Amrop's Digitization on Boards

The flow of digital know-how into Executive Management Teams is increasing, (CDOs, CIOs, CTOs). In light of this, Amrop has examined the digital competencies of the Boards of the 110 largest stock-listed companies in 11 countries (in Europe and the US), and the professional backgrounds of 1280 Non Executive Directors (NED’s).

Main Findings:

• 36% of Board Members in technology companies have digital competencies. Finland has the highest percentage, France the lowest. The US ranks third-lowest. ‘Employee Representatives’ account for 23% of tech/digital competencies.
• 5% of Board Members in non-tech companies have digital competencies. Denmark and Spain rank lowest (2%), Sweden highest (8%).
• Sectors in which digitization is vital are under-equipped. Consumer Goods & Retail (5%), Financial Services (4%) and Life Sciences (7%), have strikingly low proportions of digital profiles on Boards.
• Financial competencies are 3 times more common than digital. Outside the Financial Services sector, 16% of Board Members have financial competencies
• Only 4 listed companies have an official Technology/Digital Committee. Nominations Committees have a major role to play.

Amrop’s interviews with selected Board Members revealed the following insights:

Digital Disruption and Innovation Demand ‘Corporate Garages’.
Digital Board Members are role models and catalysts. They create innovation, new business models and new partnerships, and bring in fresh leadership talent. Some are building ‘corporate garages’ characterized by openness and entrepreneurship.

Digital Transformation and Online Security Risk Go Hand in Hand.
Online security is a priority for Boards, but they lack full understanding. Breaches in security damage IT infrastructure, corporate finances and reputation, whilst rapid innovations are taking place in the areas of ‘cloud computing’, data aggregation, mobile technology and social media.

Digitization and Disruption Demand a Risk-Tolerant Culture.
If they are to stay relevant, Boards must balance risk management with digital innovation.

The Digital Path is Being Followed Step by Step.
Many Board Members want to simplify processes and optimize their existing IT systems, (such as ERP). Two goals emerge: the need to more efficiently deploy products and services, and to better engage with customers.

Boards Are Underperforming, Say Chairs.
Digital change is often driven bottom-up by IT and/or Finance. Yet Boards must take the lead, connecting strategymaking, executive management and operations. Coaching and annual strategy days are two solutions.

Digital Investments Are a Balancing Act.
Companies are directing their financial resources to different areas along a spectrum that spans digital security at one end and service innovation at the other. Performance optimization (and streamlined data gathering/processing), are a common thread.

Digital Board Members Need Breadth and Gravitas.
Individuals in their early 30s who have a pure digital profile are exceptional, (although digital Board profiles tend to be 10-15 years younger than average). The best players are ‘T-shaped’: experience of large-scale IT- and culture change, international leadership and enough Board experience to challenge the status quo.

Niels Bentzen, Global Leader of Amrop’s Technology and Media Practice Group states: “Digital representation on Boards is still in its infancy. We predict a substantial rise over the coming 3 years. Board composition must evolve, and this means integrating new, often unfamiliar, profiles.”