How do your board and leadership team prepare for the avalanche of new technologies and the demands that they place on your business model? How do you cope in a world in which 1.5 billion people use social media to communicate and collaborate; five billion customers leverage their mobile phones to conduct commerce and share information; and 2.5 quintillion new pieces of data are accumulated each and every day?

Our answer? Put the right people in the business. Without question, those people need to be digitally savvy executives and board directors. So how do you get started?We have found the enemy of change and it is us!

We have found the enemy of change and it is us!

Here are some alarming facts:

  • According to research from Stanford Graduate School of Business and The Conference Board (a global, independent business membership and research association working in the public interest), less than 7 per cent of boards use data from social and mobile networks. Furthermore, only 33 per cent of CEOs are members of the social set, according to the business intelligence organisation In addition, the University of California at Berkeley has found that Twitter is an excellent source of early indicators of stock price movement for investors.
  • The average tenure for CEOs in the USA is around five years, down from more than ten years a decade ago, and it's currently around four years for the Fortune 200. The pace of digital and technological change is such that it takes no prisoners.
  • A Sierra Ventures study of Fortune 500 executives showed that nearly a third identified Big Data as critical (see feature p10), and almost another third pointed to mobile devices. A smaller group, 24 per cent, picked cloud computing, but only 12 per cent singled out social media.

So how did we get to a place where the leaders of the capitalised world have become  so disconnected from the digital realities of their customers, employees and investors? Simply stated, technological changes came faster than boards and managers were able to adapt. In the last 30 years, as technologies changed every aspect of our customer, employee and investor communications, corporate boards barely morphed from their original 'old boy networks' (rarely the early adopters of new technologies) to today's digital-enabled leaders. In fact, many organisations make bad business decisions that cost them their futures. Witness the demise of once great brands like Kodak, Encyclopedia Britannica and Circuit City that underestimated the power of the digital revolution.

In the past 20 years we have seen boards diversify from this homogeneous group to include politically correct, more diverse leaders, but not necessarily digitally savvy ones. This has resulted in disaster for many organisations. At the time of its demise, Lehman Brothers had a very distinguished and diverse board; all of its members were successful in their respective areas and all commanded gravitas and respect. The board consisted of a female admiral who was impressive in her own right, but not the most astute analyst of derivative product or mortgage-backed securities.

Other members included a former actress, the former CEO of a computer manufacturer, the former CEO of an industrial company, and the former CEO of an auction house. In fact, the only board member who had any finance background was a former investment banker in his 80s who wasn't even a capital markets or risk professional. No wonder the world was shocked by the rapid and regretful demise of a once great firm. The same is happening again on many boards, but this time the blind spot isn't complex mortgage securities but the intricacies of our highly networked world.

Fortunately, the truly great organisations are realising that neither the old boys nor the politically correct board directors and leadership teams are sufficient for our flattened world. Digital pioneers are leading the way in this regard. Google, for instance, has a board with acute 'digital awareness', and others, like Coca-Cola and US insurance giant Allstate, have added two or more digital experts to their ranks to keep on top of the competition.

The map to success

Step 1 - Assess your board members' and leaders' digital skills

So what do you do if you are lacking strong digital expertise? There are three key steps to get you started.

Our experience as global executive recruiters and digital board members has led us to categorise companies and their boards and leaders into four groups:

Digital natives: Natives are the creators, the ones who get it, who challenge or change business models and succeed in doing so. These are companies like Apple, Google, LinkedIn, Facebook, Wal-Mart and Nike.

Digital adapters: Companies such as Allstate and GE didn't start the revolution but they have committed to change with aggressive CEO-led initiatives.

Digital immigrants: These companies know they are behind and are aware of the challenges posed by their new competitors. They want to go 'native', but tend to apply Band-Aids to the problem. These are companies that missed the impact of today's technologies.

Digital illegals: These companies are clueless! Unaware, they are plodding along with a business-as-usual perspective. They are the ones that will perish first. Think Encyclopedia Britannica, Blockbuster and Borders.

Step 2 - Recruit digitally competent leaders and corporate directors

Once you have identified the category that your company falls into, the process of developing the skill sets to compete effectively in this new environment can commence. It is during this phase that companies must dispel their traditional strategic planning methodology; companies often make the mistake of using old thinking to develop a new digital strategy.

