To accelerate digital initiatives, the board needs to align executives on the right investment mix of “build, buy, partner or corporate venture” and drive an integrated approach.
Establish strong governance to measure success of digital investments
Companies should have a robust governance model to measure the success of their digital investments. This should include setting metrics, reviewing KPIs, assessing the impact on portfolio value realization and making necessary adjustments.
The DII findings suggest that digital leaders are more likely to monitor their performance on digital investments, produce greater financial impact than others and mature their digital investments faster. Eight in 10 digital leaders who responded to the global survey have a formal program to identify, measure and report digital investment outcomes. What’s more, 87% of these digital leaders have a centralized governance and oversight approach to measure benefits and related cost outlays.
Overlapping responsibilities can lead to teams “hiding behind” the organizational structure and systems. Some companies even create a temporary and cross-functional center of excellence to look at the transformation needs of the organization.
Create a conducive culture
Digital leaders distinguish themselves from their peers in another important way — they consider culture changes when devising digital strategies. Forty percent of digital leaders who responded in the DII survey said they have a fail-fast culture that encourages employees to experiment and allows for greater agility and speed. These digital leaders tend to develop flexible strategies that can be adjusted when disruptions arise.
The board should work closely with the management to provide a clear vision from the top and set the tone for an innovative culture that integrates digital investments with greater agility. The board should also assess if the management empowers team leaders or change agents to socialize and champion digital projects that require more scrutiny.
The board can play a role by identifying the right behaviors and creating incentive structures to reinforce them. For example, executive compensation, including senior executive performance metrics, should be aligned to the behaviors or culture needed by the business.
More than ever, businesses need a clearly defined digital strategy that enables them to succeed in the post-pandemic world and weather future disruptions. As companies continue to make heavy digital investment bets, selecting the right mix of investment vehicles, measuring RODIs and creating a favorable culture for digital transformation are crucial. Boards have a pivotal role in steering their teams on a calibrated digital journey with a focused and holistic strategy.
Boards should consider the following questions:
- Does the company have a robust governance model and KPIs to manage digital initiatives and measure the RODI?
- Is there a clear digital strategy that sets out the company’s current and projected digital spending, technological requirements, and a roadmap to roll out its digital transformation?
- Have the sources of funding for digital investments been identified and are the right interventions for proper usage of funds in place?
- What is the company’s strategy for hiring and retaining top talent to support its digital-transformation journey?
- Are there clear guiding principles to drive the organization’s strategy for allocating digital capital, taking into account corporate strategy goals, the technology portfolio and impact on the business?
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Summary
Boards play a key role in helping businesses to implement a clear digital strategy for success. Crucial actions include selecting the right mix of investment vehicles, measuring RODIs and creating a culture that supports digital transformation.