Is digitisation also revolutionising your board of directors?
For businesses, the digitisation process is not only a challenge, but also an opportunity for innovation. How should boards of directors and corporate leaders handle this transition?
For businesses, digitisation is not only a challenge, but also an opportunity for innovation. How should boards of directors and corporate leaders handle this transition?
Many companies are facing the sweeping effects of digitisation, which through the exponential increase in connectivity and data quantities has generated a so-called “fourth industrial revolution”.
Technologies such as artificial intelligence, predictive data analysis, and blockchain are rapidly revolutionising entire sectors. At the same time, customers are increasingly empowered by improvements in their ability to inform themselves and react, including through social media.
In the pre-COVID era, these factors had already triggered a market upheaval of epochal dimensions, challenging the pre-existing corporate status quo while offering a wide range of new opportunities for corporate innovation at the same time. The trend is now even more pronounced today.
Research undertaken in Switzerland has confirmed high levels of consumer engagement with digital devices, media, and products. 77% of consumers carry out research on the internet to find information on the product or service they intend to buy. 69% say they feel confident in purchasing, using, and managing digital services. On the other hand, 83% consider transaction security very important, placing great emphasis on the issues of data security and digital trust.
Business leaders are looking for the best way to deal with open challenges. And some of the recurring questions are:
- How can current levels of business be maintained, even generating additional business, against the backdrop of the digitisation process?
- Can this be done within the current company structure?
- What changes (cultural, strategic, organisational, technological) are needed to ensure continuity of business success?
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It is important that boards understand the costs and opportunities arising from the fourth industrial revolution created by digitisation. This is crucial for successfully steering the transformation. It is also the board’s responsibility to ensure the continuous development and appropriate oversight of the company’s digital strategy: the customer is increasingly empowered and must take centre stage. The board can strive to achieve a balance between the old business model and the new one.
Here, timing is everything: digital transformation projects should be set up even if the business has not yet fully experienced the market upheaval. This will protect against serious risks, such as loss of market share or reduced profit margins.
Boards should have a planning horizon of more than five years, and be prepared to challenge the CEO and the executive committee on the strategic direction of the organisation.
New technologies develop very quickly: Management must work with the board to adapt the corporate strategy by introducing new working practices at an equally rapid pace.
It should also be emphasised that the digitisation process brings with it inherent dangers, such as cyber-attacks and data protection threats, which have affected both governments and companies in the recent past. Data theft is on the rise, as is the threat of denial-of-service attacks, malware and ransomware (cyber blackmail that restricts access to computers). As we have said, IT security is crucial for the survival of the enterprise.
The EY “Global Information Security Survey”, an annual survey conducted in 2020, found that many companies experienced one or more significant cyber-attacks in the last year. Yet, the investment priorities of organisations do not include advanced protection technologies and models. As the sources report, more than half of the cyber-attacks suffered by companies (one in three, according to the data) can be blamed on employees’ lack of awareness.
Research has demonstrated a still ineffective approach to managing cybersecurity issues and cyber-attacks, also in relation to the technologies used for smart working: only 10% of respondents say they implement the most important cyber threat prevention actions, such as adopting the latest security updates (patching) and managing the devices used by mobile users. The use of digital security tools is also limited. Finally, only 4% of companies claim to provide specific employee training on IT security issues.
Indeed, some aspects of the problem of cyber threat management seem to be generalised. Even across borders, organisations are doubtful that they will be able to continue to identify suspicious traffic on their networks (49%), track who has access to their data (44%) or be able to find hidden and unknown zero-day attacks (40%).
In light of this, boards of directors must ensure that management minimises cyber risk as much as possible. And today, cyber-attacks should be considered an essential part of the risk map in every company. Equally important is the recruitment of competent personnel to manage a successful digital transformation. Yesterday’s management is not necessarily the best choice to face the challenges of tomorrow. Boards of directors should evaluate more flexible models, perhaps more effectively, in order to encourage corporate spirit and innovation. Or to understand whether certain acquisitions are really necessary to expand digital competences within the organisation.
Board members must have the necessary tools to oversee the implementation and success of a digital strategy. Metrics reflecting the transformation universe are often difficult to define. However, there are useful indicators. For example: the number of digital transactions and their value, digital marketing costs and returns, the number of employees involved in digital projects. The more integrated the digitisation programme becomes, the more sophisticated the monitoring metrics must be.
The board must also look at its own structure and consider the potential benefits of including IT-savvy colleagues (e.g. in a strategy and technology committee), weighing up the costs and benefits of bringing in additional expertise from outside or within the company.
For the boards, there are therefore five key questions:
- Do you know if — and how — your current business model will be affected by digitalisation (opportunities and threats)?
- Have you considered which future business strategies are most appropriate for your company in a digital world?
- Does your company have the right culture, organisational structure, and digital capabilities to effectively implement a digital strategy?
- Does your company have an effective cybersecurity strategy?
- Does your board of directors have a designated expert capable of dealing with the different aspects of digitisation?