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Non-executive directors ‘go digital’

Category:
Leadership & Governance

Date:
28 May 2019

For all their impressive corporate credentials, supervisory board members often lack the technological expertise needed to assess, and provide advice on, their companies’ digital strategies. Experts believe now is the time to bone up.

Supervisory board members are responsible for evaluating their company’s plans and are relied upon to give advice when needed. While they are generally more than up to the task, their companies of all sizes are grappling with a flurry of new challenges – challenges that inevitably call for them to update their digital strategies. One strike against these non-executive directors is that most of them are experienced generalists who lack specific knowledge and expertise in the digital realm.

“Most non-executive directors are experienced generalists who lack specific knowledge and expertise in the digital realm”

“And it’s precisely that specialised expertise and know-how that’s needed so badly,” Joost Steins Bisschop says. As a senior consultant and partner at Jungle Minds, a digital agency, he’s speaking from experience, having successfully guided numerous large companies through their digital transformation over the past few years. “One lesson I learned was just how tough these processes can be to manage in some cases. Solid governance can prevent things from spiralling out of control.”

Someone who shares Steins Bisschop’s opinion is Ruud Kok, Director of Board & Governance Programs at Nyenrode Business University. Kok believes many current members of supervisory boards in the Netherlands fail to be ignited by the idea of new technologies, which formed the impetus for Nyenrode to introduce a special eight-day immersion course this year called Technology for Boards, which is offered alongside the longstanding basic course for supervisory board members.

Kok: “Although the topic of technology as a strategic driver is covered in the basic course, we gathered there was a need for more in-depth understanding. New technologies are transforming companies radically, which calls for new insights and new models of governance and supervision. I meet supervisory board members who’ll tell me: ‘I keep hearing about it and reading about it. I’m not stupid and understand that it has an impact; I simply want to gain a better understanding of it.’ The fact that several leading Dutch supervisory board members have signed up for the course shows that our timing is right.”

New business and revenue models
The trend that Steins Bisschop calls the ‘digital transformation’ is twofold. For one, it refers to the automation or computerisation of a company’s existing processes that have become dated. Steins Bisschop: “Say you’ve got crucial customer data stored on multiple systems that are not in sync with each other. Since this prevents you from creating a comprehensive customer view, it means you also can’t develop the types of new services that will bring you closer to the customer – undeniably one of a company’s key competitive assets these days.”

Then there is the fact that companies rely on digital technologies in developing new business and revenue models, whether complementary to the existing business model or intended to supersede it. Steins Bisschop: “You might have a leasing company, for example, developing an online platform for vehicle maintenance or a commercial information service that uses data already stored on the company’s systems. No matter how you slice it, both these business activities – involving adaptation and innovation – need to be developed within an organisation from the same capability, as they have an impact on one another. Companies that treat new business development as an isolated process within the company that comes to fruition in a type of lab environment are missing the point of what a digital transformation is all about.”

Horizontal process

Steins Bisschop reckons it is these insights that could be most valuable to non-executive directors. “You really don’t need to grasp all the technicalities of your organisation’s IT infrastructure, but you do need to be able to ask the right questions. For instance, we often come across companies that have implemented a digital strategy, but have entrusted one of their vertical silos – marketing, say, or IT – to manage it. That doesn’t work, because digitalisation is a ‘horizontal’ process that, by its very nature, affects all levels of the company and spills into every business process. So it’s important that your Chief Digital Officer isn’t tucked away in some back office somewhere, but reports directly to the CEO. We feel this is just the sort of thing supervisory board members should be asking the management questions about, because your digital strategy can only be a success if it’s properly organised and you get the appropriate individuals involved.”

“Digitalisation is a ‘horizontal’ process that affects all levels of the company and spills into every business process”

Steins Bisschop relates how supervisory board members tend to be taken aback by the sheer speed with which their companies implement their digital strategies: “Time has become a massively important factor. Every month you put off the digital transformation process will basically lead to another several months’ delay. There’s even a radical change in the way you work, based on short, consecutive cycles of designing, developing, assessing, adapting, reassessing, customer validation, further tweaks and changes, and so on. It’s a completely different dynamic from your basic governance dynamic.”

Missed opportunity
Kok and Steins Bisschop are both proponents of digital training for supervisory board members of companies undergoing digital transformations. “It takes more than attending an afternoon session to develop any kind of real understanding of the subject, but there’s certainly a lot of valuable knowledge you can pick up along the way, over time,” he says. “Another option would be to have a ‘digital non-executive director’ join the supervisory board, who would be placed in charge of all things digital.”

Kok endorses this idea: “The original draft of the current Corporate Governance Code contained a section providing that all supervisory boards must include at least one expert in technology and innovative business models among their ranks,” he says. “That section was left out of the final version, but it does speak to a general awareness that members cannot automatically be presumed to have the requisite level of knowledge. You have two options in that case: you either get an expert on board once you’ve established you need one, or you start boning up, educating yourself on your industry’s current game-changers and how they’re impacting your company’s business model,” Kok concludes.

Also read ‘Eight pointers for a successful digital transformation’