What is the role of boards of directors in digital transformation?

In early May, the Swiss Post General Meeting appointed Maria Teresa Vacalli as a new member of the Board of Directors. Director of several companies, this Ticino engineer has held management positions at Cablecom and Sunrise and was, until recently, at the head of the neo-bank Cler. “Thanks to her experience and knowledge in the digital and banking area, Maria Teresa Vacalli will represent a considerable asset on the Board of Directors of La Poste”, underlines the press release of the yellow giant. A choice that is not surprising when we know the company’s digital ambitions and profound change that undoubtedly occupy its board of directors’ meetings. And this is not an isolated case: the topic of digital transformation is on the agenda of the boards of most companies today. “From the moment we understand that, much more than a technological project, digital transformation is a strategic issue, it is logical that the boards assume it. Not to mention that this transformation has an impact on priorities and risks”, explains Aline Isoz, digital specialist and director of several companies, including Alpiq, SIG and the Board of the Swiss Foundation for Paraplegics.

These same two reasons – strategy and risk – are recurrent in the words of other directors and experts consulted by the ICTjournal to justify the board’s digital agenda. Isn’t the body responsible, according to Economiesuisse, for “defining the strategic objectives and the general means to achieve them” and for “ensuring that risk management and the internal control system are adapted to the company”? Thus, for most managers, digital strategy has become an integral part of the company’s strategy. Digitization is also at the top of topics discussed by Swiss boards of directors in 2021, according to the latest swissVR Monitor survey (graphs 1 and 3). And the topic is undoubtedly addressed in the other topics on the consulting agenda, whether talent, competition, risk, process optimization, go-to-market or compliance.

How to learn the subject?

If the topic of digital transformation is essential due to circumstances, not all boards of directors give it the same importance. The vast majority of directors surveyed on swissVR Monitor believe that they devote enough time to learning about digital challenges and reflecting on the organization’s strategy in this area. It is much rarer, however, for discussions to focus on the ethical issues raised by digitization. “I regret that the matter is treated mainly from a technological perspective, and that we are much less interested in the impact of digital technology on the business model, culture, talents, or even society and the environment”, attests Aline Isoz. .

The complexity, importance, and multiple dimensions and impacts of digital transformation require boards to think about how they approach it. “Discussions with dozens of board members reveal that digital transformation is increasing the scope of the board’s mandate, opening up new frontiers of risk and competition,” McKinsey experts explain in the Harvard Business Review (1). To meet the challenge, it is not necessary to completely reinvent the board model, but it is necessary to carefully recalibrate the areas where directors should focus their energies.”

With that in mind, it happens – very rarely, according to the swissVR Monitor – that boards of directors set up a committee dedicated to digital, as there is to risks. This is the choice made by the ECA Board of Directors. For its vice-president Aimé Achard, the structure has the particular advantage of being able to delve deeper into digital transformation issues and pre-chew on the most important issues for the board (read the interview).

skills up

To effectively address the challenges of digital transformation, boards of directors must also have skills in the field. In 2019, only 40% of new Fortune 500 board members had digital experience, according to an analysis by consultancy Heidrick & Struggles (2). In Switzerland, few managers are convinced that their board has the know-how to set the right benchmarks in this area – it should be noted that almost none of them consider management to be perfectly competent in the area (graph 4).

Eventually, the situation will undoubtedly improve as new generations join the councils. For now, companies are responding by appointing profiles with digital knowledge and experience to their boards: Aline Isoz has been in the field for a long time, Aimé Achard manages IT at Banque cantoale vaudoise and Maria Vacalli comes from telecommunications and online banking. IMD professor Michael Wade cautions, however: naming a Google executive doesn’t mean he has experience in digital transformation…

Still, offering trendy skills is a good way to join a board of directors, Fabienne Meier of executive search firm Knight Gianella & Partner recently explained to finews.ch (3): in environmental governance and social issues, as well as cyber risk, are top priorities today.” Regardless of whether they wear the digital, ESG or cyber cap, these profiled admins risk becoming the only interested interlocutors when their favorite topic is discussed.

In addition to recruiting profiled managers, boards can also build on the knowledge of their existing members and/or onboard new members. At the head of an IMD training program specifically aimed at administrators who want to increase their digital skills, Michael Wade knows the subject well. He explains: “The directors who follow our training are often financially educated and generally inexperienced with digital. They have the feeling of not being able to participate and effectively contribute to the Board’s discussions on the matter. Our training is not intended to make them experts, but to give them the knowledge and tools to be proactive and challenge management in terms of the company’s ability to respond to digital upheavals.”

What support for management and IT?

Michael Wade also highlights that directors aren’t just there to control and challenge: with their understanding of the digital, they’re also there to support efforts and approve the investments needed for digital transformation. “Boards determined to lead the way in digital transformation must foster a culture that rewards innovation and change and does not penalize failure. It starts with supporting the long-term thinking needed to bet on large investments that may not pay off for years,” say experts at Heidrick & Struggles. For McKinsey experts, the board of directors can accurately drive this long-term perspective: “The investment horizons of many companies tend to be very short-term focused. However, by developing a clear vision of long-term value, the board can put pressure on the company to incur the multi-year capital and operating expenses needed to capture that value.” They add that conversations between the board and management need to be about the value and revenue streams that digital can generate, not just about efficiencies and cost reductions.

Through their understanding of digital and its challenges, experienced administrators can also become valuable management and IT allies. “I’m looking to meet the IT manager and make him a partner. I can be a lever, help you obtain resources, for example, in terms of cybersecurity”, explains Aline Isoz. It is also with this in mind that the ECA Board of Directors has integrated the CEO and CIOO into its committee dedicated to digital. “Management understands that the committee can help it and facilitate the transmission of projects to the board of directors”, explains Aimé Achard.

  1. References:

  2. “5 Questions Boards Should Ask About Digital Transformation”, Harvard Business Review, June 2021

  3. “The Role of Boards in Sustaining Digital Transformation”, Heidrick & Struggles, 2020

“How do I join the board of a Swiss company?”, finenews.ch, 06.05.2022

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