For the most part, board directors know that they need to keep up with the latest technological innovations, align them with their strategic plans and allow enough budgeted funds to support them. Board directors are also largely aware that security threats can extend to data protection and privacy, business resilience and protecting intellectual property. While the directives are clear, most boards lack the technical knowledge to oversee technology-driven threats and opportunities, as well as how to be technically innovative in order to give them a competitive advantage.
According to the Deloitte global CIO survey, about 34% of the boards surveyed said that their boards weren’t engaged well enough in overseeing or understanding the company’s annual budget for IT, if they were engaged in it at all. The survey also indicated that 37% of CIOs surveyed said that they had increased their technology budgets by up to 20% over the previous fiscal year and only 12% had increased their IT budgets by more than 20%.
Board directors with technological expertise can be instrumental in leading the board in overseeing complex digital transformations and processing integrations. Without the aid of technological expertise, current technological efforts can give boards a false sense of security. A board director’s fiduciary duties require them to give technological oversight more attention than a quick shot in the dark.
What Does Digital Transformation Mean?
Perhaps part of the problem is that many board directors perceive digital transformation as little more than investing in improving the corporate website or developing a mobile app. Innovation and digital transformation actually refer to how companies use technology to better compete and sustain an advantage over the competition for the long term.
A Deloitte study proves the theory that adding technological expertise to the board yields higher performance. Over the last six years, the number of corporations that added tech-savvy board directors increased from 10% to 17%. By contrast, nearly twice the percentage (32%) of S&P 500 companies were high performers, up 10% in the past three years.
How to Build the Board for Technical Innovation
Building a board for technical innovation incorporates more than just adding a new board director with strong technological qualifications. Board directors and managers need to work in tandem with a technology-strong director to develop a vision and work toward aligning their strategic efforts to it so that the vision becomes a reality. Using the right data sets, the board, managers and IT experts can make better-informed decisions and use technology to deliver a better customer experience.
Boards will need to begin in-depth discussions with their senior management teams about the digital programs that affect customers and the business in meaningful ways. A team effort will bring about expertise, questions, judgment and a healthy dose of skepticism for how to enhance their current business offerings, as well as how to expand opportunities for new markets, products and services.
What the Boards Responsibilities Are For Technical Innovation
There is much for board directors to learn about technical innovation. As the digital age continues to push forward and evolve the boardroom, the board of directors need to better understand how technology is changing board operations. Gone are the days of paper board books. With the addition of technology in the boardroom, directors should be relying on a secure board management system for all of their board needs, including communications. This ecosystem of technology is readily available with the Diligent Governance Cloud, which aims to improve governance in boardrooms through using the right technology. Understanding technological information is complicated and takes time. It’s better to get started sooner rather than later and increase knowledge over time. Boards should start with five basic truths about technological innovation.
- Technology drives the competitive advantage.
Boards understand governance. IT experts understand technology. The key to bringing both forces together is for boards to understand how technology plays a role in delivering a competitive advantage. Board directors can use this understanding to build a bridge between themselves and technological experts on how to leverage IT enhancements to drive efficiency, improve customer engagement, and promote innovation for new products and services. Boards can strengthen their relationships with IT experts by involving them in analyzing how their combined efforts can increase revenue and enhance customer satisfaction, while saving time and money. Success motivates board directors and IT experts to make a deeper commitment to working diligently together.
- Major IT initiatives deliver value.
Major IT projects and transformation efforts come with a cost that produces value. Fear of failure causes board directors to be hesitant of taking too many technology-based risks or investing too much in IT initiatives. Board directors need to insist that IT experts work only on projects that are aligned with the business needs as outlined by the strategic goals. Board directors define and measure outcomes that hold the board and IT experts accountable for profitable results.
- Technology fosters business resilience.
Cybersecurity is a well-known topic among board directors. Boards need to understand how security protects the company. In addition, boards need to have plans for how technology can help the business to quickly overcome disruptions to daily operations while safeguarding employees and their assets.
- Technology enhances employees’ ability to perform their duties.
Nearly every industry takes advantage of automation in some form within their employee operations. Boards need to understand what they can learn about how technology enhances processes, applications, systems and the overall infrastructure in their company’s workforce. Boards should be analyzing metrics related to employee satisfaction, process cycling times, and whether they’re delivering projects on time and within budget.
- IT talent and corporate culture go hand-in-hand.
IT talent and corporate culture are essential to business success. This is yet another area that demands the combined talents of board directors and a qualified CIO. The CIO is responsible for hiring and retaining a qualified team of IT talent, while the board oversees the strategy of the workforce and analyzes the results of their combined efforts.
In addition, boards need to be aware of six things that enable innovation, which are:
- Connecting products, data, people, spaces and technology.
- Experience innovation. Linking technology to a winning customer experience.
- Data intelligence. Using data and analytics to maximize the efficiency of products and services.
- Leading-edge innovation. Using cutting-edge technology, such as artificial intelligence, virtual reality and machine-learning.
- Using technology such as robotics to automate mundane tasks and free up employees for tasks requiring higher-level thinking.
- Using technology to ensure the protection of sensitive information, such as health or financial data.
What is Governance and How Technology Innovation Can Help
Corporate governance is a standard of rules. Board of directors should live by these principles to ensure that they are serving the needs of their shareholders, stakeholders, management team and customers effectively and responsibly. Included in their corporate governance principles is how they are running the company to make sure it is done in a way that meets the company’s short and long-term goals.
At this point, most boardrooms have realized that technology can greatly help them in the boardroom, which in change provides support to their governance goals. corporations. By looking for the right technology solutions, they can easily meet their business needs. In looking toward the future of good governance, technological innovation is starting to develop comprehensive business solutions. The board of directors should realize that technology is now the key for good governance and the future of technological innovation will also work toward enhancing good governance principles.
Innovation Through Technology
Transformation and innovation are terms that will be invading boardroom spaces for years to come. The terms transformation and innovation characterize today’s version of how corporations interact with their customers, employees, investors and vendors. Boards are on the cusp of developing the necessary technical maturity that they need to oversee and monitor those relationships while working toward long-term profitability and sustainability.