Here is some great insight from by Celia Huber, Alex Sukharevsky Rodney Zemmel from McKinsey.
The CEO of a large retail company recently brought a $500 million digital-transformation-investment plan to his board. The board reviewed the proposal, but after asking a number of questions, they were unable to evaluate it. Was it too costly? Was it aiming too low? Was it focused on the right priorities? One board member admitted he just didn’t know.
Similar scenes have been playing out in boardrooms around the world for years. “I hear lots of digital buzzwords, but I’m not sure how to deal with it,” as the chairman of a different board put it. “I know digital is important, but how do we capture the value?”
Even before the pandemic, 92 percent of companies surveyed by McKinsey believed their business models would have to change given rates of digitalization at the time. Covid-19 has only accelerated that timeline, with estimates indicating we’ve moved three to four years forward in digital adoption in a matter of months. Digital transformation has become a matter of corporate survival and a top priority for boards.
While many board members have told us they know that digital is essential to keeping current business models viable while developing new revenue streams, they struggle to see how they can best add value. The complexity of technology and the speed of digital can make board members feel like they’re always playing catchup.
Discussions with dozens of board members reveal how digital transformation is increasing the scope of the board’s mandate, opening up new fronts for risk and competition. Rising to the challenge doesn’t mean completely reinventing the board model, but it does require a thoughtful recalibration of where to focus directors’ energies. Asking the following five questions will ensure that boards are focused on the most important digital challenges. While some of these questions are more strategic, and others more operational, boards that address all of them can help push companies to achieve the digital transformations essential to today’s competitive advantage.
Digital Business