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Digital directors: Boost tech savviness of the board


May 26, 2022

Over the past year, I’ve been talking about the evolving role of the CIO in today’s organizations—the increased need for hypercompetent CIOs who straddle the business and tech worlds is a result of the faster and bigger digital transformations companies are now undertaking. These efforts reveal something else about today’s companies: The corporate board’s role is evolving as well, and businesses must think about expanding the tech expertise of board members. It’s another opportunity to supercharge innovation and change and doesn’t require a lot of heavy lifting.

The consequences when tech expertise is underrepresented on boards are clear. A company contracts with a technology vendor, for example, only to learn the partner’s data privacy policies are inadequate. A financial institution introduces artificial intelligence (AI) and machine learning to optimize processes but realizes—after adoption—that it lacks the ability to adequately explain the underlying tech to regulators, or that AI algorithms are based on biased data.

In my recent podcast—How to Nurture a Tech-Savvy Board of Directors – and Why It’s Essential with Jeannie Diefenderfer, CEO of the Higher Ambition Leadership Alliance, a nonprofit community formed by design for CEOs, we discussed why expanding technical knowledge and capabilities within the Board is important. “It’s a best practice when a board cares about being technology aware and brings each person’s functional expertise to the table,” stated Jeannie. “That way, you have the right collection of board members who are as a team looking out for the company's assets.”

My colleagues Tim Good, Mauro Macchi, Michael Spellacy and Andy Young have conducted extensive research into the growing influence of technology on the corporate board agenda. Combining this research with the first-hand experience that I, and many of my colleagues, see every day allows us to share a number of critical actions corporate boards should undertake to raise their digital and technical literacy.

Across all industries, organizations are embracing digital transformation on the one hand, while not being sufficiently prepared to deal with the consequences of new technology for the enterprise, on the other hand. And there’s one major reason for this: the required tech expertise is missing at the board level.

According to Accenture research in the financial sector, only one in 10 banking board directors has tech expertise (and only 33% of these are women, another important issue). In 2015, that figure was only 6%. While it’s worth celebrating any improvement, it’s important to note that at this rate of infusing the board with tech expertise, we believe that at least 25% of banks’ board directors should have technology expertise before the end of this decade.

Of course, this comes at a time when all organizations—and especially financial institutions—are responding to volatility by accelerating their tech investments. According to another recent Accenture study, 68% of banking executives report that the pace of digital transformation at their company is speeding up. The reasons for this are clear: The great migration to cloud, for example, typically cuts operational costs by 10-20% and reduces the time to market by 30-50%.

But while these are real benefits, banks also face real risks in making big technology leaps without the board expertise to optimize them. It’s not all bad news. Compared to 2015, 67% of boards overall today have at least one board member with technology expertise (compared with only 57% six years ago). Still, one member is not enough. And again, this drawback isn’t limited to banks.

What is at stake?

Companies without tech expertise represented on their boards risk making mistakes and overlooking key issues when they develop tech strategy, evaluate vendors, and roll out new system—all the activities they are currently accelerating.

Six ways to develop a tech-savvy board

There are several approaches organizations can take to boosting tech expertise on the board:

  1. Boost directors’ TQ. The first step might seem obvious but is crucial: educate board members. We call an individual’s ability to understand and explain technology their Technology Quotient (TQ). Continual coaching helps lift low TQ–learning about what specific technologies do, how they work and are applied and how they are combined with other technologies and potential risks.
  2. Listen outside the boardroom. TQ is important everywhere in the institution, and especially with stakeholders in a company’s technology ecosystem–suppliers, business partners and outside consortium organizations.
  3. Put technology on the agenda. You must ensure the board has time to discuss technology. One way to do this is to create a technology board committee. In addition, some companies have introduced a tech advisory council that advises the board and management on technology and cyber risk but is not part of the board itself.
  4. Consider the tech credentials of new appointments. Companies must strike the right balance between upskilling the existing board (see above) and appointing new directors. When board vacancies do arise, consider candidates’ tech expertise, alongside traditional criteria (including diversity).
  5. Understand the human-technology interplay. Technology can’t reach its full potential without human ingenuity. The company’s working environment and culture should be conducive to attracting and retaining the brightest technology minds.
  6. A transformation mindset means offense over defense. Exploring how tech can transform the entire business takes time and isn’t just the IT team’s responsibility. While risk should be a recurring topic, how to use technology for bringing about change and improving efficiencies should be a primary discussion topic for the board.

Across all industries, organizations are embracing digital transformation on the one hand, while not being sufficiently prepared to deal with the consequences of new technology for the enterprise, on the other hand. And there’s one major reason for this: the required tech expertise is missing at the board level.

Taking these steps will help all organizations get more technology bang for their buck on their boards. Another move that has become increasingly popular is establishing a separate Technology or Risk Committee, where the focus can be on risk management over just compliance. This has the added benefit of enabling boards to balance reactive and proactive agendas when it comes to technology, from spurring growth and innovation to managing tech talent.

Too often, companies attempt to undergo digital transformation without ensuring that there are supportive measures to smooth this process. The lack of tech expertise on boards is one of these measures and is not prohibitively difficult to ameliorate.


Greg Douglass

Senior Managing Director – Technology Strategy & Advisory (RETIRED)