Digital know-how in the boardroom

Digitalisation is a tsunami reshaping the world and challenging organisations to embrace its possibilities and mitigate its risks.

Digitalisation is a tsunami reshaping the world and challenging organisations to embrace its possibilities and mitigate its risks. However, few Directors in global board rooms have both the first-hand experience and the know-how to oversee organisations’ digitalisation despite recognition of its importance.

In this podcast, Dr Sabine Dembkowski, Founder and Managing Partner of Better Boards, discusses digital know-how with Hassan el Bouhali from Toronto, Canada. They discuss the barriers to bringing digital know-how into the boardroom, steps organisations have taken to increase their board digital acumen, where boards can find the digital talent they need, and what they need to do after recruiting a suitable candidate.

Hassan is a business executive with 25 years’ experience in various industries leading to SVP Business Transformation & CIO roles for global multinationals. He is currently the Head of Technology & Digital at Mastercard Foundation, one of the biggest philanthropic organizations in the world. Previously, he was CIO at Rio Tinto Alcan, Bombardier Recreational Products and Woodbridge Automotive, and he now holds board advisory positions with established industrial companies such as Agropur, as well as many start-ups and SMEs. He also acts as an independent consultant to private equity and VC firms. Hassan is very active in the Toronto and Montreal tech ecosystems as a Mentor and Angel Investor with University of Toronto CDL Labs and University of Montreal Next AI incubators.

Some of the key takeaways of the conversation include:

“The whole discussion about digital is boiling”

Digital is clearly a lot more than a buzzword. Hassan explains that no industr, no matter how complex or regulated it is, is immune from digital disruption. He describes how theutomotive industry today is totally different from just 10 years ago, with new players, new business models and new rules. Despite this reality, he observes that most boards lack required digital knowledge, know-how, experience or what he calls a ‘digital IQ’ to fully face digital opportunities and risks. Moreover, even when boards do hire executives with a tech background, it is generally difficult for these new members to steer board discussion beyond basic risks such as cybersecurity. He notes that unfortunately, deep strategic discussion about how digital is transforming the industry value chain and the company business model are still the exception, not the rule.

“Tech or digital natives are not that well represented on boards”

Hassan believes that the biggest barriers to getting digital know-how into boardrooms are threefold. Firstly, there is often an entrenched belief that the management practices that worked in the ‘industrial age’ are still valid for the digital age. He points out that the assumption in most boards is that some cosmetic tech projects now will be enough to make it through disruption further down the road.

The second reason is the natural human aversion to risk, Hassan thinks that embarking on a true digital transformation that changes the value chain or transforms the business is inherently risky. Board members are only too aware that their reputations are at risk if major digital moves end up failing.

The nature of technology itself is also a factor, Hassan says.  Digital technologies are different from industrial age ones by design and definition, making them difficult to comprehend, so the tendency is to step back and continue to focus on basic, easy to understand risks such as cyber.   Deeper discussions about more complex digital opportunities and risks for the organisation are often lacking.

Hassan notes that there is great need for more diversity, and more ‘digital native’ and ‘digital educated’ board members, pointing out that the average age of board members means that most of them were at the peak of their careers in the 1980s and 1990s, before the internet, the iPhone, and the digitalisation of everything.

“In this space, playing it safe is a risk in itself”

Hassan notes that in this area, risk taking is a necessity, as is failure and experimentation. Management teams now seem to understand this, but it still has to percolate across executives and board members.

“Power point presentations will not do. Increasing board members digital IQ requires experiential training.”

Regarding best practice in bringing technology into the boardroom, Hassan feels things are improving and mentions three specific examples. Firstly, he finds that most organisations now have a technical or digital committee, which was not the case until recently. However, the main driver for these committees is still cybersecurity risk, making them risk-focused not growth-oriented.

Secondly, he relates how giving board members education with the clear intention to increase the overall board digital IQ is important, making board members understand how digital is disrupting their industry and company, and how this can be used for the benefits of their business. Hands on experiences are essential in this regard, such as taking a board to visit a fully automated plant, where the product is made from raw material to finished good with no or minimal human intervention. He emphasis the need for this kind of experiential education to instil required sense of urgency.

He also advocates increase in frequency of discussions about technology and digitalisation, as well as changing the focus of discussion from risks to opportunities to support and improve growth.

“Talent does exist, we just need to look for it in the right place”

Hassan believes that the right talent is ‘out there’, but bias must be overcome. He feels it is not so much a lack of talent, but that boards need to look in new areas, such as the technology industry, searching for people who may not have done traditional CEO and CFO roles. The technology industry is huge, and talent can be found who would be happy to become board members or board advisors.

“We should expect a different perspective, different type of questions and different type of solutions”

Hassan notes that board members need to govern the enterprise not run the business., not do so, new members need sufficient non-negotiable experience to govern properly without getting too much involved in management. But new board candidates also need a high level of ease with technology, and to have done or delivered technology driven products, projects or large scale transformations that allow them to understand how technology enables or generates value in economics terms.

Once suitable talent has been recruited, Hassan believes onboarding is the same as with any other board member – introductions to the right people, meeting the management team and visiting the operations, so they can view, grasp and understand clearly the business they’re trying to help.  Critically, the board chair has an important role here, to give the new member time to speak up and give their perspective, and most importantly, to be open to the new jargon and the new mix of opportunities and risks  that technology and digitalisation brings to the table.

The three top takeaways from our conversation are:

• Disruption is real and accelerating in every industry, and this has major implications. The board must be aligned with the opportunity that digital presents.
• The digital IQ of the board must be collectively increased with experiential training and education.
• Board structure and composition must include technology savvy and digital native people, and discussions around technology and digital need to be about growth not just risk.

 

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