By Betsy Atkins
How is your board addressing technology? Strategic thinking is what is needed to use technology as a tool to drive your company’s business forward.
As a member of four corporate boards and a venture investor with a strong interest in good governance, I encounter lots of clichés about the “changing role of the board of directors” today. One popular observation is that technology is radically changing how everyone does business, and that smart boards need to be on top of the issue. Very true—but that’s not nearly enough.
Governance clichés won’t deliver the smart board oversight needed for today’s fast-moving issues like cybersecurity, data analytics, social media/ad tech marketing, and mobile technology—much less for anticipating the new tech challenges and opportunities flooding in at increasing velocity. Good corporate governance demands boardroom talent, structures, information, and drive to be effective. This means that if your company is going to be ready for the digital age, your board must be willing to reshape itself for this oversight task.
So far, boards have been pretty halfhearted about this structural shift. A survey by the NACD found 40% of US public company board members feel they receive too little info on tech challenges facing the company. More interesting, barely 5% of these boards have a dedicated technology committee. How does today’s best-practice board build technology oversight into its DNA? I’ve served on the boards of a number of firms with strong tech elements and personally know board members of major Fortune 500 companies with tech committees. Pooling our experiences with governing technology, here are some ideas.
Realize that tech is a vital area of governance oversight. Ask business leaders today what their top five priorities are and “digitalization” is inevitably near the top. “Technological advances are defining and shaping our globally connected economy and fueling new growth opportunities for businesses,” says Maggie Wilderotter, executive chairman of Frontier Communications. But where does digitalization—big data and analytics technology, mobile, social media, etc.—fit on your board agenda? When was it last a topic of strategic board discussion?
Consider a board technology committee… but first, consider the role it should play. Even at companies with a board tech committee, it’s rarely a pure “technology” committee. American Express has an Innovation and Technology committee. At FedEx it’s an Information Technology Oversight committee. Don’t let the committee get bogged down in IT reports or backward-looking forensic disaster recovery plans. Instead, focus on how to make smart, strategic use of new and coming technology. “Not every board needs a committee to do this, but the subject matter needs to be routinely brought to the board’s attention,” says Robert “Steve” Miller Jr., former executive officer of Hawker Beechcraft (now Beechcraft Corp.) and currently nonexecutive chairman at American International Group, as well as a number of other boards.
Yet other business leaders I spoke to are bullish on the need for a committee tightly focused on tech itself. Ted Leonsis, venture capitalist and former top AOL exec, finds a “dedicated technology committee allows for a fresh perspective and a diverse set of thinking from industry experts.”
Make this committee your board’s forward-looking fiduciary. Current board committees have been shaped by regulatory demands—they’re in business to assure compliance and to review yesterday’s information. But boards today need a built-in voice that looks ahead rather than behind. I’ve found that a technology discussion is a natural fit with a board’s strategic and innovation duties and can kick in fresh thinking from the very top. The tech committee charter should assign it to look at new business models (such as ecommerce), competitive dynamics, and how technology can be exploited for the future.
Here’s an example. A $3 billion retail company asked me to join its board to bring in some digital know-how. The company was tech savvy but hesitant to embrace ecommerce because management thought any dollar earned online was one lost by its bricks-and-mortar retailers. It took some boardroom prodding, but eventually this retailer invested in social media and mobile engagement, plus a robust ecommerce platform. Result—the company found the move to be very profitable and a source of net new customers.
This points to one of the most surprising, but vital aspects of the new board tech committee—tech is not the ultimate point of the committee, but rather an important tool in its forward-looking mandate. Top business leader Gary Reiner heads the board tech committee at Citi, and notes “since technology is a big part of the company’s cost structure, [we] see if there are ways to take advantage of new technology and better practices to reduce the cost and still get the same (or better) productivity.” He finds tech is not the “end” for board focus at Citi, but a tool for “enabling faster, simpler, lower cost ways to interact with customers and new business models.”
Who should serve on a board tech committee? No, you shouldn’t automatically seek techies for this committee. Focus on breadth of experience. A proven top executive with solid exposure to cyber tech, social and mobile media, big data analytics, and ecommerce brings both the business and the technology savvy demanded. A tech industry leader, a corporate CIO, or consulting firm member who specializes in tech are a few of the talent pools to explore. Mixing deep technology expertise with a former or current CIO, chief marketing officer, or business development strategist on the committee may cover these bases. Be willing to look outside your comfortable board circles for skill. “Boards typically have senior folks as members, few of whom are schooled in info tech,” notes Steve Miller.
How should a board tech committee function? In many ways, it’s just another committee of the board. It should meet around four times yearly, with three or four members as described above. But I’d include some crucial differences. While most information that boards receive is inward facing (company reports, financials, filings, etc.), give the tech committee an outward focus. Members should review industry and analyst reports on the company and its sector (not just stock analyst reports). Focus on maximizing your markets, your margins, and potential growth areas. Identify where the company should lead versus its competitors (i.e., do you want to lead in ecommerce or use data analytics to drive customer intimacy?) The committee then becomes the board’s “what if?” and “why not?” advocate. It voices technology risk issues such as cybercrime and hacking, but also addresses risks the company business model could overlook, causing the company to lose out by missing new tech opportunities, such as using mobile enablement or big data to drive new analytic insights and engagement.
A board technology committee fills a vital need in the modern boardroom. It brings focused knowledge of technology to address the strategy and innovation oversight that is too often squeezed out of the current board agenda. This committee works closely with the company’s chief strategy/business development officer, CTO, and CMO to monitor management’s framework for evaluating new business models and how technology may help accelerate them. “Board and committee members cannot be expected to have all the answers,” says Steve Miller. “But they need to ask the right questions of management.”
In the end, referring to a board “technology committee,” or even focusing on tech as an end in itself, misses the mark. Technology is only one tool in an overall new capability we should demand of boards. While boards must now offer savvy and skills in new technology, this is only of value if used to stimulate innovation, to see what’s coming for business, and to encourage management to prepare for the future.