Board – by all means do not stick to what you do best
The board needs to take the lead in the company’s digital transformation, here is why:
Blog post written by Toril Nag , Lyse
Analysts often claim that companies that do not ‘focus enough on their core activities’ are being run badly or even recklessly. But what does this really mean? Technology is advancing at a furious pace. Digitalising existing arrangements and streamlining current operations is no longer enough. What the vast majority of companies require is a digital transformation where we use technology as a driving force behind genuine change and restructuring. My argument, therefore, is that companies that are not developing in step with technological capabilities are operating recklessly.
Technology and the environment are two trends that are changing industries, business models and value chains – quickly.
It is not just the oil industry and diesel car makers who have owners and boards that now have to constantly think differently and innovate. Business and industry must undergo a digital transformation.
And, of course, this is not just about increasing efficiency – those who did not put a digitalisation strategy in place a long time ago and who are not well underway with its implementation, have already been left behind. Resolving a task using as few resources as possible without the customer, employees or society suffering during improvements remains at the core of good business – and the opportunities presented by technology made their way onto the agendas of most boards long ago. So technology as a means of improvement and streamlining is not enough. It is about digital transformation.
So what would it take to achieve more, better and faster restructuring and innovation? In addition to a minimum of crisis understanding, today, every manager or board member needs to understand how new technology is changing society and companies. Does everyone – employees, managers and the board – know what technology will mean for companies? Do they have the necessary insight into how it will change the behaviour and preferences of the company’s customers?
The human factor
The government has established a digitalisation committee tasked with helping state enterprises succeed with their digitalisation projects. The committee recently published its fourth report on the lessons that have been learned, which focuses on precisely this, the challenge of transforming – or brutally changing – a company. The main theme this time was more the ‘human factor’ rather than ‘technology’. This was because it has been well documented that good change projects depend more on culture and organization than on technology alone.
It is the human factor – our feelings and the human brain – that largely steer the choices we make. It is the human factor that makes us scared of change – and it is the human factor that makes us underestimate people’s need for communication, dialogue and insights in order to go along with such change.
It is also the human factor that means we have a propensity to ‘wait and see’. It makes investors hold onto shares for too long as they are falling off a cliff, and the same investors wait too long before they buy a promising startup. The brain seeks confirmation of predisposed views and delays discarding investments in wrong technologies because it is so painful to accept that you have chosen the wrong path.
Lead the organization safely
Given this, boards must as a minimum acquire an insight into how good decisions can be made during times of uncertainty. It also means we have to work on the narrative. Where are we going? What are we REALLY going to do? What does this mean for the individual?
To lead an organization safely through a restructuring process, the managers and board must together be able to tell a clear, engaging story about where the company is, where it wants to go, and how you will get there, together.
Companies that do not develop in step with technology are asleep at the wheel. They risk being left behind by others – their customers will choose other suppliers or other solutions; their employees will choose to work elsewhere. So boards must – in addition to their control tasks – ensure that their company changes and is transformed in step with technology and customers.
The Limited Liability Companies Act could well have started as follows:
“The board’s main duty is to ensure that the company grows in terms of both earnings and profit. The board must, therefore, ensure that the company continuously adapts to changes in customers’ needs and available technology.”
Boards are not just meant to supervise; they must demand change. Business operations anno 2020 will be about transformation in step with technology and customers. So, therefore:
Cobbler, by all means do not stick to your last!