In the new approach, first hire talent to develop the go-forward strategy. Most likely, these people will not come from inside your company or industry. Think back to the music industry when it was experiencing disruption from a little company called Napster. This threat to the industry required them to think through their new hires. At the time, a major music company needed a head of technology. Napster's prior CIO hailed from consumer packaged goods, since one of the challenges they addressed was the supply chain. They wanted to cut the cost of CD production and ensure timely delivery to retailers.

However, in 2000, the profile for a head of technology in the music business needed to be re-evaluated. The company required not only a CIO, but a CTO as well – their business was about to undergo a significant shift. Their needs were not only CD production, but also data encryption and intellectual property protection. A CIO from any other media entity would not do at this stage; they needed to think outside the box to recruit this person, and that is our recommendation to you. Think differently when it comes to recruiting these new professionals to your ranks.

Today, the face of the music industry has changed completely. Take Katy Perry who, with over 40 million Twitter followers, can reach her fans with less than 140 characters and without spending much on marketing.

Other industries can look to the media and entertainment sectors to learn some valuable lessons. While an insurance company may wonder why it would put a guy who built a digital media business on its board, it may want to think twice about digital marketing and customer acquisition strategy before answering that question.

Step 3 - Educate other members of your board and leadership team in 'digital everything'

It is not enough to assess your board and bring in a competent digital leader, as this new member will be in danger of becoming 'the token'. Beyond recruiting this type of individual, education of the board and leadership team is the next step to help reorder the thinking around how to foster an innovative digital culture. Educating your leadership team will go a long way in ensuring your company will recognise the changing digital landscape in your sector, but will also help you to identify the best way to nurture innovation and develop cutting-edge social and mobile technology. In this way, your company will not optimise to death, but instead find the path to true innovation.

How do you do this? Hire young millennials to mentor your senior executives (reverse mentoring). At the dawn of the email age, Jack Welch of GE mandated that his senior executives hire a 20-something to familiarise them with the technological changes sweeping through corporate America. Not surprisingly, GE went on to be a leader and innovator, creating new online purchasing mechanisms and sales tools that were ahead of their time.

No need to fall in potholes

As you begin this journey into all things digital, be aware of three pitfalls that all organisations should avoid.

Firstly, avoid thinking you are digital with only one or two leaders and corporate directors. CEOs who think they have addressed their digital strategy by hiring a single digital executive to build a digital presence are sorely mistaken. Many companies will start hiring Chief Digital Officers (CDOs), but if the company is not fully committed and the CDO is not fully supported, the hire will become nothing more than a figurehead who will serve as an internal ambassador for digital. Companies must understand the purpose of hiring the right digital talent. And talent means an entire team and more than one digital director.

Secondly, avoid using today's digital technologies throughout your entire organisation. With the advent of social, mobile and cloud-based platforms (offered as a service), existing technology infrastructures may prove to be a burden rather than an advantage to many large companies. McKinsey's research clearly points out that companies that embrace digital technologies perform better than those that don't and receive the benefits of faster growth, more flexibility and improved margins. Bain's research about Big Data shows that boards that use Big Data make faster, better and more competitive decisions.

Finally, add digital to your business model rather than creating a digital business model. It is not sufficient to just recruit digital directors and leaders; companies need to adopt their business models. More specifically, to be a leader tomorrow, organisations must 'go digital' and reallocate their capital accordingly. Our research shows that companies that become digital business models – those that move from making and selling things (including services) to those that codify their IP as Big Data and analytics, or build social and commercial networks – are worth two to four times more than then their brethren (manufacturers, retailers and distributors, and services firms).

Reshape to survive

It's time to reshape your board and leadership team if you don't want to follow in the path of those that did not believe in the power of digital to reshape our society.

The bottom line is that you have a chance to either be a disrupter or be disrupted. It's your decision to make; we hope you make the right one.

Steve Potter

Steve Potter is the CEO of Odgers Berndtson US and sits on its Global Board. He has spent over two decades as a founder, CEO and senior executive of several financial services executive search firm...

Barry Libert

Digital Board Advisor at OpenMatters – USA



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