Digital transformation is a current hot topic in business strategy. Organizations are looking to gain a competitive edge, reduce costs and increase efficiency by bringing technology solutions to bear on their corporate challenges. Yet, it’s not straightforward. For organizations and their boards of directors, corporate digital transformation can be challenging.
There are three contributing factors at play here:
- Firstly, it can be difficult to arrive at a consistent definition of the term.
- Secondly, the concept is so broad: what is digital transformation — where does it start and end?
- Finally, because success can be hard to define (partially due to its ambiguity). Organizations and their boards are asking how to successfully measure it.
In this guide, we attempt to bring clarity to the topic. We’ll cover:
- What digital transformation means
- The importance of it for organizations — and then specifically for GCs, CoSecs, board administrators and board directors
- Risks: the risks involved when companies digitalize and how to mitigate these
- The stages of digital transformation
- The boards role (short video included here)
- Implementation pitfalls and best practices
- What software can help
You can use the table of contents on the left to select specific questions and below we’ve included a link to our popular white paper for further reading on digitalization. But for now, let’s dive in to the full guide to better understand digital transformation.
Leadership in a Digital Age: Why Now Is the Time for Boards to Digitize
One of the challenges around digital transformation is the lack of a consistent definition.
Incomplete definition: The term is often used to describe the modernization of legacy IT systems or moving services online — but this is reductive and fails to encompass the many elements a true digital business transformation can cover.
Our definition: More accurately, the term “digital transformation” is used to describe an extensive re-engineering, a wholesale reimagining of the business using digital technologies to create innovative processes or to adapt and digitalize existing ones.
As such, it is a process that touches every element of the business. Digital transformation in this sense is a major strategic change in direction rather than a one-off technology project or initiative.
In creating a digital transformation definition, it’s also important to look at what corporate digital transformation isn’t. Contrary to expectation, it isn’t only about technology. Corporate digital transformation relies on your people and processes as much as on your digital transformation solutions and technologies.
There are some compelling reasons why digital transformation is happening at pace in 2021:
- Customer expectations are increasing. In the era of Amazon and highly personalized shopping experiences, your customers, no matter the sector, demand slick interactions driven by their preferences and informed by a deep knowledge of their habits. A huge 89% of millennials expect brands to use technology to shape their customer experiences.
- Speed is increasingly important, whether this is the ability to respond to customer demand or tackle business risks. Digital technologies enable the fast-paced reaction that’s needed to deal with today’s threats and opportunities.
- Digitalization empowers customer insights. The customer experience detailed above relies on in-depth knowledge of your customers’ habits — whether this is a macro view of your customer base or personalization at an individual level.
- Digital transformation propels business transformation. As we noted above, the digital transformation process extends beyond your technologies, encompassing your people and your strategic approach. Transforming your digital processes should transform your entire business model — something that growing numbers of organizations seek as their markets and competitors evolves.
And of course, underpinning this is that today’s organizations have unprecedented ability to deliver digitally. Innovative solutions with the power to disrupt traditional business models are proliferating.
This explosion in technological possibilities combines with growing imperatives for business change to create a perfect storm for digital transformation. The corporate landscape is transforming, and not in a way that benefits legacy approaches. A May 2021 McKinsey survey found that just 11% of business executives believed their current business model would still be economically viable by 2023.
The coronavirus pandemic accelerated the need for change; companies’ adoption of digital technologies sped up by three to seven years in a matter of months in response to the disruption resulting from the pandemic. A global move to remote working, exponential growth in online transactions, as “stay at home” orders came into effect worldwide, and a need for a swift resolution to cybersecurity challenges that resulted has all helped propel digital transformation to the fore.
The drivers outlined above give some indication as to why digital business transformation is important.
Digital transformation addresses several business imperatives:
- The quest to deliver the consummate customer experience; the need for agility and responsiveness.
- The desire to ensure you optimize the potential of digital transformation solutions to drive business-wide improvements.
It has been shown to deliver tangible business improvements and efficiencies for companies that have been through the process.
