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The board’s role in digital transformation

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Business team gathered in meeting room A recent survey by Celerity found that 63% of leaders said their organizations are embracing digital transformation sooner than expected, and 63% were making greater investments in technology due to the pandemic. The survey cited widespread supply chain disruption, dovetailing concerns around employee engagement and productivity, and new delivery channels and business models as the key drivers of accelerating transformation.

It’s no surprise that global spending on digital transformation technology is predicted to reach $6.8 trillion by 2023 (IDC). However, undertaking a digital transformation does not guarantee a successful outcome; boards play a critical role in ensuring successful transformation. There are three distinct cycles that require close oversight — pre-transformation, transformation and post-transformation.

Pre-transformation The first step is to assess the role of technology in the overall strategy. What are the expected key outcomes? Is the goal of deploying technology to lower the cost of service? Or is it to create new revenue streams?

The next step is to assess the competency and alignment of internal functions, because the roles of the chief information officer (CIO) and the chief technology officer (CTO) are often confused. The former tends to oversee internal processes such as management reporting and supporting/enabling technologies to run the business. The latter develops and utilizes technologies that can be commercialized. At times, there is a bit of overlap between the two.

It’s important to consult with management on an intended organizational structure. For example, at Grant Thornton we found a separate innovation function to be ineffective, so we named a national managing partner of enterprise technology. This leader oversees both the CIO and CTO responsibilities and processes to keep our business moving and also oversees external technology product development. Cost savings from a much more efficient internal technology deployment have helped to fund innovation.

During transformation Throughout the transformation process, it is important to understand, and keep focus on, the business case at all times. If the board can’t articulate what your company is doing with transformation — why and how — then slow down (but don’t stop), and get this addressed. Because board members tend to be more seasoned corporate executives, they tend to not be digital natives, having not grown up with a mobile phone and tablet in their hands. Consequently, they often do not understand approach or applicability to technology transformation.

It’s critical to understand in-house versus outsourced capabilities, which is essentially the “make-or-buy” decision process. The board should know why and when you will go out and pay top dollar for innovative talent, and when you are better off outsourcing. Your CTO should be prepared to clearly explain the framework. Many organizations depict a relationship model, showing the various transformation service providers and business partners, and the roles and responsibilities of each. No organization maintains all capabilities in-house, understanding the right internal and external mix for your organization is critical.

It’s important to always be aware of the buckets of spend and how management plans to deliver. Where will spending increase, and what is the return? What technologies are being commoditized and are ripe for either sunsetting or leapfrogging? For example, the pandemic caused Grant Thornton to move fully to Microsoft Teams for calls and conferencing, and it accelerated the ability to end an 800 dial-in conference number program at a seven-figure annual savings.

The board should realize the importance of culture in your transformation function. Are the transformation professionals plugged into the organization? Does the rest of the organization know what they are doing (at a high level)? Sometimes outsourced functions, particularly those that affect an end user’s experience, frustrate employees and are not worth the savings.

Lastly, recognize that cybersecurity and other important initiatives still exist, and balance these against innovation opportunities. At times, the board will need to focus on external threats, and this may impact the transformation timeline or speed of execution. This is particularly acute in decentralized organizations, where internal controls and security risks are not easily or uniformly addressed.

Post-transformation The reality is that transformation is an evolution — you’re never really finished. It is an ongoing process requiring the board’s continued oversight.

The Grant Thornton board’s approach has been to use management-hired but board approved consultants to help understand key performance indicators (KPIs), leading practices and tools that should be utilized to monitor and measure effectiveness going forward. This is to support the overall board KPIs with specific drilldowns into key measures of success. Some link to cost reduction or scale, others to new revenue sources.

We recommend that boards keenly consider these pre-transformation, transformation and post-transformation activities and follow a similar approach when it comes to management-hired, board-approved consultants.

Contact:

Enzo Santilli Enzo Santilli
National Managing Partner, Transformation
Director, Grant Thornton Partnership Board
T +1 412 586 3801