“At any board meeting, the amount of time devoted to an item on the agenda will be in inverse proportion to the difficulty of the issue.” This is the Parkinson’s Law of Triviality coming from C. Northcote Parkinson. Parkinson is a British humourist who articulated back in the 1950s a simple human truth that change is difficult, and most people would prefer to avoid it and continue doing what they know best and is easiest. It was quoted in a recent Forbes article referring to it as the culprit why many companies fail at digital transformation.
Corporate boards have been traditionally focusing on effective governance during the last decade brought about by scandals in the business world such as that of WorldCom, Lehman Brothers, Tyco, and so on. But in this period of the 4th Industrial Revolution where multiple disruptive forces such as platforms, artificial intelligence, and other digital technologies are threatening established business models as well as creating new opportunities for innovation and growth. Hence, investors and shareholders increasingly expect boards to demonstrate their relevance, provide technology oversight, and steer the corporation toward digital transformation.
Consulting firm Spenser Stuart observed that “a growing number of ‘next-gen directors’ are being appointed to boards around the world. Many bring knowledge in the fields such as cybersecurity, AI (artificial intelligence), machine learning and industry 4.0 technologies. Others have first-hand experience of digital transformation, organizational design, customer insight or social communication. Inevitably, experts in these disciplines tend to come from a different generation than the majority of existing board members.”
This is supported by a 2017 study by Deloitte titled ‘Bridging the boardroom’s technology gap’ which contends that ‘technology expertise has become a key criterion for corporate board appointment’. In fact, according to its comprehensive research, the percentage of public companies that appointed technology-focused board members has grown over the last six years from 10 percent to 17 percent. Interestingly, this figure almost doubles (32 percent) for high performers—companies that outperformed the Standard & Poor’s 500 Index (S&P 500) by 10 percent or more for the past three years.
The study further noted that ‘although having a technology-focused director may not be the sole reason for performance success, many high-performing companies appear to recognize the potential advantage of having technology expertise in the boardroom’.
In the Philippines, many companies such as in banking and financial services are increasingly placing digital-savvy independent directors to their boards, recognizing the need to influence other board members and ultimately help transform their organizations.
But when choosing a candidate to place a digital-savvy director in the board, he or she must not only have technology background. The candidate must also possess a well-rounded business acumen and strategic mindset. Deloitte spoke about choosing one with ‘horizontal’ experience such as customer engagement, cybersecurity, and so on versus only ‘vertical’ or industry experience. This makes sense because traditional industries such as in banking or manufacturing are moving into new business models that cut across other industries. Hence, the need for a horizontal expertise to help steer the company.
But one of the biggest value of a digital-savvy director is in the engagement of executives that will implement digital transformation in the company such as the Chief Information Officer (CIO). The CIO normally does not have enough ‘airtime’ with the board as he or she is expected to keep the ‘lights on’. But the CIO will have an enormous role to make digital transformation successful.
A digital-savvy board is the way to go to ensure that a company remains relevant by taking an offensive stance to face and confront head-on the disruptions happening now.
The opinions expressed here are the views of the writer and do not necessarily reflect the views and opinions of FINEX. The author may be emailed at firstname.lastname@example.org. The author is President & CEO of Hungry Workhorse Consultancy Inc, a digital and culture transformation firm. He is the Chairman of the ICT Committee of the Financial Executives Institute of the Philippines (FINEX). He teaches strategic management in the MBA Program of De La Salle University. He is also an Adjunct Faculty of the Asian Institute of Management.