MAKING BOARDS MORE DIGITALLY SAVVY
Following our statistical analysis, we conducted interviews with chairs, lead directors, and other directors of large companies and asked what actions can help to increase the digital savvy of board members. We organized these activities into three categories:
Encourage Self-Directed Learning
There is no substitute for curious and committed directors who understand what areas they need to develop. Age was not an issue—some of the most digitally savvy directors were some of the older directors we talked to or heard about. Even though they typically didn’t have previous digital experience, these directors had invested heavily in becoming digitally savvy. Some of the most effective activities included taking online and in-person courses, reading research reports and case studies, attending technology conferences and finding reverse mentors—digital natives—to learn from. Others jumped to learn on the job. As one director reflected, “When the opportunity came up to join either the IT committee or the remuneration committee, I jumped at the IT committee, thinking, ‘I think I can have more influence on the future of this company on that committee.’”
Commit to Board-Wide Education
We found that three important kinds of educational activities increase the digital savviness of all the members of the board:
1. Scanning and learning: Board members regularly pointed to a board tour as the most impactful type of learning opportunity. A director who described these tours as “digital tourism” said that nothing could substitute for confidential, in-person discussions with leaders of born-digital companies such as Amazon, Tencent, Facebook, and LinkedIn to understand how these leaders behave and think differently. Also valuable were visits to non-competing companies in similar industries that have made significant progress in digital transformation. There was consensus that one of the best travel models was a subset of both directors and senior management touring four or five companies in a week in a place like Silicon Valley, Israel, Berlin, London, Mumbai, or Boston. Another director summarized that “if we don't step outside and see what ‘better’ can look like, we can actually think we're doing pretty well.”
2. Working the problem: Several directors mentioned the annual (or more frequent) strategy retreat as critical to improving the digitally savvy of directors. Here are some proven criteria for success.
- The starting point is having dedicated and significant time—often one or two days—to focus on digital threats and opportunities.
- The agenda should include activities where directors focus on how digital will impact the company.
- Effective is a series of activities, such as provocative external speakers who engage the directors in conversation; presentations from leaders of other companies who have made significant progress, and from company executives on current activities and their views of the future; and hands-on exercises during which directors can work on case studies.
3. Ongoing review: Several chairs referenced the annual survey of directors as a great source of information about changes the board needs, such as adjustments in expertise or a requirement for director education. For example, one strong practice was to conduct an annual survey of directors, with in-depth director interviews conducted by an independent consultant every three years to produce recommendations for change.
Add New Directors
Several board chairs and directors spoke about needing a port- folio of skills on the contemporary board to help the company succeed in the next decade or more. For some, this was a shift from the previous mindset of requiring of each director a minimum set of attributes (e.g., financial skills, large enterprise experience, business connections, experience with compliance, expertise in the company’s industry). One board member described this concept as “developing T-shaped thinking,where everyone on the board has to be knowledgeable across all issues, but you need some people who are deep in each key issue.” For most boards, to have three digitally savvy directors will likely mean adding at least one new director while helping to increase the digital savviness of several, if not all, of the other directors. Several directors recounted observing invitations to join a public company board being extended to first-time members (often much younger than the average age of other board members) because the invitees were digitally savvy.
DEVELOPING A DIGITALLY SAVVY BOARD STRATEGY
Our conclusion is that chairs and lead directors, working with their CEOs and CIOs, need to develop strategies to create more digitally savvy boards. Here are four questions all board chairs, CEOs, CIOs, and directors should discuss:
- Do we have a good-enough understanding of the threats and opportunities from digital technologies in our company over the next five to ten years?
- Do we have at least three digitally savvy directors, and a working understanding of digital issues among all the directors?
- Do we have a plan to increase the digital savviness of our board over the next few years? If so, how is it going?
- Do we strike the right balance in weighing the risks of a project under consideration versus the risk of not doing something new?
Here is a final thought, from the two authors of this paper who are lead directors of US-listed company boards: Experience is a great teacher. Using the company’s technologies personally— taking the customer’s journey with the company’s products and services—is a terrific way to understand the customer experience. And staying abreast of digital startups, investing time with incubators and accelerator programs, and finding time for formal education in technology topics (e.g., agile) are all helpful to becoming more digitally savvy.