Boardrooms globally have undergone a significant transformation, from being dominated by closed inner circles and individuals with similar backgrounds to embracing diversity. This evolution includes leaders with varied genders, backgrounds, career paths, and skills.
With the digital era reshaping the very fabric of business management, governance practices, security protocols, and leadership dynamics within companies, digital skills, in particular, have become a pervasive topic inside the boardroom and an imperative for board members. Directors don’t have to be an expert in every digital domain but familiarizing themselves with key topics and understanding the implications of digitalization on business operations, company risk, organizational culture, and talent management is paramount for effective governance.
To become a “digital” board member, directors can tap into various resources and must stay vigilant about market trends and digital transformation, strategically guiding the company through this landscape, as we will explore in this article.
Compelling Reasons for Becoming a Digital Board Member
Becoming a digital board member starts with understanding the digital board management model. The board member's role is to grasp how vision, market dynamics, and talent affect the business, enabling them to generate, transform, capture, and deliver value. This entails asking the right questions, aligning with the board and executive team, and closely monitoring action execution.
The digital board member plays a significant role in defining what digital transformation really means for the company. They must explain and understand the ambition of change to the executive committee, identify value levers, and assist in designing metrics to measure success. The company can only survive if it understands and serves its digital consumer well, with new habits, consumption trends, and approached by new competitors.
The company can only survive if it understands and serves its digital consumer well, with new habits, consumption trends, and approached by new competitors.
In this sense, digital marketing should be a new entry model and seek new enabling technologies. With data as the main business asset, it crucial to understanding how it is managed, structured, and analyzed for strategic decision-making. If the first wave of the internet was about reading and the second was about social participation, the third one we are experiencing is about reading, writing, listening, and executing.
1. It Enables a Better Understanding of Customer and Talent Trends
Every company is bound to undergo digital transformation. Customers no longer accept just reliable brands, traditional communication channels, or word-of-mouth recommendations. Geographical limitations are a thing of the past, and technology isn't a barrier; it's an enabler. Employee contracts shouldn't be transactional. Optimization isn't the only goal anymore, and stability is outdated. In this new landscape, customers demand personalization and are increasingly impatient. Channels are omnichannel, advertising happens through social media recommendations. Brands are volatile, markets global. Companies must be agile and flexible. Employee contracts should be based on value, and continuous learning is a must.
Next year, 75% of professionals in the market will be millennials, while by 2050, one-third of the world's population will be over 65 years old. Where will brands find their target market? The board must balance focus between numbers and consumer needs, short-term and long-term goals, and enhancing customer service and experience. The critical question members should be reflecting upon is: What role will they play in their ecosystem?
2. Boards Can Better Govern the Company’s Tech Adoption
There are different options between buying or developing internally, using or not companies to finance and pay for use, among others. It is essential that the digital board member stays abreast of available technologies and knows how to apply them to improve the company's efficiency and productivity.
For example, the use of AI as a business tool directly correlates with productivity. Studies indicate that AI has the potential to contribute up to 3.3% of the world's GDP, equivalent to approximately $25 billion in increased productivity. So why has AI only gained significant traction now, despite its inception in the late 1950s? The answer lies in the abundance of data, immense computing power, and advancements in models and algorithms. With the accessibility of processing capacity and the rise of engineers skilled in modeling, it's foreseeable that the ultimate victor in this race will be the data owner, as data serves as the primary asset for machines to learn and evolve generatively.
The digital board member should possess expertise in technological architectures and adeptly leverage technology to integrate financial, production, distribution, and consumption management systems. Being in the cloud is no longer a choice; it's imperative.
It is important to analyze costs and security, but overall, organizations will be at three levels of service: IaaS (Infrastructure as a Service), which is the hardware layer for servers and infrastructure; PaaS (Platform as a Service), which caters more to programmers to develop their applications on the IaaS base; and finally, SaaS (Software as a Service), for end-users (Office 365, Google Docs, CRM, etc.).
3. It Facilitates Better Risk Mitigation Policies
Cybersecurity is an increasingly important issue for companies. As guardians of the organization's values and culture, the board must ensure that there are robust barriers against cyberattacks and provide keys to good computer security. It is crucial to understand how vulnerable the company may be, and which protection plan is most suitable: preventive or corrective? Moreover, it is important to identify what needs to be protected: infrastructure, applications, and/or information. In case of identifying a breach, having a clear and efficient action plan is paramount.
4. It Takes the Company to a New Cultural Era
The board must also stay vigilant and informed about emerging work methodologies tailored to the digital age, such as lean and agile models, along with the enabling technologies that facilitate more efficient team management. Through the People Committee, it falls upon the board to spearhead the cultural shift necessary for navigating a new era, where companies face heightened challenges in attracting, retaining, and nurturing talent. To achieve this, it's essential to leverage not only physical resources but also intangible elements when managing a partially remote workforce and potentially engaging with new models of shared employability.
Learning Pathways to Become a Digital Board Member
There are several pathways and approaches a board member can take to enhance their digital savviness. In Spain, for example, Egon Zehnder has recently established a partnership with ISDI in a digital board certification program, exploring how cloud, cybersecurity, AI, and other topics impact businesses and what role directors can play in addressing governance around these issues. Similarly, our Directors Development Program in India delves into this critical competency, among others. For those interested in self-learning, Egon Zehnder has several publications on AI, cybersecurity, and other relevant issues for board members:
- The Board Member's Guide to Overseeing AI
- Cybersecurity and the Role of the Board
- Rewiring Boardroom Cybersecurity
- Tackling Your Business' AI Leadership Questions
- Leadership in the Age of AI
Are you interested in learning more? We’d love to hear from you. Please get in touch!
