November 20, 2018
Anticipating Disruptive Innovation and Digital Transformation
November 20, 2018
To stay competitive and relevant in a rapidly changing business landscape, organizations in every industry must navigate an increasingly disruptive, technology-enabled environment. Companies that do not address and embrace new and emerging technologies will be less competitive or may even face obsolescence. Netflix and Uber Technologies disrupted traditional business models by rethinking the way in which service delivery occurred, tapping into new technology capability to empower customers.
Given these challenges to companies, what does innovation mean in this era of digital transformation? Innovation now involves finding the right problems worth solving; building new offerings, business models, and experiences; and generating value at scale for customers.
Furthermore, the rapid digital transformation of advanced technologies such as blockchain, robotic process automation (RPA), and artificial intelligence (AI) now portend similar effects in industries from financial services and healthcare to communications and manufacturing. Boards must become knowledgeable about these digital disruption trends in order to be able to conduct meaningful oversight that management can use successfully as the company embraces new technologies.
Advanced digital technologies bring with them both opportunities and challenges for boards. Consider the following strategies when the organization evaluates or adopts any new, potentially disruptive technology:
- Overcome technology anxiety. Directors and executives who either lack knowledge of disruptive technologies—or lack confidence in their knowledge—stand to allow their companies to lag behind or fall into a state of stasis. This is something no organization can afford in this age. Management can feel threatened or uncertain about jobs surrounding the adoption of advanced technologies. Concerns can arise around the lack of historical evidence and case studies to demonstrate the technology’s value. Management must be confident and equipped to explain how the tools will support the existing workforce, rather than cannibalizing their talents. To support this mindset and approach, the board needs to support and approve major policies focused on empowering management with knowledge around advanced technologies.
- Reduce fragmentation while achieving enterprise-wide consistency in adoption. Organizations tend to assign value and evaluate impact as disconnected activities. In a world where value is created by technology across the enterprise, value and impact should be assigned as part of a cohesive business strategy that embraces advanced technology. Neglecting to do so creates knowledge and skills gaps between teams, causing inefficient business processes and ineffective or sporadic performance, rather than fully functioning, optimized operations. Boards must go beyond fiduciary responsibilities to take a more active role by challenging management constructively on how new technologies fit into the overall organization’s strategic plan.
Management may focus too narrowly on addressing a problem through technology for a small group of individuals and lose sight of the larger application of the technology, resulting in a varied impact across the organization. The board can provide clear guidance and ensure balance by reinforcing a consistent, enterprise-wide, business-change approach to technology adoption.
- Manage the pace of technological change. The adoption of advanced technologies demands teams that are agile in nature. This process can potentially leave legacy business units behind. For example, blockchain technology can be used to identify the location of any transaction, file, entity, or product at any given time. However, information changes in a data-driven age, expanding quickly and exponentially, which can have a cascading impact on how the organization currently uses the technology. Digital technologies demand organizations to be both agile and adaptable to the new ways of doing business. The board must promote digital innovation when it comes to doing things faster, better, and more efficient. The board must also monitor the pace of innovation to ensure the organization can best manage the change while meeting strategic objectives.
- Define evolving responsibilities and accountabilities. Adoption of advanced technologies can create knowledge gaps and roles changes. For instance, when an organization implements RPA for a particular process, the digital resource (robot) and the human workforce each may have responsibilities to support or execute an element of the process. In order to provide sound oversight of the changes to a business unit, the board must ask management for clearly defined roles, responsibilities, and accountabilities affected by or involving an advanced technology’s adoption and use.
While the board isn’t tasked with the hard work of managing through digital transformation, its members must be cognizant of the policies and decisions made to ensure they aren’t driven by legacy assumptions. Directors must ask the right questions about the technology as well as the broader questions about the company’s information technology (IT) strategy. This, in turn, requires that board directors, senior management, and IT use a shared language to discuss IT performance. Deeper board involvement can serve as a mechanism to cut through company politics and focus management on the large, integrated technology investments needed as digital weaves ever further into the fabric of today’s businesses.
Waqqas Mahmood is director of advanced technology and innovation for the advisory, tax, and assurance firm Baker Tilly.