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Boards are finally beginning to recognize the challenges they face in overseeing digital transformation. Three top the list.
The classic Board role of “oversight responsibility” is really being challenged. Oversight implies the capability to have expert insight into business practices and decisions … from a distance … based on years of experience on the front lines in the business. Today we must courageously admit that when it comes to digital transformation, Board members have not yet acquired sufficient digital insight to exercise informed oversight .
There are not enough digital experts to populate Boards, and so most lack sufficient experience with entirely new technological innovations, tech-driven business models and effective work methods in a digital organization. All of this places Board directors in an unfamiliar position fraught with paradox. What is less recognized is just how deep this paradox runs.
Let’s unpack this.
Insight
is a different mental activity than oversight
,
and requires some nifty neurological gymnastics to shift from one to the other.
Board oversight
typically draws upon the
traditional “watch out” role of fiduciary and ethical responsibility: make sure
nothing goes wrong. Research in
neuroscience indicates that threat or fear shuts down the “executive function”
of the cerebral part of the brain, and kicks the amygdala into gear which in
turn reacts emotionally with the classic “fight/flight” response. This applies not only to physical danger but
also to intangible emotional or social threats.
Developing insight
into entirely new economic
and business models -- dramatically different from the past -- draws upon the
plasticity of the brain to form new neural pathways. This requires learning
through a more expansive cerebral mindset of curiosity, openness, creative
experimentation and exploration of foreign territory.
In the face of digital transformation, the Board’s highest oversight
responsibility now is to learn to be open to new insight
. Herein lies the
paradox.
And if that were not enough, some suggest that Board Directors may need to learn from their own employees – the very people they are charged to oversee. This is an odd, potentially awkward, reversal of roles. Typically it is not healthy to interject Board members down into the inner workings of an organization. But admittedly, here is where the learning might happen, “down” where the digital natives live, out ahead of the rest of the organization… assuming an organization is fortunate enough to have them.
So what does a Board do about this?
First, the Board needs to raise awareness of the size of its challenge and the seemingly “unorthodox” nature of its “insight /oversight” role. Put simply: Directors need to be prepared to act differently.
Second, the Board needs to be astute about its approach and focus. There is a huge amount to take on here and
focus will be critical.
One essential step will be to conduct an assessment of the organization’s readiness for digital transformation. This should be thorough, top-to-bottom, and include the Board and senior leadership. The Board needs to really understand the digital transformation capability internally to evaluate how much help needs to come from outside.
We also believe the Board needs to focus its learning efforts
at the business model level around higher level strategic and economic decision
making. How has digital technology
changed the nature of business? And how
does the Board continue to add value while it is concurrently in a continuous
technology learning mode?
Here is a two-step approach to prioritize:
Today, data analytics and digital technology are so
engrained in the daily operations of business that it is probably already a misnomer
to delineate “Digital Transformation Oversight” as something separate from
business model economics and strategic transformation. The greatest value from Board oversight (aka,
insight) will come at that higher level.
This need for Boards to shift their mindsets isn’t a new
phenomena. The same happened in the Industrial Era. The difference is that “back then” directors
of Boards rode on the backs of a century of accumulated experience. Now they sit at the cusp of a new technologic
era. Their greatest fiduciary
responsibility is to be open to learning what that means - as fast as possible.
This means directors today must pioneers
and explorers, discovering new uncharted territories, new pathways -- both
neurological and otherwise.