Digital transformation is essential to sustain the current business models and develop new revenue streams> however the complexity and speed of digital technology can make everyone feel they are playing catchup.
For the top leadership team, digital transformation increases the scope of the teams’ responsibilities while at the same time increasing the risk and competition. Examining the impact of digital transformation with the following aspects would help the top leadership team focus on the most important challenges.
Understand the implications of technology to guide the team.
The top leadership team (Board) should understand the implications of digital technology and its impact on business. Adding technology at varying stages of maturity further complicates the issue.
The boards can take a strategic view while taking on new directors. Look for experiences in digital transformations and bring on board members who can use their expertise to guide the board in taking appropriate decisions.
Another option is to undergo intensive training programs to focus on the impact of technologies on business. The objective is not to build digital skills but to understand their influence on different facets of the business.
Digital transformation changes the way business creates value.
Digital transformation should help take huge leaps in business growth. This means that the transformation will impact the technology, operations or business model of the company.
Efficiency and cost-cutting is only a small part of digital transformation. It is more about generating new sources of business and revenue. It helps understand the real sources of competitive advantage to deliver significant new sources of revenue.
Investments must be made over the long term. This may be challenging for many companies as it requires heavy investment in the beginning with the promised payoffs much later. The Board must take a long term view and invest in multi-year capital and expense provisions to capture future value.
Measurement of digital transformation.
Digital transformation is a complex activity with many initiatives taken up simultaneously. To get a measure of its progress The Board must have a clear roadmap and strategy. There should be a common understanding of the strategy so that one can assess where the value is.
Get the strategy and roadmap assessed independently. initially focus on two or three domains that create maximum value for the company. Again focus on two metrics
- track outcomes and indicators leading to value. Establish baselines as a starting point to track changes.
- track the changes in behaviours and processes within the organisation. eg., how quickly new ideas get translated to useful tools, the percentage of people working in teams where the change occurs.
Have a broad view of talent.
The board may have approved more digital natives or people with experience with digital initiatives. Given the change that is being undertaken, the board must go one step further and question the type of talent being considered for recruitment.
It is data engineers, product managers, agile coaches who are the backbone of digital transformation initiatives. Boards should also look at upskilling options for existing manpower and make them more productive. Finally, they should plan for the long term by looking at hiring requirements over the next 6,12 months.
Have a clear view of emerging threats.
Digital transformations may blur out traditional boundaries and create new sets of threats that have to be dealt with.
Digital transformations open up new risk profiles. Regulations, local compliance requirements introduce new risks to the business.
Keeping track of competition poses fresh challenges. Boards and executive teams must be more externally oriented, take an outside view and have more precision in scenario-planning exercises.
Digital is the way forward and inevitable. The boards have a key role to play in guiding the company to transform itself digitally to further its business.
5 Questions Boards Should Be Asking About Digital Transformation
by Celia Huber, Alex Sukharevsky, and Rodney Zemmel
HBR 2021/07
R2G 