Gartner Says 69% of Boards of Directors accelerated their digital business initiatives following COVID-19 disruption

The 2021 Gartner Board of Directors Survey was conducted via an online survey from May through June 2020 with 265 respondents in the U.S., EMEA and APAC in a board of director role or a member of the corporate board of directors.   The majority of BoDs (67%) expect budgetary increases in technology as a result of the pandemic, while functional areas such as marketing and HR are expected to experience budgetary cuts. Respondents expect a nearly 7% increase in their IT budgets for 2020. [Gartner]

In an increasingly digital world, being a business that is not only positioned to embrace the opportunities of digital, but to discover them before others do, is critical. The answer to being a business that leads the way doesn’t lie in simply appointing digital leadership. Whilst this is a critical move, it doesn’t fully bridge the knowledge gap between monetising traditional assets and successfully navigating the challenges and opportunities digital business models can create.

Understanding the impact of technology

Achieving this comes down to having a board and leadership team that is willing to develop an understanding of:

• how technology can impact an organisation and its value chain
• the way it can stimulate long term business model changes, with high short-term costs
• how it can help redesign ways of working and attract new talent
• how it can open your organisation to new customers that you’ve perhaps never considered before for your business.

This doesn’t mean that your board needs to be digital experts themselves. It does, however, mean they need to consider special sub committees or advisors to ensure that digital is being considered in discussions around strategy and risk management, and to ensure that innovation investments can be effectively governed.

Technology governance encompasses the board’s strategic and risk oversight role in a wide sense, covering everything from IT systems, web, cybersecurity, mobile and increasingly prevalent technology such as robotics, artificial intelligence, augmented reality and virtual reality that your organisation could potentially have on your radar.

Directors have a fiduciary responsibility to look after an organisation’s assets – both tangible and intangible. Today, data and technology are becoming major business assets and are the key drivers of company growth and profitability. If you looked at your own organisation, does your board truly understand its digital assets, and can govern these accordingly?

A digital-first approach

Digital isn’t a passing trend. To survive in not only today’s market, but also thrive in tomorrow’s, it’s critical that digital strategy is embedded across three growth horizons in your business – operational (short term), strategic (mid term), and radical innovative strategies (long term) which requires an understanding of how digital can change business models.

Therefore the ability to navigate in a digital-first world boards need to be challenging the CEO and leadership teams to respond to new business models that remove cost and create new revenue opportunities, and to explore the stock of digital assets. Boards should recognise CEOs will not have all the answers, and encourage the guidance of digital advice, ensuring they are equipped with the relevant data, knowledge and networks to lead effectively.

Some tool recommendations for boards

There are many resources online for board level scorecards and dashboards to govern digital business transformation, I recommend using something simple, co-designed with your strategy.  It’s important the governance tools have a common thread with the strategy so everyone across the business can locate their contribution to the collective success of the transformation.

Personally, I use a few tools in my playbook (albeit I always adapt for each organisation as every business has a unique journey).

Here are two of my favourites:

1. A tool for governing the portfolio

As we know, digital business transformation is a holistic and fundamental shift across a business, and a great tool for capturing this is the Digital Capabilities Framework.  What I love about this tool is it balances the enablers and goals within the portfolio across a multi-year roadmap. At the board level, a version of this tool can be simplified with some key metrics to govern the portfolio (risk, funding, scope).

This framework goes further to determine priorities  based on their importance to the future business and recommends the funding model and activation methods accordingly.

Your board will expect each initiative to be accompanied by a business case, and for most initiatives a lean business canvas, strategic risk profile and financial modelling will suffice, however when we are talking about innovation and exploration this will not work – why, because we don’t know enough yet.

2. A tool for governing uncertainty

There is where I highly recommend boards and leadership upskill on a tool called Discovery Driven Planning which turns conventional innovation and business growth on its head when dealing with the unknown, uncertain and not yet obvious to competition. It offers a low-risk way to move exploration and innovation forward, minimising expense and maximising learning.

The basic principle uses a reverse income statement (RIS) to bring clarity and reality to the venture, but you need to be clear of your financial expectations at steady state.  With Discovery Driven Planning, you model financials bottom up – instead of starting with an estimate of revenue and working down, with the reverse income statement you start with required profit, return on assets and subsequent sales required.

Once the profit model is clear, assumptions are built in, and using sensitivity analysis a checkpoint plan is created to test the assumptions in priority of their effect on the profit model. By continuously updating the RIS, we can largely eliminate downside risk, and create greater upside.

It is not the role of the board to ideate, management should have already done this, but to govern the learning  and spending.  This means ensuring we are only investing as far as we know, and focus on testing the assumptions, so the board should:

• Understand the initial hypothesis
• Agree that its big enough to matter
• Agree the assumptions
• Approve investments decisions for the next checkpoint by elevating the learning plan, removing impediments and decide at the checkpoint whether to continue, stop, pivot, accelerate.

I highly recommend you follow Rita McGrath who co-designed Discovery Driven Planning, and her latest book Seeing Around Corners is a must read.  For a good example of this in action check out this article she shared today called Disciple Turns Vision into Reality.

If you are interested in learning more about these tools, please reach out and I can connect you with advisors in your region successfully using these tools to drive business growth.

Bod’s are you prepared?

About UpSw!ng

The content in this series is my perspective, open to discussion and healthy challenge, and welcomes ideas and collaboration should you wish to get involved.

It is my objective to represent diverse thinking and inspirational leadership towards a fundamental shift in the way technology and innovation can grow profitable NZ organisations, whilst making positive impacts on society.

What may feel dramatic now, will be considered visionary in the future!