There are clear roles to play in the digital transformation process, not just for board directors but also for board administrators and others. For different members of the board and executive committee, digital transformation will mean different things and accomplish different goals.
For General Counsels
For the GC, the benefits of digitalization coalesce around governance, risk and compliance (GRC) processes.
Digital communications, for instance, facilitate secure collaboration between board members, business executives and external parties — something that is likely to appeal to a general counsel trying to align several board stakeholders with an eye to cybersecurity.
Digitalization of governance processes and control mechanisms will enhance the rigor of your corporate governance as a GC and reduce the risk of regulatory compliance or legislative breaches. And digital approaches to measuring and monitoring your DEI strategy, your board effectiveness and your reputation will help GCs to deliver on their obligations around environmental, social and governance (ESG) and corporate social responsibility (CSR) issues.
For Corporate Secretaries
Frustrations for the CoSec include ineffective board processes and the inefficiencies brought about by labor-intensive approaches and errors caused by manual intervention.
For the corporate secretary, digital transformation can be ground-breaking. The simple step of moving to a board portal for the management, minutes and admin of board meetings, for example, can be transformative in minimizing time-consuming manual processes.
Voting within board meetings can be overhauled by transforming processes, particularly if meetings are taking place remotely. Collaboration before, during and after meetings is optimized, speeding approval of decisions and smoothing the role of the CoSec.
For Board Administrators
For the board administrator, inefficiencies and time-wasting processes can be a headache; this is possibly one of the roles that will see the most immediate wins from the digital transformation process.
Manual processes in board administration play out in missed deadlines and mistakes and in time wasted due to errors and rework, all of which lead to a lack of confidence when it comes to communicating with the board. For the administrator, this can be disheartening at best and career-limiting at worst.
Being able to rely on a robust, digitally-driven solution for board administration transforms the role of the administrator; little wonder that administrators are taking the lead on digital business transformation in the boardroom.
Board book solutions can save time and prevent errors in board pack compilation. Online surveys and evaluations can enable administrators to help the board evaluate themselves and measure performance — crucial for continuous improvement. Board portal technology supports directors by giving them a single source of all corporate and board information, enabling a fully rounded decision-making approach.
How Board Administrators Can Lead the Digital Transformation in the Boardroom
For Board of Directors
The benefits of digital transformation for board directors themselves encompass all of the above. A more efficient board process that benefits administrators also makes life inherently easier for directors via “access anywhere” board documentation, greater accuracy and timely publication of board materials.
Better corporate governance processes reduce the risk of regulatory breaches and the resultant penalties, fines and reputational damage — a nightmare for any board to deal with.
Smoother, more efficient board processes facilitate informed decision-making and speed strategic changes in direction, keeping your organization ahead of competitive threats and business risks.
At its highest level, digital transformation enables you to set and monitor policy across your entire organization, with a technology-enabled, robust approach to managing all your corporate entities.
It’s therefore clear that the digital transformation process brings numerous significant benefits for boards of directors and those who support them.
That’s not to say that digital transformation is risk-free, though. As with any business change, corporate digital transformation comes with several potential risks and challenges that every business should be alive to.
1. Security risks: The more digitalized our approach becomes, the greater the cybersecurity risks it entails. Whether your digital transformation process opens you to potential distributed denial-of-service attacks, made more likely via an Internet of Things (IoT) strategy, or to the risk of threat actors gaining access to company-confidential information, there are numerous possible security risks of digital transformation if you do not select robust systems and trustworthy, experienced suppliers.
2. Risks of sub-optimal technology: Employing technology that isn’t fit for purpose can be one cause of security risk and also creates other issues, such as the risk that you base strategic decisions on incomplete or inaccurate data. Mastering GRC risk demands that you can rely on the data your technologies and systems deliver.
3. Supplier risks: Who is providing the technology you use? Aside from questions around security and technology quality, any Software as a Service (SaaS) provider needs to deliver on the service and the software.
