Published on the 11/03/2021 | Written by Heather Wright
Covid accelerated DX, but is it at risk of all coming undone?…
Just seven percent of large companies have the digitally savvy executive teams needed to drive their businesses forward and ensure they don’t become irrelevant in a rapidly changing market, according to a new report.
The MIT Sloan Management Review report looked at nearly 2,000 large companies and found a dearth of digital savviness – defined as an understanding, developed through experience and education, of the impact that emerging technologies will have on a business’ success over the next decade – among the executive teams.
It also found that companies with digitally savvy leadership teams – defined by MIT Sloan as a team in which more than half of the executive members are digitally savvy – is becoming a key success indicator. Those with digitally savvy executive teams outperformed their peers by more than 48 percent based on revenue growth and valuation.
“If we look at some of the challenges businesses are facing right now, digital innovation has got to be the way through.”
The results aren’t a surprise to Kirsten Patterson, New Zealand Institute of Directors CEO, who says not having enough digital savvy on boards and executive teams is an issue across New Zealand.
The New Zealand Institute of Directors’ annual survey of its director community last November found just 35 percent of directors feel their boards have the right capability to lead their organisations’ digital future.
That’s an increase of just two percentage points from 2019. And the results vary widely across sectors. Smaller companies were most confident with 45 percent believing they have the right capabilities for digital. The state sector followed closely at 44 percent. In contrast, not for profits had very low confidence, at just 25 percent.
“2020 has shown us why we all need digital savvy, even in our own households as we all suddenly became virtual school teachers,” Patterson says.
“We’ve been saying for a long time that digital is the way of the future, and bricks and mortar retail etc is shifting, and that was exacerbated in 2020,” she says.
“If we look at some of the challenges businesses and frankly communities and the planet is facing right now, digital innovation has got to be the way through some of those.”
Those challenges include climate change. “If we want to address climate change we are going to have to be able to do that through innovation,” Patterson says. “That’s going to be through technology, there are going to be digital components to all of that and digital is driving innovation. So it is critically important to the future of business, community and the planet.”
Without a leadership team with the digital nous, companies may find themselves struggling to use digital tools in a strategic way.
Accenture’s Technology Vision 2021 found that technology has become such a critical part of business that 83 percent of business leaders believe their technology and business strategies are inseparable, and even indistinguishable, and 77 percent believe that the overall success of their business is dependent on their technology stack.
But finding the talent is an issue – one that was also highlighted in NZTech’s recent Digital Skills Aotearoa report which showed a dramatic skills mismatch and an over-reliance on importing skills, rather than creating a local skill base.
That lack of available, appropriate, skills is also impacting higher up the chain, with Patterson noting that because businesses are clamouring for the skills, those that have them aren’t progressing into governance careers as much as they could be.
“One of the things we’re always trying to encourage is for those senior digital executives, whether CIOs or CTOS, to be serving on a couple of boards as well and sharing their skills. We think it makes them better executives when you are involved in governance as well, and in different companies – it gets you thinking outside your own business.
“But there’s just not enough of the ‘digital directors’ to go around.”
One perhaps surprising aspect of the MIT Sloan report was the size of the gap between the digital savvy CIO and CTOs bring to the c-suite, versus that of the CEO: 47 percent of CTOs and 45 percent of CIOs possess digital savvy according to MIT Sloan. Just 23 percent of CEOs can say the same about themselves.
It’s a result that suggests even CIOs and CTOs need to be upskilling for a different technology future – and one that isn’t just based around infrastructure.
“That’s a broader challenge for business – that digital doesn’t mean computer systems and infrastructure anymore,” Patterson says.
“That’s one of the challenges for boards. In the same way that all boards are responsible for finance, each board member is also responsible for digital. They can’t just have that one expert on the board.”
All directors need to be upskilling in digital and be able to challenge and test and know what ‘good’ looks like, she says.
Patterson says when it comes to the areas executive teams and boards are most needing help, it’s around business models and the future of work.
“Before Covid we were all worried about the robots, right, they were going to be taking over our jobs. And then we all tried to work from home and would have quite liked the occasional robot to take over,” she says, laughing.
“That is still very much on the agenda: What is the future of work going to look like, and some of the digital transformation around that.
“And our business models. What is the Uber or Netflix equivalent of your industry, how will consumer behaviour move to subscription type models – those issues. and how you extract value in an online world.”
But Patterson also points to a huge need for innovation in areas such as agritech, saying if we’re going to compete on the world stage and address some of our challenges around climate, then energy, innovation, agritech, future of food are areas that we as a nation need to be leading on.
So how do you build a digitally savvy team?
Patterson offers up three tips:
Be curious “The really great directors that we see are really curious. They are engaging in issues, in content and learning from a real range of sources. That’s critical for all of us as directors. We’re all responsible for finance, we’re all responsible for digital and innovation, we’re all responsible for climate. So we all have to take that responsibility to upskill.”
Surround yourself with diversity “That way you will be exposed to what the ‘youth of today’ are doing and more connected to things outside of your normal networks.
Actively seek to upskill, follow a range of leaders, influencers and futurists, read about interesting and unusual future trends. “Stay connected to what is happening in different trends to see potential.”