Article
6 ways boards can influence digital initiatives to maximize business value
For companies still working toward digital maturity, this year’s digital initiatives are critical steps on that journey to deliver business value
January 27, 2020
Article
For companies still working toward digital maturity, this year’s digital initiatives are critical steps on that journey to deliver business value
January 27, 2020
Digital initiatives can feel daunting. They have the potential to be expensive, time-consuming, and complex, both in technical and organizational terms. But they also can help drive revenue growth, operational efficiencies, and improve the customer experience.
Those results are achievable for every organization. The key is setting the right course before digital initiatives kick off. It’s one of the most important roles that board members can play in digital projects. The following steps can guide directors toward developing a well-defined plan with organizational support and the right leadership. This, in turn, will help put digital initiatives on a course to deliver meaningful business value.
It’s critical to define the vision and intended outcomes in clear business terms before approving or launching any digital project. Articulating the vision often means clearly defining what digital means to your organization. Next, act on that vision by identifying potential disruptions and prioritizing the opportunities and challenges they present. What are you solving for? How do you define success? What financial and operational metrics are you looking to improve? How will the customer experience change? Initially, you might not have good baseline data to obtain metrics but acquiring it will allow you to more easily measure value creation. Directors don’t need to know every technical nuance or demand a thorough breakdown of the incremental steps, but they absolutely should know what business outcomes they are setting out to achieve.
Many people naturally think “technology” when they hear “digital.” But digital transformation is not about technology. It is first and foremost about people. It’s crucial to have the right teams and leaders in place to achieve success. At its core, digital transformation entails changing both internal and customer-facing business processes. Business-process change requires organizational and cultural change. The champion for change – and the person accountable for its success – must be a senior executive on the business side.
People, process, technology – you’ve heard it a million times. The people part is always the most challenging. You’ll need to be more agile with a higher tolerance for mistakes and learning from them - it’s one reason Amazon has been so successful. Before launching into an expensive, time-intensive digital initiative, it’s critical to step back and understand how the organization and culture will need to adapt. That includes leadership: Are they committed to making the necessary and potentially difficult organizational changes and investments? Digital initiatives often hinge on building new muscle memory throughout the team. This involves new ways of working, skill sets, and working styles. Create small teams with people who have experience or can be trained in more agile ways of working. Test it. Tweak it. Then expand it. All the best technology and processes won’t get you there. Individuals and teams need to become more agile and embrace a mindset of lifelong learning and adaptive change.
Remember the data warehouse projects that were all the rage in the 2000s? They were notorious for becoming multi-year, black hole projects that rarely delivered business value. Avoiding that fate begins with prioritization: Identify a single or very limited number of digital projects that will drive the most value and focus intently on them. And because a digital initiative may take several years and require significant investments, you’ll want to ensure the project can deliver value incrementally along the way. If large initiatives lose momentum, the organizational change becomes exponentially more difficult. Get customer feedback quickly. Iterate. Have a huge sense of urgency. Achieving quick wins is a key part of agility.
Your data strategy should address three basic questions. What new data will you capture to drive better decision-making – both reactive and predictive? How do you think about the value of your data, and is it possible to monetize it? When Microsoft purchased LinkedIn for $26.2 billion in 2016, that eye-popping price largely derived from the value Microsoft placed on the troves of data LinkedIn collected. Lastly are you complying with legislation surrounding personal data privacy? Policymakers across the world are constantly devising new regulations, and customers are waking up to the tradeoffs involved. This means your data strategy must address privacy, potentially across multiple countries.
A security incident can negatively impact your brand, but the brand damage has proven to be limited in the long run. The real damage comes from the massive business distraction a security incident causes. This is where companies suffer the most; they are focused on a single issue for an extended duration when their competitors are charging ahead. Bill Gates admits to this day that the antitrust case against Microsoft in 2001 had huge business implications that had nothing to do with the litigation, but rather with the way it distracted Microsoft from running the business. This cost years of lost innovation. Ensure your digital initiative properly addresses security with a budget that doesn’t cut corners, so you avoid taking your eye off the business.
Digital initiatives are no longer optional. They are vital to helping organizations evolve by supporting revenue and profit growth, gaining and sustaining competitive advantages, and keeping employees and customers engaged. But before delving into any digital project, board members should press leadership on these six elements. Get those right, and your team will be on a path toward a truly transformative digital initiative.