With the sudden onset of a worldwide pandemic, companies have had to accelerate their efforts to transform themselves digitally. How can boards and their companies best leverage digital transformation to compete and thrive in a brave new world?
At a recent NACD Master Class program for active directors, one session contrasted the expected churn in the S&P 500 today versus 50 years ago.* Disruption is continuing at a faster pace than any time previously, with the big lesson from the pandemic being that more digitally advanced organizations have proved to be the most resilient.
*This session, “Digital Transformation and Innovation in a New Era,” was facilitated on August 20, 2020, by Scott Lenet, founder and president of Touchdown Ventures, and Protiviti Managing Director Jonathan Wyatt.
The various stages of the digital maturity journey were discussed. This “journey” presents a continuum — starting with skeptics and beginners, progressing to followers and more advanced experts, and ultimately, for some companies, industry leaders. It offers directors a context for evaluating where their respective organizations stand, with the point being that digital transformation prepares businesses to be more resilient when market disruptions arise.
With that context, the participating directors at the NACD event offered several insights:
1. There is a distinction between the impact of technology on the business model and its impact on other enterprise threats.
Digital technologies can transform business models but can also create new risks, such as different kinds of cyber threats. With respect to transformation, one breakout group consisted of directors serving banking, real estate and other related companies that were principally digital followers in an industry undergoing significant disruption. In these sectors, innovation is critical to the business model remaining viable.
2. Companies accelerated their innovation cycle during the pandemic.
Several examples of rapid mobilization to enable working from home were shared, including pivoting rapidly to support virtual events with a digital platform that had been under development for four years, and achieving contactless customer service and delivery by implementing visualization software.
3. Demographics are a factor when implementing new technologies over a compressed time period.
A healthcare system accelerated innovation by shifting 80% of its patient visits to a telehealth model as the pandemic limited mobility. However, when lockdowns were lifted, only 10% of health visits remained virtual, as older people were less comfortable with them.
4. Look for alterations in supply chains to reduce risk.
To learn a major lesson from the pandemic, look to its effect on global supply chains, which has forced businesses to build resilience into procurement processes. Such restructuring focuses more on speed in a digital world and could ultimately entail shifting the attention of traditional procurement processes to reducing life-cycle costs, managing operational risk factors, and achieving enduring business partnerships (rather than relying on the vendor model in which the relationship ends when the transaction is completed) as part of a high-performance procurement ecosystem.
5. Many companies may not be well-prepared for the next disruptive scenario.
COVID-19’s health complexities are not fully understood or realized yet, so unexpected effects will likely still play out. For example, education delays, stay-at-home learning mandates, ineffective online training, and sporadic interruptions to in-person education programs will have an economic impact over the near and long term.
6. Not every company needs to be a digital leader.
From a risk and reward standpoint, many companies may prefer to watch others take risks, assess what works in the market based on the outcomes of taking on those risks, and adopt best practices as they evolve, but do so in an agile manner. Ultimately, companies do not necessarily need to be leaders to succeed. Agile followers can also succeed when they focus on the market and continuously assess new ways to reach customers with a keen, watchful eye on leading competitors. The counterpoint, however, is that digital leaders may pull further ahead. The quest is all about finding ways to be better in rapidly changing markets. That may require companies to become disruptive themselves as they enhance the customer experience.
7. A team with a proven track record of disruption and digital innovation should devise the optimal strategy — and ask the right questions.
Most businesses are people businesses; thus, technology innovations should be driven by people. Companies should assign a diverse, multidisciplinary team to focus on digital disruption and innovation. That team should formulate a coherent strategy and the most cost-effective means to implement it considering the nature of the business and answers to the appropriate questions. What do our customers need? What are our competitors doing? As for needed innovation, do we buy it? Do we build it? When?
8. Use data to drive decision-making for the business.
Regardless of where the business stands on the digital maturity continuum, there is an opportunity to use data and information for insights around how to better reach and serve the company’s customers and improve operational efficiency.
To learn more, read Board Perspectives: Risk Oversight (Issue 133), “Setting Sights on Digital Transformation and Innovation.”