In the Financial Times recently, there was an article entitled, “Europe lacks non-
execs with digital knowledge.” The article, written by Maxine Boersma, cites a PwC survey that says that 9/10 chief executives believe they “should champion the use of digital technologies to the get the most from investment.” In these ever-changing times, there is definitely a strategic role to be played by Board Directors. Constituting the right mix of board members is critical. The mix will, of course, need to vary according to the business and maturity of the company. However, pretty much every company today has to have a digital component. This is a particularly key issue for companies undergoing digital transformation.
A Digital Board of Directors?
Peter Williams, Chairman of Boohoo and Mister Specks as well as Board Member at RightMove, spoke with Ian Jindal at the Internet Retailing 2015 Conference about the needs for Boards these days to be more digital:
The problem of many board members today is that they are too old to engage for this digital era. You need a digital person on the Board, not to come talk about the website and social media; but, to understand the digital landscape and opportunities. There has to be a generational step-down to have a number of more digitally savvy members… The other piece is the black box stuff, the analytics…. Particularly for the web business, you have all this data. You need someone talented who can dissect all this information to parse out the 2-3 key things on which to work.”
– Peter Williams, Boohoo.com
As Peter Williams pointed out implicitly, in fact, there are at least two different aspects to digital:
- a broader knowledge and understanding of the digital world
- data analysis
I certainly believe that bringing in more digitally savvy profiles is absolutely right. Whether they need to be “young” in age is another matter, especially if they don’t have sufficient business acumen. Meanwhile, I would argue that there is a third issue around infrastructure and technology. To the extent there is a CTO (Chief Technology Officer) on board, the challenge is to find the right profile. This means having at once knowledge of the technologies, but also a keen business sense. To have a high performing digital board of directors, the key will be in finding the appropriate complementarity.
Not just digital
As I have often said, and I agree with Ian Jindal, it is important that everyone at the executive level be at least a bit digital. I'd much rather a Board of Directors who are all part digital as opposed to a team of Luddites with one person who is 100% digital. Share on X As the FT article points out, Boards are “finally becoming more digitally literate.” The appointment of digitally literate board members will, I imagine, become a preoccupation of institutional shareholders. However, I believe that there are two other areas where Boards should have a stronger mix:
- diversity
- brand
In plain disagreement with my position, the annual Responsible Capitalism and Diversity survey just released by Hermes Investment Management, showed that not even a quarter of institutional investors felt that women representation on Boards is important. I firmly believe that diversity of opinion on the Board, injecting digital, younger and female perspectives (not to mention those of other nationalities and races) will bring a material benefit to the governance and strategic discussions. The latest Davies Review (in the UK) shows that less than 9% of executive board positions are held by women (up from under 6% five years ago). Yet, there are studies that show that boards with more women members outperformed in terms of shareholder return. “Catalyst’s 2011 study found that companies with the most women board directors outperformed those with the least on return on sales (ROS) by 16 percent and return on invested capital (ROIC) by 26 percent.” (Catalyst Study)
For any evolved mindset, a lack of diversity is neither tenable nor desirable. Sure, it does not serve a purpose to be overly dogmatic; but diversity in this internet-enabled, increasingly transparent world makes business sense. As a friend of mine who is Chairman of a major organization said, it should be a far higher priority to have diversity (notably women) versus having digital know-how. Diversity (of origin, opinion and perspective) is a little like the question of digital: it is a question of mindset above all. For some, they can get two-for-one in a digitally savvy and younger woman executive.
Branding on the Board
The question of brand is a much trickier one. Certainly, some companies have a greater deficit in or need for branding than others. But, in this digital era where the funnel has been flipped and the customer is king (and has at least part ownership of the brand), the risk/opportunity related to brand building has never been more important. I believe firmly that the long-term sustainability of companies will depend on the ability to drive value and build a differentiated and de facto brand. Share on X
Most interested to hear your opinions!
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Photo credit: Empty Board Room by https://www.flickr.com/photos/89228431@N06/
I agree with this. We are constantly coming up against companies where digital transformation is stymied by a generational gap in knowledge. In fact, I even think that the terminology around this subject is quite misleading. Digital suggests that all this change is merely about technology. Really, as the CIO of John Lewis Partnership pointed out this is a convergence of lots of different technologies driving an unprecedented pace of change. It is as much about the human response to this dynamic environment as anything else. Do you have a company which has really worked out its bedrock of unchanging values and mission so that it can feel free to take the risk of trying new strategies and tactics around those unique qualities? That is the real question. If you have a rigid hierarchy, silos and central command then someone somewhere is seeing your niche as an opportunity for exploitation!
Boards constructed on the back of the old boys’ network are unlikely to want to quash their reactionary views but without reflecting the diversity of their customers it seems unlikely that they will be able to drive the kind of agility needed in 21st century business.
Your article is bang on the money but, as with getting a “quota” of women or accounting or financial or mixed race or whatever is that you end up getting the “wrong ” person who can take the board in a very bad direction eg GEC in the 90s which went totally digital and then collapsed ending 100 years as one of the leading UK companies….so, as they say, “be careful what you wish for.”
The idea is spot on.
You will be (or not be) surprised how many boards try to fill the “digital gap.”
But it is much more difficult to fill than you think.
Part of it is due to capability (you want someone with the knowledge of innovation but you end up talking with telecomm people), size and relevance of experience and shortage of supply.
Keep writing.
This discussion is particularly appropriate when applied to the financial services sector, which is going through the beginnings of a transformation due to the rapid growth of Peer-to-Peer and Marketplace Lending. An industry sector that already considers itself digitally advanced is suddenly facing changes in financial technology which, among other things, use different data differently. For the boards of traditional financial services companies, not only do they face the conceptual challenge of change but also considerable technological challenges. Finding board directors with sufficient experience, capacity for change and digital know-how is a major challenge.
