By Bob Zukis
I recently spent some time with Christopher Desautel, Chief Digital Officer at Berkshire Hathaway Homestate Companies on digital leadership to get his insights into the corporate board’s role on the digital future. Here are his thoughts on how to create a win-win-win scenario.
Zukis: What are your views of the corporate board’s role in digital leadership, transformation and risk management?
Desautel: Given the current state of the marketplace in every industry, in every business, technology is an ever increasing and more important part of the company. How you deliver service, how you delight customers, how you attract employees — technology and the digital world we’re creating is at the forefront of every one of those challenges.
If the board lacks the skills and experience to also be at the forefront of digital, their effectiveness to govern and steer the company will naturally be limited.
What’s the business benefit of having a digitally competent board?
I think it helps everyone. Studies have shown that digitally savvy boards and companies outperform others. If the board is digitally savvy and can help guide the company in making the right strategic decisions regarding the upside and downside risks surrounding these new tools, it’s going to be better for shareholders. If the board understands digital risk, it will be better for the customers and employees as well — it’s going to be a win-win-win situation for everyone.
It’s not going to get any easier, digital decisions aren’t going to get any less complex and the pace of digital change is not going to slow down – the board needs to keep up.
What do you think the biggest barrier is to the corporate board getting the right skills in place?
I think it’s probably a little bit both on the supply and demand side. On the supply side, how many board savvy technology experts are available in the marketplace? There’s probably not as many that have the right skills and background that are needed to fill board roles. Often that selection pool may be smaller just from a board experience standpoint. At some point you need to help develop that skillset and take that leap. Individuals need to train and prepare themselves, to be ready for board opportunities when they arise.
On the demand side, you first have to recognize the need, then get assistance, via recruiting firms or by establishing relationships in the right technology circles. Not only do you have to select the right digital director, but their experience should match where the company is in their journey. Are they in aggressive growth mode? Are they in a restructuring mode? Are they transitioning from a small company to a big company? Do they need an industry outsider’s perspective? Technology opportunities and risks can depend on the company’s current business challenges. The type of individual you’d select for the board should have a background that fits with that journey.
As you’ve progressed through your career and gotten involved in the boardroom, what was your biggest surprise?
The first time I worked with a corporate board was at a prior company, several years ago. I was surprised by their level of understanding of the technology issues facing the company. They were extraordinarily well versed on the financials, on the market, customers, competitors, the regulatory issues, etc. They were just very inexperienced on the technology side and I don’t think they understood the value proposition or the risks associated with it.
What’s the biggest adjustment you had to make in dealing with the board versus your management responsibilities?
Take the technology issues — whether it’s the risk or the value proposition. Being able to translate the technical issues into relatable information that is easily consumed and allows the board to make the appropriate decisions. Everything is really about a business opportunity or business risk and if you can frame technology in those ways, that helps make the right governance decision.
Was that a big adjustment for you? To communicate differently or did it come naturally?
I started my career in management consulting so I had some background already in framing the information, which was very helpful. But it’s something that any senior technology executive needs to be able to do. They need to take the bits and bytes, the details, all of the things that are changing and put them into terms that other executives and board members can understand and make decisions around. How will it provide business value and where are the risks?
Put your forward-thinking hat on. Ten years from now what does this issue look like in the boardroom?
I think you’re going to see most of the board members having some level of technology depth. If I’m a COO, CFO or CMO I should already have some level of technology knowledge as I’ve grown throughout my career. Digital and technology knowledge and experience shouldn’t just be the sole responsibility of the CIO, CISO or CTO. A lot of that knowledge needs to be ingrained in all executives. Not to the same depth, but I think you’ll see more of that in different board members in the future.
How should the board organize its activities around these issues?
If it’s a small company, maybe there needs to be just one board member who is deep in digital technology issues who can help advise on value proposition or risk avoidance. If it’s a larger company, maybe you need to form a technology committee, much like existing audit or compensation committees.
What are the two top recommendations you’d give to any chair of a S&P 500 company board?
If they don’t have at least one board member who is deep in technology, they should get one. The second point is for all directors to start to understand digital across every aspect of the business. It’s only going to grow in importance, it’s only going to grow in its influence in business and in society.
So, find at least one individual, and then, look in the mirror, and grow your own.
Digital success, and failure starts in the boardroom. Corporate boards can’t effectively oversee what they don’t understand and corporate America has a digital leadership crisis in its boardrooms. All corporate directors can and should be improving their understanding of the transformative impact and risks of digital technology with structured learning and development.
Investors, along with corporate CEOs, CIOs and CISOs should all be demanding that their boards have the skills to understand these issues. Regulators have woken up to the public interest issues surrounding data privacy and cybersecurity risk and are doing their thing, regulating.
This is a leadership moment requiring America’s corporate leadership to decide to step up to the digital opportunity and the risks. Back in 2002 regulators had to force corporate boards to do the right thing to protect investors from financial fraud with the legislation known as Sarbanes-Oxley (SOX) that forced corporate boards to add a Qualified Financial Expert (QFE) onto the board. The requirement for America’s corporate boards to have a Qualified Technology Expert (QTE) in the boardroom to understand risk in complex digital systems isn’t yet a regulatory requirement. It very well could be though, as proposed legislation is heading down this path.
Less than 20 years after SOX fixed the glaring hole in boardroom financial literacy, the digital boardroom skills gap is staring us in the face. Corporate boards need the right digital and cybersecurity skills in their boardrooms to effectively lead their companies into the digital future.
Cybersecurity risk gets the headlines, but competitive risk is a boardroom responsibility also. There is nothing stopping corporate boards from closing their digital and cybersecurity skills gap on their own.