Raphael Thyshttps://www.linkedin.com/pulse/digital-enterprise-why-boards-should-pay-attention-papanastassiou/
When a business discussion takes a more technical or engineering turn, an alarmingly high proportion of senior executives seem to switch off. More often than not they are not comfortable with technology and instead of trying to find out what they don't know they tend to discount things as "technical" as if to say they are just implementation details. That's profoundly misguided and probably one of the reasons why so many incumbents see new ventures steal their market before they even realise it. Looking at the four stages of disruption discussed by Chris Bradley and Clayton O’Toole in McKinsey Quarterly (issue of May 2016), the stage at which a disruptive business model becomes clear and possibly inevitable is probably delayed by the inability of far too many business executives to consider science and technology as very fundamentally strategic in today's increasingly digital world. That makes incumbents slow and vulnerable.
A recent paper by McKinsey titled "Five questions boards should ask about IT in a digital world", highlights the following:
"As companies digitize, boards can’t assess the value and performance of IT using traditional, cost-related metrics. They should embrace and understand digital themes such as speed to market and agile development."
As this new reality takes root, we will probably witness the end of a period in business history, which started with the financial crisis of 2008-2009, when IT started being viewed as a mere cost center in many companies, with responsibility for it often falling under the CFO. But, let's face it, most CFOs suck at having a vision about technology and what potential it has for business. In that they're closely followed by those Boards whose majority of members were born when the typewriter was becoming powered by electricity. If a company is to have a future in a digitized economy, it needs a different mindset.
There are a few definitions out there for what a "digital enterprise" is. In books considered as strong on the topic, a digital enterprise is sometimes defined as "a company where IT is used in internal and external operations to create a competitive advantage". I disagree with that view, because there is no such thing as a "digital enterprise" in the sense that it's not a new kind of enterprise that would be in its essence digital and therefore different from all other kinds of enterprises. There are only businesses that are fit for a digitized and hypernetworked economy and businesses that are not fit (yet hopefully). That fitness for a digital world is not only a matter of IT and certainly not a matter of an IT that would be considered in a traditional way. In fact, becoming a digital enterprise in the sense of a digitally fit enterprise is a matter of using digital technologies and having the appropriate culture, skills and ways of working. And that's why Boards "should embrace and understand digital themes such as speed to market and agile development", in McKinsey's words. No Board Member and no Executive should ever feel that it's OK to be technologically ignorant and to hide their ignorance under the carpet of "lowly technical matters" that are not worthy of the attention of senior executive decision makers. Looking at the definition of "digital enterprise" that we're using in the "Digital Enterprise" course at Solvay's MBA programme, it becomes apparent why boards need to raise their game when it comes to:
- digital technologies as a whole, where IT is only a part of the story
- the culture and practices of the digital age
- the speed and relatively low cost of systematic and almost scientific experimentation in business today
Boards and senior executives need to start having some seriously improved discussions about how (digital) technologies generate value for the business, how they affect people and processes, how they improve the life of customers and how they can be leveraged if an existing business is to evolve to become fit for a digitized economy. In fact, they absolutely must (re)imagine and (re)build their companies from the outside in and that's not merely being or claiming to be "customer centric" or "market driven". It is much more profound and when achieved it's not over: their next task is to assess and manage future transitions from direct interfaces between living organisms and electronics, to nanotechnology and greentech.