Within a relatively short space of time, the question of whether to appoint a ‘digital director’ has become a pressing concern inside the boardroom. This article summarizes the perspectives of board members recently appointed for their “digital expertise” across Europe.
Introducing digital expertise to the board
Different boards have different learning curves and risk profiles when it comes to addressing the digital transformation challenge. There are many digitally savvy boards with outstanding knowledge of the issues. For these boards, the issue is not so much what to do, but how to do it.
The majority of boards, however, have not yet focused on the digital transformation challenge, either because they do not have the expertise around the table, or because they do not see the relevance or urgency for their business or their sector. Our view is that it will not be long before every board recognizes that is must find a way to educate itself about the challenges and opportunities presented by digital innovation. In some cases this will involve hiring a specialist onto the board.
A chairman should only consider appointing a digital director if the need for digital innovation is incorporated into the strategic plan and the right people are in place to execute the digital transformation. Otherwise, the digital director may find that he or she is no more than a token presence with little or no real influence.
Digital directors can find themselves frustrated and ineffectual unless the company is committed to change. “If you are going to commit to digital transformation, do it properly,” says one recently appointed director. “As soon as you have two or more people on the board with digital experience you have an exponentially better conversation around the table – you are not just talking to yourself.”
How can a digital director affect the business?
It can be two years before the true impact of a digital director is realized. It takes time to build the digital DNA of an organization – to phase out legacy systems and integrate digital thinking throughout the business – particularly in a large listed business with a strong entrenched culture. “We underestimate the value of effective storytelling in helping people envision a different future for the organization,” says one director.
Getting the leadership and organizational structure right is the board’s first priority, particularly if the business is under threat from faster-moving competitors or new, disruptive business models. Sometimes this means replacing the CEO, in which case the digital director can influence the specification for the top leadership role to ensure that it reflects the digital aspirations of the business.
The maturity of a business is an important factor when considering how best to drive digital transformation. The digital director should be in a position to help the CEO envision the necessary phases of organizational transformation. For example, creating a distinct department or group of people – a “digital team” – should only be a transitional concept until such time as digital thinking becomes embedded in the organization.
Digital directors say that it is good sign when the leadership is willing to admit what they do not know. “If you are not a CEO who can ask what seem like silly questions (e.g. ‘what is the difference between the internet and digital’), then you are in a sea of pain.”
There is also a role for the digital director in helping the board take critical investment decisions, revealing where the value lies in digital investment and helping the board to understand the trade-offs between satisfying shareholders in the short term and allocating funds for digital growth over a longer time frame. The digital director, who may not come from a PLC background, can help answer the question: ‘How would a growth business think about this problem versus a corporate board?”
When the innovator becomes the incumbent, there is a tendency for investment aimed at protecting the business from a decline in revenues rather than looking for where the growth is going to come from. It takes a brave board to invest in areas where it believes the company can be disruptive. The digital director’s voice in this debate can be critical.
Challenges for directors
A great deal of organizational behavior is based on the past. There is a strong tendency for boards to take comfort in the metrics of the past rather than to think about what the metrics should be for the future. One of the digital director’s tasks is to challenge the way management and the board understand the trajectory of the business and to question an over-reliance on what has worked in the past. “In a world of creative destruction, the pie doesn’t grow, it gets shared in a different way,” says one digital director. If growth is not expected in a sector, then the boards has to ask itself, ‘where is the value going to go?’ Sometimes it may even be necessary for a company to cannibalize itself to prevent a competitor stealing its market share.
After the board and management have agreed on a course of action to accelerate digital transformation, the implementation process can take too long for some digital executives, which can lead to retention issues. This can be a source of frustration for digital directors, too, especially those plucked out of private, entrepreneurial organisations who are used to faster innovation cycles. For this reason, boards have to be careful about appointing a digital director in their 30s or 40s when the rest of the directors are anywhere from their 50s to their 70s. While there is much to be gained by increasing generational diversity on the board, it can also lead to tensions which need to be carefully managed.
There are signs that some former digital executives are going plural, taking on multiple board directorships because their knowledge and experience are in such demand. One of the challenges they face is how to stay current once they are no longer in their executive roles. This is similar to the problems faced by non-executive directors of B2C businesses who can easily get distanced from the consumer. Any non-executive, especially a digital director, who is no longer working in the current business environment or experiencing competitive pressures at first hand, is in danger of becoming obsolete and so must find a way to keep abreast of developments in the digital arena.
What should the skills of the digital director be?
The skills required of the digital director will depend on exactly how the role is defined. Some directors believe that the appellation “digital director” diminishes what they have to offer. It is too often used as a catch-all covering anything from ecommerce to cybersecurity. Since no one person specializes in all the possible areas classified as digital, each board must come up with a clear definition of what it means by digital before considering what kind of digital director to appoint.
One of the digital director’s tasks is to act as a bridge between innovation in the area of technology, social media, mobile, etc. and other board members by using language that makes digital issues accessible. Communication skills are therefore a vital piece in the digital director’s armory.
The non-executive director’s role is a broad one. Prospective digital directors must understand that the specific set of skills that may get them onto the board will not be sufficient to make them into an effective director. Every director needs to be able to go beyond their specific area of expertise to make an all-round contribution.
A director bringing broad-based business acumen, and preferably hands-on commercial experience at a profitable company, is likely to be much more effective in the boardroom. A pure technologist, product or strategy expert or chief digital officer may be helpful in pushing the company to leverage social networks or to move quickly into digital content, for example, but may lack the business experience to really translate these initiatives into the broader strategy of the business. Having a rounded set of business skills is just as important for the digital director as the technical expertise that brought them to the attention of the board in the first place.
For a full discussion of the pros and cons of hiring a digital specialist, read Digital Expertise in the Boardroom.