Alongside architecture and security reviews, review your preferred supplier’s track record on things like customer service and support to make sure you can have confidence in the solution you choose.
4. Governance risks: Governance in the digital age brings new challenges. Board Agenda reports that AI without human intervention presents a governance risk; just one example of the way your digital transformation process may open your organization to new or increased GRC threats.
5. Corporate mindset risks: A risk that the corporate mindset doesn’t keep pace with the IT infrastructure. As processes are digitalized, with automation and machine learning central to an organization’s strategy, cyber resilience needs to be front and center. From the board down, business leaders need to ensure that policies, processes and the corporate governance model are commensurate with the technologies used.
Preventing Digital Transformation Risk for Your Board
As with any business transformation process, digital transformation has several stages.
Stage 1: Decide What You Want to Achieve
What do you want from your corporate digital transformation? What would a successful digital transformation look like? Identify what digital gaps you’re trying to fill:
Are you trying to digitalize your internal processes, for instance, employing governance, risk management and compliance solutions that bring more intel and rigor to your GRC efforts — or your external, customer-facing interactions? What different objectives and approaches will each entail?
How can technology support your employees to do their jobs better? You need a digitalization roadmap to guide you as you explore how your leadership, teams and corporate structure can be enhanced through digital transformation.
Stage 2: Set the Tone From the Top
For a successful digital transformation project, it’s essential that you have leaders who champion digitalization.
Your board and senior leadership play a key role in driving your technology projects. They are responsible for walking the talk by digitizing the board’s processes and providing a supportive environment for digitalization across the business.
Stage 3: Create a Culture of Digital Transformation
If you complete stage two right, a positive culture should follow — and this is no less crucial. Everyone in your business needs to understand your vision, appreciate the importance of digital transformation for your business and get behind your initiatives to transform your internal processes and external interactions.
Stage 4: Assemble the Right Team
Diligent’s Building the Optimal Future of Work: A Technology Roadmap has “teams” as one of the four critical areas for success — and with good reason. To effect a successful digital transformation, you need the right people: a team that’s open to adopting new approaches, willing to learn new technologies and happy to champion your digitalization projects.
Stage 5: Focus on Your Processes
Digitalization isn’t a theoretical process; it needs to work in practice as well as on paper. Work with the people who use your processes — what do they need, and where could new technologies add value and create efficiency? Start with the end in mind. Don’t digitalize for the sake of it but focus on ways you can truly improve your procedures via digital transformation.
Stage 6: Choose the Right Technologies
Digitalization is only as effective as the technologies that underpin your approach. With so many platforms and solutions available, you need confidence that your choice is the best one for your organization.
First, identify your needs. Choosing a technology that, in fact, doesn’t solve the challenges you face is one of the main frustrations for organizations trying to digitalize. Stages one and five should put you on the right track here; once you have clear objectives and are working with end-users to identify what success looks like, it’s far easier for you to determine what you need from your technology solutions.
Then, look at what’s out there. Not all solutions are created equal; whether you are looking to digitalize your compliance processes, your governance approach or your entity management, there is a range of potential vendors and platforms. Do your due diligence to make sure you choose the right one.
Digitalization clearly pays dividends: You only need to look at online businesses like booking.com, whose valuation currently tops that of Marriott, Hyatt and Hilton combined for evidence that companies focused on the digital are powering away from traditional competitors.
What role should the board play in the digital transformation process?
Prior to the coronavirus pandemic, digital was starting to make its way into the boardroom; COVID-19 has rapidly accelerated that advance.
As corporate leaders, the board can keep the company ahead of the digital curve — but how?
- Be clear on the board’s role: As David Sable, Board Member for American Eagle Outfitters, points out, boards are about governance, not managing the company. Focus on this governance role and leave the day-to-day management of your digitalization to your senior leadership and their teams.
- Understand what digital transformation is — and what it isn’t — and convey this throughout your organization. Digitalization does not equal social media or digital marketing — it needs to be embedded throughout your business processes.
