Vision, Oversight and Digital Transformation: A Primer for CEOs and Boards

What does digital mean for a business?

What does it mean to have undergone digital transformation?

The world has witnessed rapid technological adaptation since the COVID-19 pandemic hit. Companies claim to have transformed themselves digitally when all they do is hold Zoom meetings and spend more time on social media.

But that's not it! Is it?

Digital transformation is all about leveraging technology to become more digitally enabled. But most importantly, as the first step towards evolution, digital transformation is about creating a workplace culture open to change. Mindset significantly impacts how things are carried out in a company—if the leaders are willing to paint a progressive vision, the only way is forward. 

So, who is in charge of leading digital transformation? Is it the responsibility of a single department or function? Historically, that department or function has been the Information Technology organization. Still, increasingly digital transformation leadership in the most progressive organizations is becoming vested in the purview of a President or CEO, with oversight where possible from the board.

The Harvard Business Review conducted a global survey on board members regarding digital transformation triggered by COVID-19. It is striking to note that “80% of global directors said they believed digital transformation should be led at the board level rather than relegated to the IT department. Boards in different regions differed dramatically in terms of follow-through. More than 90% of directors in Vietnam reported that their boards were actively exploring new digital tools, compared to 76-79% of directors in Thailand, Japan, and Malaysia; 67-70% of those in China and Singapore; and just 64% of those in the U.S.”

Isn’t it logical to seek diverse management in an improved system?

Board members must understand that not all company departments are as sensitive to business culture as others, such as marketing which by definition must be forward-looking to be highly effective. Likewise, not all employees and leaders within a company appreciate the breadth and depth of business systems and workflows that need to be instituted to drive digital transformation. The traditional corporate mindset overlooks this reality that for the desired transformation to take place, a corporation needs a flexible and diverse workforce while staying true to the company’s culture and brand in the market. This suggests that when responsibility for digital transformation is distributed across all departments, companies can better transform to adapt to changing cultural and market requirements within and outside the company. Corporations will be more likely to achieve broader inclusion of leaders of various departments within the company if there is similar diversity of focus points at the board level. We need more cross-functional boards for cross-functional executive teams to operate smoothly.

AMC Entertainment Holdings, for instance, is competing with the comfort of its customers' homes, where everything an individual needs seems right at hand. So how do you beat that experience and make people want to visit the theatres, leaving their large screen TV’s and home snacking options behind? The board of directors at AMC is an excellent example of a large company moving in the right direction, with a bit of poor execution.  The bios of members of the AMC board show a great combination of geographic/ethnic/gender and functional diversity, and notably the board includes a board member appointed as Chief Digital Officer of Nike.  Unfortunately at a tactical level, AMC looks amateurish by posting this board member’s bio as Nike Chief Digital Officer when in fact he left that role for a CEO position elsewhere almost a year ago.  Other than this goof, AMC is at least moving in the right direction, leveraging non-traditional movie theatre-goer options right on the web site such as food ordering via the website and on-demand or out of theatre movie streaming options, however, significantly as COVID-19 eases, there remains much room for improvement in areas that involve customer experience and technology that could drive more people leave the comfort of their homes where the board was pushing the executive team harder in order to uncover all opportunities for change.

What does the ideal board look like and what qualities do they need to have?

To predict a board member's contribution level to the company, we must look beyond gender, industry, or functional diversity!  Some board members, just like some executives, will need to be more focused on oversight which can be heavy lifting and time-consuming, and others must be able to see the bigger picture. It’s time we prioritize both oversight and visionary contributions as key success factors for a modern-day board member. 

Visionary leadership is more focused on creativity and innovation and often more customer- and external-focused to help drive company executives to contribute more toward developing ground-breaking ideas to improve the business. 

No one's going to want to admit that they're not part of the vision equation! The takeaway is that you need to strike a balance between being visionary and being responsible for oversight, so the board should include a mix of members who, in the aggregate, bring plenty of vision along with oversight.  It is helpful when targeting functional diversity on boards to consider a board member’s current or prior executive background.

Executive functions like the following often tilt toward vision or oversight but these are not black and white attributes.

Perhaps one can reach average performance with minimum risk simply relying on incremental change and oversight, but one can’t achieve outstanding results without vision. So the example of a modern-day executive is someone who knows enough about the business to ensure that the operations are running seamlessly. Still, concurrently, they also have the vision to drive the company to greater success by staying on top of market trends and changes.

On the path towards digital transformation, why is the US left behind?

In the same way that consumers in many other countries have often been earlier to adopt new technologies and ways of working and living, US companies that are used to being global leaders need to be pushed harder to innovate in the digital era!  Keeping up with such rapid developments requires an understanding of the era with age and mentality. The HBR article revealed that many board members from the USA felt that they did not have sufficient training to leverage technology for the company's benefit. Training can always help, but choosing the right board members, with or rotating out longer-term, likely more set-in-their-ways board members, will allow companies to drive more successful digital transformation.

The above discussion triggers two questions that merit continued conversation: 

• Despite the stock market in the US doing so well and so many tech juggernauts based in the US, why are North American-based company boards behind much of the world when it comes to digital transformation? 
• Is it because US-based company boards are older on average, more ‘comfortable’ and therefore not embracing digital, technology, and security, and others who have to fight harder to win? Or is it just a needed mindset change to bring in more visionary leaders to boards who come up from the marketing, technology, or digital function?

The problem with much corporate and board leadership today, especially in mid-sized to large companies, is that not having enough leaders and board members with passion and vision and not just management are driving the train. Until more of these passionate visionaries become involved at the top, conversation about innovation often falls flat because its unconventionality causes leaders discomfort. This obstacle is limiting a prosperous digital future for many of our well-known companies, so it is vital at the board level to focus on members who are and can be adaptive risk-takers that are not afraid of change. 

CEOs and CHROs would be well-served to focus on this expanded view of diversity to help them drive their companies to become more digitally-driven that exemplify themselves as leaders of the future. Partnering with a retained executive and board search firm like Leadership Capital Group can help your companies accelerate into the envisioned digital future.