What your chairman needs to know about your digital transformation: Risk and reward
Here, we cover the priority conversations – the risks and reward associated with digital transformation – that digital savvy executives should be having with their board directors as they plan for a customer-centric, digital future.
In a rapidly changing economy where the performance of organisations is increasingly impacted by the extent and progress of their digital transformation plans, digitally literate executives have a unique opportunity to influence board room priorities.
Conversations with the board should go far beyond quantifying the value of brand spending and must now include the opportunities and risks associated with digital transformation. With the threats posed by privacy and regulatory changes, the need to plan for a customer-centric, digital future is paramount.
Digital transformations are taking place with increasing regularity, with more than 80 percent of organisations surveyed for a recent McKinsey study transforming at least one end-to-end customer journey and 70 percent developing new digital propositions and ecosystems.
“Companies in all industries are launching digital and analytics transformations to digitise services and processes, increase efficiency via agile and automation, improve customer engagement, and capitalise on new analytical tools,” McKinsey argues. “Yet most of these transformations are undertaken without any formal way to capture and manage the associated risks.”
For board members, a broad view of risk management, ethical and lawful operational practice, and responsible investment of shareholder funds to create long-term value and growth are among the key priorities.
A holistic view of digital transformation risk and reward
When it comes to assessing the cost, risks and growth opportunities created by an investment in digital transformation technology, it’s essential for boards to consider the complete picture.
In the past year, there has been an increased demand for marketing teams to contribute to the overall business strategy based on their ability to understand and interpret customer data and changed customer behaviour, according to the Adobe 2021 Digital Trends Report.
According to Peter Weill, Senior Research Scientist and Chair of the Centre for Information Systems Research at the MIT Sloan School of Management, companies typically expect better customer experience, improved operational efficiencies, and experimentation with new business models from marketing.
Leadership teams will typically also look at the cost and the predicted payback time for digital transformation technology and analytics investments. Still, board examinations should include a broad assessment, including the upside risks that drive longer-term growth and value.
Digital as a growth multiplier
“Growth is the topic that gives marketers a real agenda to talk to the leadership of organisations like mine,” Insurance Australia Group CMO Brent Smart told a recent Adobe Summit customer panel. “That’s marketing’s role, to bring in new customers and to create future revenue, and there’s no one else who does that inside companies.”
Digital transformation must be framed as a growth multiplier, according to Indian metals group Hindalco. The company is implementing Adobe’s customer experience stack to transform its aluminium window division Eternia.
“You have to see digital as an enabler and multiplier,” says Priten Bangdiwala, Senior Vice President and Head of Digital Platforms and IT-led Business Transformation at the parent Aditya Birla Group. “Don’t talk about a technology platform. The minute you put it in the commodity budget you will not get a seat on the board.”
At Adobe, we’ve seen our customers’ digital transformation drive growth despite a challenging past 12 months, with customers of our Experience Cloud experiencing a 3-year return on investment of close to 300 percent and payback within six months, and Commerce customers seeing 30 percent average revenue gains.
Understanding the long-term risk horizon
Recently, we were fortunate to participate in a boardroom and executive education initiative undertaken by one of our customers, 7-Eleven. During the session, General Manager of Strategy and Technology, Stephen Eyears discussed the risks and rewards of its 3-year digital transformation — the second-biggest investment the company had ever made.
“We had a real obligation to make sure the board knew what it was signing off on,” Eyears told a media and analyst forum ahead of our recent Adobe Summit. “We got all of them together in the room allowing them to ask lots of dumb questions.”
Helping the board and the senior leadership team deepen its understanding of the long-term benefits of digital transformation assisted 7-Eleven to assess the longer-term risk horizons. The retailer is now targeting 28 percent of all transactions to be conducted digitally by 2030 as it builds out a real-time, first-party customer data strategy around its core brand promise of convenience.
“The board is very good at reminding us about risk in the positive sense,” Eyers says. “The board’s role is to remind us: If you have your eyes down, who has your eyes up? Who is looking at the horizon? They can help with that, but they need to understand the possible to do that.”
Along with a holistic view of the immediate and long-term risks and rewards associated with a digital transformation, boards must also ensure they’re across the data strategy, stewardship and governance required to enable it.
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