case of ‘you know what you don’t know’)
- The likelihood to widen the executive-to-management relationship gap by giving too much control away to management for the growth of the organisation
Digital as the great unifier between management and its board
Boards today need a more active approach to counter the digital disruption affecting their management and workforce. As the old adage goes, ‘you got to be in it, to win it’. Boards need to be on that journey with management; to not only feel the bumps, but more importantly be able to anticipate them. Boards obviously do not drive the car, but they make great navigators for management. Unfortunately, many boards are positioned in the backseat of the car, ready to question the driver when something bad has happened.
No one is asking board members to become technology and marketing experts. And boards are not makers of value, they instead provide an important oversight role. Given the importance of organisational growth, boards must play a more active strategic oversight role.
One powerful approach to align the board to the organisation’s digital journey is for boards to become adept at using digital platforms for their own purposes. Here I don’t mean the use of software that will help manage board papers better. This requirement should be a forgone conclusion. And I’m also not talking about executive dashboards either. These are just fanciful online reports.
I’m instead describing the use of an interactive, workload-style digital platform to provide boards with a similar style of working platform as their management peers. Imagine a platform that shows over different time periods how the organisation is performing their strategic execution, highlights which risks need to be better managed, and how a change in measurement in one area of the business can have a knock-on effect across the organisation.
A digital platform is all about identifying, capturing and analysing the organisation’s digital value beyond a set of corporate reports. It’s about removing that degree of uncertainty and guess work from board discussions and decisions today. It’s also a single place that as time passes, collects evidentiary history that can be used later for searching, new board / C-suite on-boarding, and audit purposes.
The digital platform in essence unifies board and management by creating an environment where important decision-making data is sourced from management and then aggregated, where applicable, up to the board. This allows both board and management to conduct better oversight of their respective responsibilities from board meeting to board meeting.
A digital platform thereby can make boards not only more efficient, board members also become more engaged participants to the affairs of the organisation. Governance is improved between management and the board. And most importantly, the growth of the organisation – represented through its strategic intent and corresponding delivery plan – takes precedence with sound and credible discussion at every board meeting, as it should be.
The alternative is just not as attractive…
