Change across the board: Why boards need to digitally evolve

Jodie Sangster

Jodie Sangster has been the CEO of the Association for Data-driven Marketing and Advertising (ADMA) since 2011 and is also chairperson for the International Federation of Direct Marketing Associations (IFDMA). She has worked across the US, Europe and Asia-Pacific for 14 years with a focus on data-driven marketing and privacy, and began her career as a lawyer in London specialising in data protection. Her resume includes senior positions at Acxiom Asia-Pacific and the Direct Marketing Association in New York.

Traditionally, the non-executive board of a company acts in an advisory capacity - attending monthly board meetings to offer overarching advice and guidance typically focusing on:

  • Strategy: Contributing to and challenging the overarching strategic direction of a company.
  • Performance: Ensure the performance of the management of the company, including succession planning.
  • Risk: Managing risk and ensuring corporate governance of the company, primarily related to financial systems, process and reporting. This area has taken on elevated priority since the high profile collapse of companies like One. Tel, Harris Scarfe and HIH Insurance in Australia as well as high profile global companies like Enron and WorldCom.

In today’s world this hasn’t changed.

What has changed, however, is that digital transformation has fundamentally altered the way that executive management should be shaping company strategy, performance and future financial success. Transformation is also widespread across Australian industry. A recent study by Russel Reynolds showed that to a greater or lesser degree, all sectors of business are being disrupted.

This means that if non-executive directors do not possess or gain the requisite understanding of digital issues, trends and innovations, they will become increasingly incapable of providing effective and forward thinking counsel.

This poses a real risk to the long-term health of a company; particularly ironic given managing risk is one of the most important remits of a non-executive board.

While some boards are aware of this risk and busy recruiting or upskilling board-members with digital capabilities, many are not. This is of concern given the rapidity of consumer behavioural change, the continued globalisation of products and service and the importance of digital transformation to our nation’s economy.

Why don’t boards have the right skills in place?

The quick answer is the sheer pace of change. Digital transformation was kickstarted by the world wide Web in the 1990s and broadband advances of the following decade, but turbo charged by mobile.

It has only been nine years since the first smartphone was introduced but it has transformed the way global consumers search, consume and communicate with brands, not to mention how people communicate and interact on a professional and personal level. It is hard to overstate its impact on all facets of society.

Executive management has a hard enough task of keeping up with the ensuing technical and consumer evolution – we know from our own research that one of the key problems facing businesses in Australia is the ability to recruit appropriately trained data analysts and data-driven marketers. For non-executive board members, some of whom are likely to have been away from coal face of day-to-day executive management for a while, the task of keeping up can be even harder.

Whilst age isn’t necessarily a barrier to the possession of digital skills it is certainly a correlating factor. Recent research from Corrs Chambers Westgarth shows that while the average age of non-executive board directors in Australia is beginning to get younger, over half (57 per cent) of ASX 200 board directors in 2015 were over 60 years old.

The rise in the number of women represented at board level is reducing this median age, with the same study shows finding female directors are on average six years younger than their male counterparts on the ASX 100 and nine years than the ASX 101-200.

This is pertinent as global professional services company Accenture, examined women on the boards of over 500 Forbes Global 2000 companies and found that 16 percent of the women on the board of these companies have digital experience versus 9 per cent of men (and another reason to embrace the Australian Institute of Company Director’s ’30 percent club’ initiative which aims to achieve 30 per cent female representation on ASX 200 boards by 2018.).

What should the board be doing to address this?

First and foremost, sitting non-executive board members should ensure they understand the mindset and the requirements of the company’s customers, which will undoubtedly have pivoted in the last few years. At minimum they should be able to confidently challenge the executive team on how they have – or are – adapting their strategy to become customer-centric.

This is because although digital transformation is powered by technology, which in turn has altered customer behaviours and expectations, it is not in and of itself a technology ‘play’ or siloed issue to be dealt with by IT or marketing. Rather the threat and opportunity that digital transformation brings is to the whole of business and predicates itself on the ability of an organisation to put the customers at the front and centre of everything they do.

Too few Australian businesses understand. Frost & Sullivan found that as recently as 2014 three quarters of Australian executives failed to accept that there was rapid change in their industry. This way of thinking poses significant risk for businesses given it is widely accepted that all industries, societies and economies are being digitally transformed.

Secondly, when looking to replace and recruit new board members, companies should look for diversity in experience and skills in order to elevate strategic direction. As businesses have to become increasingly agile, then so must their boards - it is important to attract people who are prepared to challenge prevailing ideas and bring new ideas to board room discussion.

The failure of companies to successfully digitally transform poses one of the biggest corporate risks of recent times. Boards, whose raison d'être is to mitigate risk, must evolve if they are to effectively fulfil their purpose.

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