Why Digital Innovation Is Growth Strategy And Must Be Driven By Boards
Recently, I heard a strategy executive say dismissively, “Says the tech guy,” to a technology executive. I believe that if you're hearing the phrase “alignment between IT and the business,” you could be working in a culture that's doomed to fail; no company can afford such misguided separation between business and technology in this age of streaming, cashless, virtual try-on, same-day delivery, near-instant international financial reconciliations, robotic manufacturing, warehousing and smart contracts. In my experience, the competitive edge provided by technology is second only to product or service differentiation itself. Customer bases understand and expect miraculous technology-based experiences and immediacy. I think it's time for leadership to acknowledge and prioritize digital innovation as growth strategy.
Achieving customer centricity can be difficult if you can't meet experience expectations and don't have the production and delivery velocity to back it up. So, why is this not a prime directive on many CEOs' agendas and a substantial part of board agendas? Technology issues like cybersecurity and industry regulation have grown too important to be avoided. I've observed that new board members with a technology background often get relegated to security and regulations discussions. But when will company boards drop defensive approaches to technology and go on the offensive to drive continuing digital innovation as a growth strategy?
As the CEO of a digital strategy, transformation consulting and investment company, I've written about key digital paths for companies as well as driven initiatives for my clients. I know well that the opportunities and accompanying challenges for technology, such as AI-driven marketing, dedicated salesbots and more, can never be tackled merely by a tech team or CDO or CIO. In my opinion, treating technology like an afterthought is no longer an option — companies and their boards should embrace technology, bringing it into the fold and making it a priority.
Market dynamics and company readiness have often been the province of C-level skill and vision. Even many management consultants are still tied to the idea that IT is a second-tier concern and haven't yet presented a picture to convince CEOs of a new way to run the company. We are officially in an era where there's enough market data and operational data to allow granular merging and outcome simulation. Imagine being able to set in front of the board not just conjectures but data simulations for all risk and opportunity factors and to be able to credibly prioritize paths forward!
I believe that rapid growth can never happen if the CEO and board want to sweep technology under the table, only thinking about it if there's a massive hack or a delay. Tech has become a very substantial part of business and growth strategy, and it should become a regular topic on the board-level agenda. The consistent enhancing and upgrading of technology and any resulting culture change and revenue increase from it will require education, investment and performance measurement from all executives in the C-suite and on the board.
The rate at which advances are being made in digital technology is only matched by how quickly customer expectations are changing. Privacy and security concerns abound, but many customers are happy to fork over data and behavior in exchange for convenience (registration required) and speed.
Periodically, present advances made in customer experience, along with projections of market share based on such differentiation, to the board as education. Additionally, regularly enlighten the C-suite and board about the increasingly complex technology transformation and change management required for the company to stay abreast of competition. Socialize and discuss business cases and plans to future-proof company technology and operations. In my experience, more than one technology board member must be embedded in the board to sustain conversation about digital innovation. Avoid tool-centric debate and instead focus on competitive advantage via technology.
Large new investments can be risky and eat into the bottom line. Further, business cases for deep technology change are often considered with far less seriousness. No one wants to fix what's seemingly not broken. I have seen CIOs and CDOs get into trouble when they don't have other C-suite members backing them or do not couch the strategic advantages in terms of upside. Often, the tech team does not have the appetite for the speed required to reach those technology milestones. I believe that only boards can get companies through and over this obstacle by setting incentives for the entire C-suite, and not just the CIO, for rapid digital innovation. I recommend to charge the CEO, CMO and CRO with building the business case for tech as well for seeing its development, adoption and returns through.
Digital innovation has been further spurred by the pandemic. For example, telehealth and e-learning have been adopted in much larger numbers. The next five years could make or break large companies as they wrangle to keep customer interest. I suggest discerning boards to allocate annual funding for technology development within their companies with appropriate share and milestones along the transformation path for production/services, operations, data analysis and AI and sales and marketing. In the next yearly cycle, you can increase sales and marketing digital spend, reduce operational spend and increase data analytics spend based on insights and efficiency results.
Once the board invests in digital transformation, monitor progress with KPI and ROI metrics. Each quarter, examine internal and customer usage of the new technology, increase in velocity of all tech augmented processes and new revenues as realized by this transformation. Appropriately disperse bonuses for the C-suite. Examine and course correct any shortfalls from projections. It's possible that technology platform issues will rise. Hold the C-suite to the previously set timeline so they don't abandon platforms when teams change.
In my opinion, ongoing digital evolution is the second largest strategy that will drive organic growth in the foreseeable future. Smart boards should focus on and drive technological innovation.
Author: Pradeep Aradhya