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Unprepared for Digital Disruption?

Mikael Norr

Global pressures of digital disruption are failing to impact businesses as only five per cent of non-tech digital board members have digital competencies. Contributor Mikael Norr, Leader, Global Technology & Media Practice – Amrop.

What’s more, despite the central role digital transformation plays in building a more competitive and efficient business, non-tech organisations have shown little or no effort to improve their digital capabilities in the last two years. Amrop‘s Digitisation on Boards: Are Boards Ready for Digital Disruption? examines how listed organisations are addressing digitisation. Worryingly, it revealed that the digital picture remains fragmented, and multiple questions still surround its role.

Stagnant success
Since the previous study in 2015, Amrop’s Digitisation report found that most non-tech listed organisations have shown little or no effort to improve digital competencies on boards. The latest report revealed that the five per cent figure remains quasi-unchanged since the study’s first edition. This is despite the view that digital transformation is supposedly occurring in organisations all across the globe.

The study, which examined the profiles of 3,000 board members in listed organisations across 14 countries, did find some places where digital board representations had improved. This included the UK, where non-tech companies raised their digital competencies from three to eight per cent since 2015. Finland is leading the way and in growth-mode, tripling its representation between 2015 and 2016 from four to two per cent. In the Netherlands however, there has been a decline in digital competency, with representation dropping from seven to five per cent in the last two years. Moreover, the report found that traditional committees are still dominating. Just nine of the 300 boards analysed have an official technology committee. That’s just three per cent of organisations that have a committee dedicated to technical strategy on their business agenda.

Tech sector widening the gap
The report analysed the digital competencies on boards for a number of sectors. Unsurprisingly, it found that representation for tech companies far outstrips the non-tech equivalents. Compared to the five per cent representation in non-tech companies, the study found that 43 per cent of board members in technology companies have digital competencies.

What’s more, the gap between tech and non-tech is widening – in 2015 the previous study found board-level digital competencies were seven times higher in the tech industry than in others. In this study, the representation now sits at nine times higher. One explanation for the sluggish movement is the length of time needed to nominate and integrate board members. The wheels of board governance turn slowly and in some sectors, regulation clogs them even further.

The core answer must lie in the difficulty of positioning the right talent in the top layer of organisations, people who can help fellow board members develop a robust strategy based on a strong business case and a clear view of the purpose of the organisation, its culture, its structure, and its markets. Once this is done, change must be stimulated in the right place, at the right pace, with strong management of resources and risk. Engaging in education programmes for boards, before setting out, can help prepare the road.

A catalyst for gender diversity?
Whilst examining the profiles of 3,342 board members, the study revealed a significant correlation between boards with tech profiles and a higher degree of female representation. According to the findings, women hold 35% of all digital/technology positions in the boards surveyed.

What’s more, the report found there to be a significant increase in female representation in these roles over the past year. For an industry that is often criticised for its lack of diversity, these findings suggest that digital/technology jobs may in fact now be a catalyst for change.

France and Italy lead the field with around 60% of digital/tech profiles represented by women. The UK however is worryingly at the bottom of the list, alongside the USA, Turkey and Spain, having named no new female digital/tech board members among the 133 new non-exec directors appointed in 2016.

Discussing the importance of diversity in these roles, Amrop Partner Bo Ekelund, who authored the diversity section of the report, comments: “Every day, working with clients worldwide, we see successful enterprises adopting the powerful trends of diversity and gender balance. Yet we also know that only 20% of all the people working in the IT sector are women. Those who are in place are severely under-represented in decision-making positions”.

“Diversity drives innovation. To ensure new voices are properly heard, boards may need to ask tough questions about how they interact as a group. A structured and anonymous board assessment and rigorous onboarding for new members is strongly advised”.

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