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A Company at Risk: Are Your Business Leaders Holding Back Your Company’s Digital Transformation? 

A report from MIT Sloan finds that if the leaders of your business lack digital savvy, your company could be performing under par.

March 21, 2019 Lisa Montgomery 2 Comments

digital transformation

As enterprises become increasingly digital many roadblocks seem to disappear in terms of efficiency and productivity. Communication and collaboration becomes seamless, data collection and analysis simpler, and a host of other business-boosting benefits. However, there can still be a few obstacles standing in the way of a true, complete digital transformation: people; more specifically, the business leaders and board members of your organization.

A recent study by Peter Weill, senior research scientist and chair of the MIT Center for Information Systems Research (CISR), and Stephanie Woerner, a research scientist at CISR, found that this characteristic is particularly critical for board members, as it is a new financial performance differentiator. Their study showed that companies whose board members are digitally savvy outperform other companies in areas like revenue growth, return on assets, and market cap growth.

Although no one like to point figures, it may be wise to identify if a lack of digital knowledge among board members is holding back the profitability of your enterprise.

 

In a machine analysis of the digital know-how of all of the boards of U.S.-listed businesses, the researchers looked at data from surveys, interviews, company communications, and the bios of 40,000 directors. They defined digital savvy as an understanding, developed through experience and education, of the impact that emerging technologies will have on businesses’ success over the next decade.

They found that among companies with over $1 billion in revenues, only 24% had digitally savvy boards. They researchers describe digital savvy as comprising these three components:

  • Individual board members should have an enterprise-level understanding of current technologylike digital platforms, AI, big data as well as processes that enable new business models, improved customer experience, and efficient operations, and how to experiment and deploy these initiatives at scale.
  • It takes three members with digital savvy to have a statistically significant impact. The researchers found little difference in financial performance between companies with one or two digitally savvy directors. However, those with three or more digitally savvy directors had 17% higher profit margins, 38% higher revenue growth, 34% high return on assets, and 34% higher market cap growth.
  • Digitally savvy board members use their insight about trends and transformation to help managers explore the bigger picture facing the business. For example, rather than evaluating the project risk of an initiative, they look at the risk of not doing something new.

So how do you swing the pendulum without ruffling feathers? The researchers suggest the following:

  • Add new directors to the board—directors that possess an appreciation and understanding of digital enhancements.
  • Add a level of digital savviness to the existing board members through education. Bring in external experts and advisors for power sessions, arrange to have members visit noncompeting companies that have made progress through a digital transformation
  • Conduct retreats where board members can get a crash course on the benefits of adopting digital solutions.

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Tagged With: Corporate, Policy, Technology

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  1. Crowd Machine Partner Program Designed to Help Enterprises Develop Apps Quickly - My TechDecisions says:
    May 13, 2019 at 2:00 pm

    […] is of the essence when a company is involved in a digital transformation. Drag your feet and risk getting left in the dust by businesses who develop their digital platforms […]

    Reply
  2. Avant Provides Critical Research to Enterprises for Digital Transformation Initiatives - My TechDecisions says:
    July 1, 2019 at 4:00 pm

    […] Related:  A Company at Risk: Are Your Business Leaders Holding Back Your Company’s Digital Transf… […]

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