Technology is a crucial part of business strategy, boards and management teams may need to elevate their engagement and collaboration with each other. FEI Daily spoke with Khalid Kark, CIO Research Director at Deloitte Consulting about the power of ongoing conversation, the three avenues for having strategic technology conversations, and why is it so important that companies have a tech-savvy board.
FEI Daily: I understand that boards may, at times, bring a defensive mindset to technology and are not nearly as “technology-engaged” as they need to be. Why is that the case?
Khalid Kark: There is a very delicate balance that boards need to have between offense and defense. You need to somehow ignore the defense and move to offense. The balance between offense and defense is going to vary based on your organizational context.
If you have a competitor that's disrupting your business model you have to figure out defensive approaches first before you move on to offensive, so on and so forth.
Similarly, if there is a regulatory requirement that you have to address and you are falling behind on it, you have to figure out where the balance is. I think that's the key word that we want to ensure that everybody understands, that defense is important, and in fact, essential before you move into offense. Having said that, I asked board members, ‘Where do you think the balance is today, and where does it need to be?’ Almost always, the board said they are more defensive than they need to be. A majority of conversations are around cyber, compliance, and things that are helping them to be more resilient, not necessarily grow.
You have to really understand, based on your business context, where the balance needs to be. Across the board we found that board members felt that the balance was leaning more towards defense than it needs to.
FEI Daily: Why is it so important that companies have a tech-savvy board?
Kark: I think that there is a fundamental shift in the way that businesses are operating today. Technology is intertwined with business strategies. It's so intertwined that it's becoming very hard to separate the two, and if we're going to make any significant change, it needs to be driven through technology.
What we've found is that every growth initiative that an organization had, or any defensive mechanism that the organization had, had technology at the center of it. Unless the board becomes tech savvy, they're not going to be able to protect the organization and, more importantly, they may be blindsided by disruptions that will hit them.
The board members really need to understand technology for them to be able to be effective at overseeing the transformation that needs to happen around technology intertwined with the strategy.
FEI Daily: How can management initiate an ongoing technology awareness effort to help educate directors and, ultimately, encourage technology investments?
Kark: In the past, management and boards engaged periodically, quarterly, or every time the board connected, and that was the only time that board and management engaged. What we're finding more and more is that the pace of change is so significant that it is becoming much harder to just have a quarterly touchpoints between management and board.
One of the things we argue in our report is that there needs to be a way for ongoing conversations to happen. And those ongoing conversations can happen in many ways. We talked to several CIOs that have offline, outside-of-the-boardroom conversations, have offline direct connections with certain board members. Some of them actually do deep dives for them on technology topics, sometimes for the board meetings and, in some cases, we've found that the board members became really good conduits for ongoing information around technology disruptions and connected management and other outside entities in terms of understanding how technology can enable and disrupt their existing models. So, it became an ongoing conversation, and I think that's an important distinction from the past.
We've found that, from a tech perspective, there are these offline conversations that are happening. There's also this notion of subcommittees as a way for management and boards to figure out the role of technology and how that's going to drive change. A lot of organizations we talk to use the subcommittees as a way to do a deep dive into the tech and on getting the right alignment and asking the right questions and spending the time necessary. The full board meetings became a way for them to validate it across the full board, with the people who were on the subcommittees being key stakeholders and message bearers for what needed to be done.
We've found that if technology was part of the audit committee, the message is not delivered holistically. It's focused primarily on security and work and audits and compliance, and not as much on enhancing performance or driving strategy or driving growth for the organization. So, our recommendation is to be careful where technology is being discussed in the subcommittees. A few of the companies we talked to had success with putting technology either as part of risk subcommittees or having a separate technology subcommittee. We did a research a couple years back and we found that a little less than ten percent of organizations had a technology subcommittee. So, that may be another way.
FEI Daily: Tell me about the three avenues for having strategic technology conversations.
Kark: One of the things we found was that the path that each board takes is slightly different. So, the three avenues of ongoing conversations are, one, tech fluent board members. Tech fluency is like language fluency where the need may be different for each board member. Therefore, for some of the more tech-centric board members, you may need to go deeper versus others that may need to have some basic knowledge. But each and every board member that we talked to said that they needed to be more tech savvy. Some of them have figured out ways to externally reach out to organizations and attend some training or conferences that allow them to keep up to speed, but others were relying on their management to actually offer them. No matter what, the tech savviness of the boards needs to increase and it's a combination of internal management and external resources.
The second thing is the board and the subcommittee and the distinction between the different subcommittees and the third is the management-level technology committee. Often times in the past, technologists went to the board without getting on the same page with a business and the c- suite and the other leaders. This is where the CEO, CFO, the controller and others need to be on the same page. The fact is that, unless you've got a singular voice in terms of what needs to be done from a business strategy perspective, and the role of technology and how much the investments are going to be and the value that's being driven. Unless you've got the management on the same page around that, it's going to be very hard to build a case for the CIO.
Therefore, we're suggesting that, if you don't already have one, and many organizations do have one, look for a management committee that is focused on technology decisions and getting everybody on the same page to allow a singular voice at the lower level around technology topics.