In this day and age, digital transformation is no longer a choice for businesses. It has become an imperative. As early as 2018, research from McKinsey & Company showed that only 8% of businesses believed their model would be economically viable as digitization intensified.
The ongoing digital transformation has brought rapid change to the business world, and it has been challenging for directors and management teams to keep up. If you are a director who is wondering how to provide oversight for this innovative undertaking, you’re not alone. Consider the following five action steps directors can take to harness the power of digital transformation and use it to drive business success.
1. Consider Directors With Technology Experience
Directors must have at least some digital literacy to provide adequate oversight for the organization’s digital transformation.
Selecting board members with knowledge and experience in digital transformation accelerates the board’s education and ability to make good governance decisions.
Making the right decisions requires not only familiarity with technological concepts but also exposure to how businesses can use technology to gain a competitive edge.
Having directors on the board with this kind of expertise will ensure that the board evaluates digital solutions and their risks from all angles and asks the right questions about short- and long-term goals.
2. Link Digital Transformation With the Creation of Business Value
A business doesn’t undertake a digital transformation purely for the sake of going digital. It’s all about what going digital can do for the business. For this reason, it’s important that board members understand what benefits entering new digital spaces will bring to the business.
For example, artificial intelligence can automate processes. This automation can benefit businesses by speeding up design processes and testing, allowing teams to move products and services into new markets before competitors can.
Understanding these implications allows boards to ensure that all digital transformation is in line with the business’s overall strategy. This way, technology isn’t just an expense but an investment in reaching future goals. Informed boards will be much more equipped to provide oversight when it comes to progress on reaching those goals.
3. Oversee Plans for Internal Controls and Risk Management
With any increase in digital technology comes a strong need for a data governance and risk management framework.
While the board won’t actually develop these frameworks, it is important to ensure the management team has done the following:
- Created a roadmap based on goals and use cases
- Identified which departments and stewards will own what data
- Defined policies, rules, and decision-making processes
The board also needs to decide how the audit team will test and monitor these controls to ensure they are working and evolving with the rapid pace of change in business technology.
Additionally, boards must be knowledgeable about current regulations at the local, state, and national levels to ensure that all technology is configured and used in accordance with the law. For example, if the company is using AI to decrease the time it takes to hire top talent, boards must make sure that management teams follow laws that require auditing the technology for bias or disclosing its use to candidates.
4. Develop the “Digital Talent Bench” With Hiring and Upskilling Strategies
Organizations need employees with robust digital skills in order for digital transformation to be successful. Of course, the board of directors won’t be directly involved in hiring for roles below the C-suite. However, it is important to hold those in the C-suite accountable for ensuring the company hires top talent that can move its transformation plans forward.
Not all of this talent will come from the outside. For this reason, boards need to ensure that management has actionable plans to upskill the existing workforce.
To do this well, management needs to identify the company’s future needs, understand talent gaps, and develop personalized learning journeys to upgrade existing talent to fill those gaps. This is what will ensure the company has access to the skill sets needed to stay competitive and meet future goals and objectives.
5. Foster a Culture of Innovation and Continuous Learning
Ultimately, digital transformation is about experimenting with new tools and new ways of working to gain a competitive edge in the market. For this to be successful, boards must be able to establish and support a culture of innovation throughout the organization.
This means staying open to change and being willing to take chances on new solutions that can bring about better results. If board members squash ideas as soon as they come up for discussion, it will be difficult for management to really get anywhere with digital strategy.
One thing that might help the board better embrace innovation is to ensure that all decisions are data-driven. With concrete evidence and insights to support new ideas, directors can make more informed choices and focus on digital initiatives that have the highest possible chance of success.
Digital Transformation Requires the Right Strategy and a Supportive Culture
Digital transformation is fast-paced. However, directors can’t afford to get caught up in the hype and move too fast, nor can they stay behind the curve. In times of rapid change, it’s important for boards to be strategic about how they approach digital solutions.
To strike the right balance, corporate boards should consider making digital strategy expertise a part of their selection criteria for new board members. Additionally, it’s important to ensure that all decisions about digital transformation are made with business value in mind.
Finally, board members should work to keep the business equipped and protected throughout this journey by partnering with management to plug the talent holes that might keep the organization from carrying out its transformation plans. Boards can also help ensure that management develops proper internal controls and risk management strategies.
All of this should be carried out within the context of a culture that supports constant learning, creativity, and innovation. It is in this culture that businesses will be able to make the strategic, data-driven moves that lead to success.