- Don’t feel that digitalization demands that you throw out everything that works already. The board can drive focus and purpose for your digital transformation, ensuring that it is targeted at key areas.
- Look at the big picture. The board needs to understand the role of digital in reaching the end customer — and what the end-user wants from a digital experience. Digital goes way beyond marketing and service delivery; it touches on your HR, finance, logistics; as Sable notes, “Digital crosses every single piece of your business.” Understanding how all these pieces knit together is a core role for the board, who will have unique oversight of the entire business.
- Keep an eye on key metrics. The board has accountability for performance and will have unparalleled insight into corporate data. This gives them a unique ability to help the business prioritize and manage and track the metrics that confirm progress.
- As Sable says, data is good until you drown in it. The board is crucial in identifying and conveying the key metrics that your organization really needs to focus on. Review these in your board meetings as you would finance or operational data — digitalization demands this level of diligence too.
- Identify and keep your teams focused on your objective — your “North Star,” as Tara Walpert Levy, Board Member for Bloomin’ Brands, describes it. The board can be invaluable in bringing people and projects back on track if they start to wander.
- Enable agility. Companies that succeeded during the pandemic were those that swiftly pivoted their approach — for instance, switching to digital advertising to reach those obeying “stay at home” orders. The board is, again, central to enabling this nimbleness in approach.
- Learn from others. Particularly if you fear falling behind, take on board lessons from those that are managing transformation in the smartest ways.
Any transformation project comes with a degree of risk:
- The risk of failure.
- The risk that any new approaches may increase the threats your business faces (cybersecurity is a prime example of this in the digital transformation process).
- The risk is that the costs may outweigh the measurable benefits.
Some common challenges businesses may face when implementing digital transformation projects include:
- Introducing new technology for technology’s sake. As above, throwing out previously effective processes and systems is not required for successful digital transformation. A measured and targeted approach that focuses on key areas, core metrics and organizational priorities is more likely to deliver success.
- Seeing digital transformation as a project, not a way of life. True digital transformation embeds digital approaches into your organization’s DNA. Treating it as a time-bound initiative or something that can be done in short order will lead to disappointment and missed goals.
- Overstating the importance of technology over culture. As we mentioned, culture and creating the environment for transformation is as crucial to successful digital transformation as the solution you choose…
… But that’s not to downplay the value of choosing the right technology. Identify your requirements and implement a rigorous selection process to ensure you choose the right vendor and platform/s for your needs.
Best practices in digital transformation are pretty similar to those that drive success in any business transformation. Some best practices are covered above in our notes on the board’s role. Also, bear in mind:
- Think top-down but bottom-up. Lessons from within the business’s operations should inform strategy at the top — don’t underestimate what you can learn from your employees at all levels.
- As board members, embrace generalism. Become “breadth strategists” — understand enough across a wide range of business issues to identify issues and priorities that drive your digital transformation and work with specialists within the business to find ways to tackle them.
- Start from a desire to “do the right thing.” Whether you are looking at digitalizing to meet ESG imperatives or to address customer needs, if you start from a position of ethical corporate behavior, you will be on the right line.
- Understand how adversity can drive improvement. As transformation expert Dorlisa Flur recounts, the pandemic, though it may have physically distanced board members, created an “all in this together” mentality that in fact built dynamic working models virtually overnight and brought responsiveness through necessity creating agility and resilience.
- Keep a firm line between the roles of the board and management. While the board can suggest new frameworks and ask questions that inform managerial approaches, they shouldn’t forget their value comes in oversight and accountability rather than in operational management.
It’s clear from everything we’ve said above that digital transformation software, while not the be-all-and-end-all of transformation success, underpins a successful transformation process.
Other elements — clear objectives, culture, board leadership and metrics — are all vital ingredients in the mix of digital transformation success. But beneath all of these, your software choice is crucial.
With no shortage of available digital transformation solutions and platforms, making the right decisions will differentiate success from failure. Get it right, and your choice will enable you to achieve your digital transformation goals.