In June 2018, I wrote a column on one root cause of the failure of digital transformation in organizations — the dearth of digital-savvy boards. This was the case then, because “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.”
I was urging organizations then to appoint digital-savvy board members because of the onset of the “Fourth 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.”
Because of this, I wrote then, “investors and shareholders increasingly expect boards to demonstrate their relevance, provide technology oversight, and steer the corporation toward digital transformation.”
There was progress then, especially in the West, in effecting such boards. I noted the observation of consulting firm SpenserStuart, which said “a growing number of ‘next-gen directors’ are being appointed to boards around the world. Many bring knowledge in fields such as cybersecurity, AI (artificial intelligence), machine learning and Industry 4.0 technologies; others have first-hand experience [in] 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.”
I also cited the comprehensive research of Deloitte that says “the percentage of public companies that have appointed technology-focused board members has grown over the last six years from 10 percent to 17 percent;” and that “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.”
In the Philippines, some corporations in the banking and technology industries appointed to their boards digital-savvy directors who helped steer their organizations toward digital transformation. But the majority of boards in the country are yet to be tech-savvy.
What doesn’t bode well is that Philippine companies have the region’s oldest directors and the longest board tenures, as owners and their trusted advisers tightly held the reins of banking, property and retail giants, according to data compiled by Bloomberg from more than 5,200 listed companies.
“Corporate directors in the country sit on boards for an average 10.6 years, more than four years beyond the average of 6.5 years in Asia-Pacific,” the Bloomberg data said. Moreover, family control is the reason boards of Philippine corporations, which are dominated by the founders and their relatives, have independent board members who stay for more than a decade.
These are the reasons digital transformation has been slow among Philippine organizations. A 2017 study of Microsoft in the Philippines confirmed that the top roadblocks to this were the “lack of organization leadership to ideate, plan and execute digital transformation” as the top answer and “lack of leadership from board of directors and executives as the top fourth answer.”
Now, with the coronavirus pandemic and its resulting economic recession, companies are struggling to pursue digital transformations initiatives, as employees work from home and consumers buy online. This further emphasized the importance of a digital-savvy board to push the digital transformation agenda.
To be successful, digital transformation should be owned by the chief executive officer and the board, as it is a set of strategic directions and actions to accelerate business activities, processes, competencies and business models to fully leverage the changes and opportunities of digital technologies and their impact in a strategic and prioritized way. It is not just purchasing and implementing collaboration tools or setting up an ecommerce platform, or putting up an app for the company, as a knee-jerk reaction to the current public health crisis. It must be cohesive and methodical to make it successful in the medium to long term.
As one joke on social media put it: “Who led the digital transformation in your organization. The answer — Covid-19.” Indeed, the pandemic is forcing organizations around the world to digitally transform. This is why the role of the board has never been as critical and urgent as it is now.
The author is the founder and chief executive officer of Hungry Workhorse, a digital and culture transformation consulting firm. He is a fellow at the US-based Institute for Digital Transformation and country representative of the Institute of Change and Transformation Professionals Asia. He teaches strategic management in the MBA program of De La Salle University. The author may be reached at rey.lugtu@hungryworkhorse.com.