Addressing the board’s digital skills gap

In two previous articles I have discussed whether Boards are one of the main obstacles to an organisation embracing digital. Whilst there are some good examples of CEOs that truly understand digital and who are leading their company’s digital efforts, there is plenty of evidence that would seem to indicate that many executives are struggling to provide the leadership their business requires to compete in digital markets.

The article Are boards the biggest barrier to going digital? was based on research that found that the majority of boards did not listen to their customers and were therefore guilty of ignoring their needs and expectations. Ignoring customer needs has always had the potential to damage a business. But as digital continues to gain momentum across every industry the risk of damage has increased significantly. Digital has given power to customers; they are in control. Boards that do not understand this and that do not consider customer needs and the broader digital agenda as one their main priorities will hinder their organisation’s digital transformation.

A study by the Global Centre for Digital Transformation revealed that despite awareness of both the likelihood and impact of digital disruption, it is not viewed as a board-level matter in 45% of companies. And, reflecting the lack of board attention to digital, 43% of executives said their business either did not recognise digital as a priority or was not responding appropriately. In the article Boards ignoring digital are guilty of negligence I explained that, given all the evidence about the inevitably, impact and speed of digital any board that opts for a doing nothing approach is placing their business at significant risk of becoming a victim of disruption. Ignoring digital and refusing to even discuss it at board level is, in my view, nothing short of negligence.

Research recently published by Harvey Nash may provide an insight as to why some boards are failing to provide the digital leadership required by their organisations. A survey of 300 non-executive directors and chairs found that 53% of non-executive directors believe their boards lack the skills to tackle digital disruption, rating it as by far the most needed skill to improve board performance. The study also reported that whilst 45% of board members come from a finance or corporate strategy background, only 4% have hands-on experience in digital or technology.

Digital transformation presents many challenges. It spans the entire organisation and requires businesses to rethink their business models, products and services. It may even involve disrupting an existing and healthy revenue stream to create a new, digitally enabled source of income that is more sustainable in the long-term.

The transformation to a digital business must start with a vision that has to be created, understood and shared by the entire board, which must also provide the leadership and direction both during the initial transformation and on an ongoing basis to ensure the business continues to succeed in the fast-paced markets that digital creates.

To provide the vision and leadership required to succeed in the digital age requires a board that truly gets digital. Being a board member in the digital age requires different skills, knowledge and experience to that which has traditionally been required. To provide the vision and leadership required to create a digital business and to ensure that business survives and grows in dynamic markets that are driven by customers, requires a board that understands and embraces digital.

But many board members are just not equipped to lead in the digital era; they do not understand what it means to be a digital business. Many struggle to grasp the basics of technology let alone how it can be applied to enable new business models, products and services, create differentiation and enhance the customer experience.

To address this gap in skills, businesses will need to start appointing board members with a broader range of knowledge and skills. These board members have to be comfortable with technology and have a solid understanding of digital markets, products and services. And they also need to be able to work in a way that reflects the joined-up and fast moving nature of digital business.

Over time many board members will acquire the skills, knowledge and expertise required for digital. But some may not make the transition and will need to be replaced. Appointing new board members takes time and particularly if several new appointments are required; organisations cannot make wholesale changes to their senior team in a matter of weeks or months.

But digital is happening now; markets are being disrupted and companies that do not respond quickly to the opportunities and threats this presents face an uncertain future. The board’s digital knowledge gap needs to be filled in the short-term to ensure it is equipped to deal with the challenges of operating in a digital age.

This is an area in which I am regularly asked to help organisations. Potential solutions include:

• Executive briefings: engaging a third party to run briefing sessions for the board provides a useful starting point on the digital journey. Such sessions can be used to develop awareness and understanding of digital, explain the steps to becoming a digital business, and to initiate discussions about the organisation’s vision and strategy for digital.
• Retained adviser: engaging an external digital expert to provide insight, guidance and direction to the board gives immediate access to the type of knowledge and experience required to create the vision, and to define and execute strategy. Retained advisers can also help build the organisation’s digital competence, and provide assurance and oversight for digital initiatives.
• Non-executive directors: appointing one or more non-executive directors with technology and digital experience is fast becoming a popular route for organisations to quickly add digital knowledge and experience at board level. In fact, given the importance of digital, non-executive directors with the right experience will offer valuable guidance, advice and challenge even if the board is already tech- and digital-savvy.

Building a digital-savvy board is essential but takes time. Digital markets move quickly and organisations cannot afford to stand still while they develop their board’s digital competence. A number of short-term solutions for filling the digital knowledge gap are available to organisations to help them start their digital transformation while they are building their digital board. But they need to act now to avoid being left behind.

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