I agree – especially the fact that it is better to have a bunch of people who know a fair amount than one expert.
I enjoyed this article. It obviously depends on the type of business, but I do agree all boards need to understand the digital world.
Well selfishly I personally know a ton of talented “younger” (than most exec boards) female digital talents so I don’t think supply is the issue at all. I think the recruiter panels choosing comfortable look-alikes is more the challenge
I agree with the ideas and the emphasis on having more digitally aware spokesperson on boards.
I can see the value of digital thinking even for large “traditional” companies…
Nice summary Minter.
There can be confusion between what is digital and tech. Building tech for efficiency is common sense, doesn’t need Millennial behavioural insights (for example). However, having a strong digital strategy is much harder, needs business vision…
Apart from being the right thing to do, diversity brings competitive advantage. But Board humility in selection and integration key to success…
Minter
This is a very interesting article and in many ways has parallel views on the issues of Security on Boards
Boards are waking up the fact that Security (Digital) is not a technology risk; it is a business risk. Therefore they must understand the ‘Business of Security’ as much as the ‘Business of Digital.’ Failure to do so means a possible catastrophe if they have a breach or likewise the missed opportunities or being left behind by not capturing data or digitalising their businesses.
I was in the US last week with 2 main board Directors of a Global Sports organisation and both of them were highly aware of the issues surrounding security and much more prepared to challenge their CISO for example on what was being done to protect data. They also directly wanted to see technology solutions such as Glasswall that could not only bring more efficient protection than that currently available but also assist in risk, audit and governance requirements that could demonstrate to their Regulators or indeed Insurers that they were following ‘best practise’ and therefore reducing the risk of litigation.
This is a very interesting position to consider, and I may turn the demonstration in the direction of “m(y)ndset”more than tools or function. The digital revolution has obviously overwhelmed the customer, more centric and strategic than ever. And that’s that fact that drives companies crazy (or must to).
The real revolution in fact is not so digital but the fact that customers have power with social voice, more than ever.
Having said so is that for me is not a problem of generation, I don’t really care of “generation” but more staring at “attitudes” or “mindset”. The real problem in boards is that they are still considering customers as “cash potential” more than innovation angels. The digital workforce and crowd power shifted power from the inside to the outside of companies, forcing them to listen, stare and act. It’s then again not a problem of tools, projects or infrastructures but understanding that digital is not a “stamp” that companies can put on their reputation like “yes, we are digital enabled”. The real move must come from any entity of the company: every people, from top to down, must be concerned, digital improved in any process, conception, building. The main example today is that we created a term “uberization” to shape, name or be afraid of, these huge changes. And I think with this little term, people start to understand what they face. Hope it’s not too late and that they will realize any board, despite its concrete forces, may disappear suddenly, in the ignorance of the digital opportunities…
Thanks for the great piece ! I can only agree with your analysis (though you’re preaching to the choir). I would add that the reverse should be true as well: Digital company boards should have more “traditional” industry savvy board members also. For example, AirBnB should have a large hotel chain, resort or someone from the hospitality industry sit on their board. Just a thought.
Minter, I couldn’t agree more with your views. One of the reasons why start ups become unicorns and then eventually get valued at high billion dollars is because they have embraced technology to help the consumer need, whatever may be that need, the use of technology and big data has made it simpler/accessible for the consumer. Giants and the so called Blue Chip companies have suddenly woken up to the news that they are on a different race track all together – their opponents are not even running on the same field. The game has completely changed. In order to respond to this change one has to think like them, one has to fundamentally change the way you have perceived consumers, business, employees and stake holders. Your expectations need to readjust. The first step is to get the right CEO/MD. One who is part of the future, not the one that is already a past. The next would be to empower him/mentor him with a board which can understand what he wants to do and where he wants to take the company. If that means you get a diverse, digitally savvy and a younger board then so be it. The problem with big corporations is that they do not have the agility, they just lose it somewhere. Having younger and digitally savvy people at the board and executive level, you will be able to compete if not change the playing field again. Take for example https://www.youtube.com/watch?v=eCNeHqwQJhg (Loom) and https://www.youtube.com/watch?v=ugf6aDwgaU0 (Rebecca Minkoff), if they can write a new future for retail, why can’t corporations like Walmart and Ralph Lauren do the same – albeit with deeper pockets and better access to resources! The answer lies in the lack of diversity at all levels.
Agree with your assessment that partial digital adoption by the majority of the board is preferable to simply having a single digital expert. However, it would certainly behoove an organization to have at least one person on the board who is extremely proficient in digital, in order to lead that charge.
Where many brands fall down at the employee level is hiring someone for digital simply because they’re young. In my experience, having a digital strategist on board means having someone who not only understand the tools and platforms, but who is also grounded in business and understands the larger strategic imperatives that a company is faced with.
Great dialogue going here. As a startup founder and CEO, I actually believe in having multiple boards or groups to help guide company strategy. The true Board of Directors is mainly comprised of investors and people who know how to run and scale businesses. The Board of Directors has lots of demands, is best small, and very serious business. This is what you need for extremely sensitive matters. I have found that is almost impossible to get the “perfect” board here in terms of knowledge, skills, diversity, etc. You set priorities and do the best that you can.
Meanwhile, an Advisory Board can boarder, looser, larger, and change often. This is where you can bring clients, partners, and experts in your field. The lack of constraints allows you to go much broader in terms of who you include and what you ask of them. Combined, you get the best of both worlds.
I agree with it in principle – though really management teams run companies and I’d say this is just as important for them. In fact, in many ways more important and harder to do. It is easy enough to find a senior Facebook executive to stick on one’s board.