IT or digital capability on your Board or governing group. Do you need it? Why?

IT or digital capability on your Board or governing group. Do you need it? Why?

By Mark Nicholls, Partner, Information Professionals.
 
Considering whether you need information technology (IT) or digital capability on your Board? Then the first question to ask yourself is why.
 
It’s interesting how views have changed in just a few years. Take the Australian Institute of Company Directors (AICD) over the past five years. Each year, the AICD runs their Essential Director briefing and produces the Essential Director Handbook.  This is a useful gauge of where the peak body sees the role of IT/digital.
 
Alan Cameron, NSW Law Reform Commission

When presenting the 2013 Essential Director briefing, at the Wesley Conference Centre in Sydney, Alan Cameron said: “IT is now such a critical issue that failure to monitor and govern it properly is likely to be a failure of the director’s basic duty of care and diligence”.

 
He reflected on his own perspectives, stating that when the Essential Director handbook was first drafted, he considered removing the IT matters from it.  On further consideration, he accepted that many IT issues confront all directors, not just those of IT organisations.
 
2013 was the first year where IT/digital was covered.  Since then this trend is demonstrated by the IT/digital topics covered within the Essential Director Handbooks.  Let’s take a look:
 
Year
Total Pages
Dedicated to IT/Digital
Pages
%
2013
51pp
5.5pp
11%
2014
48pp
8.5pp
18%
2015
38pp
8 pp
21%
2016
39pp
6 pp
15%
2017
43pp
4 pp
9%
2018
58pp
2.5 pp
4%
2019
47pp
2 pp
4%
 
From 2015 the volume of IT/digital topics plateaued and reduced.  However, it is interesting and somewhat concerning that it now remains as low as it is and has remained that way consistently for some years now.  It is certainly now clear that IT/digital is a key issue that should be continually addressed as part of a Board’s governance and strategy role, but this is no longer being reflected in the annual AICD Director’s briefing.  
 
IT management meeting

One objection that has been stated by some very experienced Directors. It is that bringing in “special” skills like IT onto a Board comes at the cost of “traditional” skills, like being able to read financials or understand risks.  In my opinion, this view is a little misplaced for a few reasons.  Firstly, it sounds like they may have experienced a less than optimal Director appointment process. Perhaps there was a requirement to populate the Board with only a relatively narrow range of capabilities and without sufficient diversity. That can happen.  Not having the minimum mandatory skills to be a Board member should never be sacrificed, and shouldn’t have to be. However, the ideal Board composition should contain enough diversity of skills and backgrounds to adequately address all the challenges that the organisation faces, and of course this should include IT. There are many capable people out there that have the basic competency requirements as well as that of ICT/digital.

 
Secondly, there is an error in thinking that an understanding and appreciation of IT/digital is a specialist skill.  It is not.  It is a new general skill for all managers and directors.  I am old enough to remember a time when some senior executives and managers had trouble reading a set of financial statements, leaving such an understanding to the “bean counters”.  These days this attitude would be rare.  Today, financial literacy is an accepted general skill.  I would argue that the same evolution is underway with IT/digital.
 
If you need any more convincing, and I am sure most of you don’t, ask yourself these questions… who are the global leaders in:

Bookselling, then publishing then retailing and more………………..Amazon
Video entertainment……………………………………………………….Netflix
Music entertainment………………………………………………..iTunes, Spotify and Pandora
Movie production ……..……………………….. ………………Pixar (bought by Disney)
Photography…………….…………………………….Apple, Samsung plus Shutterfly, Snapfish and Flickr
Advertising…………………………………………………………….……Google
Direct marketing …………………………………………..………….Google, Groupon
Telco……………………………………………..……………….………….Skype
Recruitment Company ….………….……………………………………..LinkedIn
Taxi/Personal transport…………………………………..…………………Uber
Accommodation………………..……………….…………………………..AirBNB
News media…..…………………………………….…………….Google, Facebook, Apple
 
Each of these are leaders in a marketplace that used to be a physical marketplace, that is now largely a digital marketplace and they have leading IT capability to support them. 
 
If you accept the need for improved managed IT services capability on your Board, then the next question is, in which areas and how.  There are a few methods that are available to you to make these determinations.  We’ll cover that in an upcoming blog.

References


http://www.companydirectors.com.au/~/media/resources/events/essential-director-update/edu-2013/03687–13–nat–essential-director-update-2013_internal-pages-final.ashx


https://aicd.companydirectors.com.au/~/media/resources/events/essential-director-update/edu-2014/04372-3-evt-essential-director-update14-jun14-handbook_a4-46pg_web.ashx

http://www.companydirectors.com.au/~/media/resources/director-resource-centre/publications/books/pdfs-various/essential-director-update-2015_final-sitecore.ashx

http://aicd.companydirectors.com.au/~/media/cd2/resources/events/essential-director-update/PDF/05496-6-EDU16-Handbook_WEB_v6

http://aicd.companydirectors.com.au/-/media/cd2/resources/events/essential-director-update/pdf/06000-1-edu17-handbook-web-v3.ashx

https://aicd.companydirectors.com.au/-/media/cd2/resources/events/essential-director-update/pdf/06729-10-edu-essential-director-update-2018-handbook-a4-web.ashx

https://aicd.companydirectors.com.au/-/media/cd2/resources/events/essential-director-update/2019/pdf/07346-6-EDU-2019-Handbook-A4SP-4a.ashx

https://www.wsj.com/articles/SB10001424053111903480904576512250915629460

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