Boards and digital transformation/disruption

The “Digital: hidden risks from inside, overlooked risks from outside” breakout session featured a debate on the nature of the risks and opportunities inherent to Digital Transformation. Najia Belbal, a Non-Executive Director of TheDigitalBoard.org and Auban Derreumaux of innov’ICTion, NED and Board and Exec Advisor, led the discussion.

Digital transformation projects have been mainly considered IT department’ sole responsibility. And the department itself has been seen as a support function, not strategic.

As more organisations are using new technologies to achieve their goals and tech companies expand their value proposition to mature markets, organisations have started to rethink the position of technology as a competitive and growth enabler, pushing the organisation supporting them more and more into strategic roles: 

Actually, Digital Transformation is a Business Transformation, towards a digital business.

Several surveys show that 40% of all technology-related spending will go towards digital transformations in 2023, while 

“Everyone claims they are working hard on digital transformation projects, but studies have shown that as many as three-quarters of these projects fail to reach their goals,” warned Najia. 

“Too often, organisations move to embrace digital platforms without a common understanding of what is needed behind them: it’s not just an IT change; it requires a transformation at many levels of the organisation including HR, customers services …” she said. 

One of the key issue reported is lack of sponsoring of Top executive and the stewardship of the Board.

Thus in most cases, it is a mistake to see this type of change as just an evolution to be implemented by a dedicated team. Boards must formulate and ensure the strategy is clearly understood and embrace this change. Najia and Auban noted that in only a minority of cases, she have seen such impetus and leadership coming from boards.

The discussion turned to the nature of technological disruption: Navigating digital disruption can be challenging for many organisations. The directors’ past experiences are an asset, but what to do when the rules of the game in a sector are changing, new actors enter your market, and new technologies become affordable? 

“Digital disruption is not about technology, it’s about an adoption of it” explained Auban. “Your next digital disruption is the digital transformation of a competitor, existing or new entrant” he added. Disruption has to be managed precisely as strategic risk. Existing organisations need to rethink their governance model to avoid status quo and becoming victims of disruption. They first need to monitor accordingly the signals within and beyond there market. They need to ensure the organisation embrace agile capabilities in its core, i.e. learning, adaptability, empowerment and servant leadership, to able to quickly respond to change, at any level and in any team.

There was a lively debate about the extent to which legacy banks should be concerned about digital neo-banks, for example. Some contend that these new players underestimate the regulatory requirements, with others pointing to the RegTech work ongoing to take these into account.

“It is not enough to have an opinion on what’s going on; Directors have to review those facts and analyse potential impacts on their organisations’ strategies, to hire technologies/Fintech, build ecosystems to address critical issues such as Climate Emergency, ESG reporting, AML/KYC, and seize opportunities.” 

insisted Najia and Auban.

Those (r)evolutions won’t be overcome without raising awareness within the Boardrooms. ILA announced a new training dedicated to Digital Transformation and its Governance adapted to Directors in 2023.