Harvey Nash - Beyond Governance - Report CoverTHE HARVEY NASH / ALUMNI BOARD REPORT 2016/17

In association with London Business School’s Leadership Institute

BEYOND GOVERNANCE

How boards are changing in a diverse, digital world

Introduction

The world at large and businesses across it are increasingly subject to uncertainty. In 2016, the UK began wrestling with the complexities of leaving the European Union, and remaining members were finding their feet in an EU without the UK; AsiaPacific (APAC) markets are dealing with fall-out from the economic slowdown in China and rising tensions in the South China Sea; and European nations are struggling to manage the effects of migration across their borders.

Further uncertainty for business has been created by wide fluctuations in economics and transformational changes in technology. This has left boards needing to be agile in their approach to sudden change, while keeping a steady track towards longterm goals. This third annual research report from Harvey Nash / Alumni, in association with London Business School’s Leadership Institute, takes into account the impact of this increasing globalisation and uncertainty to purposefully extend its research. With over 650 respondents to our quantitative questionnaire, and in-depth interviews from a panel of 56 experienced non-executives and chairs for their qualitative insight, this report seeks to compare and contrast the major boardroom issues from not only the UK, as in previous reports, but also the Nordic and APAC regions.

Our respondents include a broad spectrum of organisations in their portfolios and come from a range of backgrounds, including Finance, Corporate Strategy, Marketing and Technology. In alignment with our initiatives towards promoting gender diversity, a third of our respondents this year are female (33%). Our 2016 research still has a high proportion of listed company respondents (24%) but has broadened to encompass diverse ownership, including family- and state-owned businesses, private equity holdings, public and not for-profit organisations, each with their own different approach on how best to solve boardroom issues. In 2016, our respondents repeatedly echo the need for gaining new external perspectives in order to deliver boardroom efficiency.

We hope that by extending our research to contrast the views and data from different sectors, ownerships and geographies, we are delivering a more outward-looking report this year for our readership. We would also like to thank London Business School’s Leadership Institute for their impartial opinions and insights. Their global reach reflects the international ambition and growth of our report this year.

Key findings 1.

DIGITISATION

Digitisation affects everything within the organisation: from operational efficiencies and revenue generation, to increasing the risks of cyber and security breaches. If you are not a disruptor then you are, eventually, going to be disrupted. – Conduct regular competitor analyses Actions: – Actively seek expert external advice – Upskill existing board members

Key insight: Digitisation needs to be understood and managed at board level because it is affecting everything from operational efficiencies and revenue generation, to the risks of cyber-attack and security breaches. If you are not a disruptor then you are, eventually, going to be disrupted.

Digital strategy stretches across the breadth and depth of an organisation from channels to market and target operating models, to management information and how best to utilise ‘big data’. It is also embedded in social media, having an impact on brand reputation, which, on its own, can determine the success or failure of a business. The loss or advantage of digital intellectual property can also have a crucial impact on the success of all organisations, not just technology-led companies. Disruptive innovation, driven by web access, smart devices and the Internet of Things, is now part of the everyday business landscape, breaking up previously dominant business models. WhatsApp has displaced telecoms companies, Uber has rocked the regulated taxi services, and Airbnb is disrupting the travel industry. In what seems like the blink of an eye to those not paying close attention to the competition, digital disruptors can force well-established companies to change the way they all do business.
Despite this, according to our survey, 41% of nonexecutives interviewed think their businesses are neither disruptors nor being disrupted. Perhaps some of the 41% view the concept of digitisation as ‘business as usual’ and the disruption as part of the ebb and flow of day-to-day operations. But for other less ‘tech savvy’ businesses this could be seen as naivety about the impact of digitisation on their bottom lines in the medium to long term. Digitisation is firmly on the agenda across all geographical regions, coming in at an overall second place only to strategy in board-level discussions. The Nordic region raises it as the number one topic being increasingly discussed in the boardroom, with more than two-thirds of respondents highlighting digital innovation as on the radar. APAC respondents list it as a significantly lower priority in current discussions. We need only to observe the emergent technologies of the Internet of Things, smart cities, quantum computing

and peer-to-peer collaboration, to see that the march of new technology and the ways of using it are relentless in their innovation and potential disruption of existing business models. Despite such impending revolutions, only 14% of those asked said that the boards that they were part of had a fully comprehensive digital strategy. Just under half (45%) said their strategies were not at all complete or somewhat incomplete. The Technology sector respondents were, unsurprisingly, confident that their digital strategies were fully comprehensive and more than half thought that it was somewhat comprehensive – although, realistically, can a digital strategy ever be deemed to be complete as digital is synonymous with constant innovation and change? When it comes to managing a digital strategy, our research shows that there is no one-size-fits-all solution. Results are pretty evenly spread for using internal and external resources at board or executive level. This may well be because there is no perfect way of managing digitisation. Our respondents repeatedly show that speed and fluidity of change is the issue. Certainly those respondents with the view that they are disruptors or are being disrupted are most likely to have appointed a digital expert as a non-executive. There is a danger in
this approach that the rest of the board may abdicate responsibility to ‘the expert’, contrary to the board members’ collective responsibility. If it is a matter of upskilling the board, this could be managed by introducing a digital advisory board or through reverse mentoring where board members are paired with and mentored by digitally-savvy employees on topics such as technology and social media opportunities. This not only upskills the existing board, but also means that current trends and technologies are more likely to be on the board’s radar. Business Services, Financial Services, Retail and Leisure boards are more likely to feel that their digital strategy is somewhat comprehensive; whereas Charities and Manufacturing boards were less likely to feel that their digital strategy was comprehensive, with 61% of respondents feeling that it was somewhat incomplete or not at all complete. It is safe to assume that business-to-business clients will demand the same level of access and simplification to the supply chain that consumers already expect from retailers. Do these sectors believe that digitisation is less relevant to them or is there naivety about the impact digitisation is already having on all industry sectors?

continued /…  To read the full report download a free copy here