Column: How board members will tackle digital transformation next financial year

Digital transformation continues to evolve and transform businesses in every sector. 

With the new financial year around the corner, there are several key ongoing trends and considerations related to digital transformation that directors are focused on and will continue into 2024.

The volume of direct investments in digital transformation will keep growing in the next couple of years. According to the Worldwide Digital Transformation 2022 Predictions study by IDC, digital transformation investment growth rates will accelerate up to 16.5 percent CAGR for the 2022-2024 period. 

These figures underline the focus, investment and need for robust measurement systems to ensure the effective integration of all the changes that will be analysed and applied.

Increased attention to resilience and sustainability in digital transformation projects and initiatives is one of the main outcomes of the Covid-related transformations and economic turbulence that has been experienced globally in the 2020s. 

“The operative word that defines the purpose of digital transformation in 2024 is resilience. The pandemic taught companies to be prepared for seismic shifts in market dynamics and consumer needs. Forward-thinking enterprises will focus on the ability to effectively pivot and deal with change with minimal to no impact on internal and external consumers,” E.G. Nadhan, chief architect at Red Hat said.

Embracing emerging technology

First and foremost for directors and businesses is the need to be embracing emerging technologies like never before. Some of these technologies include generative AI and Web3 applications.

Savvy businesses and inquisitive directors will continue pushing for, exploring and leveraging emerging technologies such as artificial intelligence (AI), machine learning, blockchain, Internet of Things (IoT), and augmented reality (AR) to drive their digital transformation initiatives.

While each of these may not be directly applicable, knowing what to ask, knowing what is possible, and being open to learning and listening, is an ever-growing requirement into 2024 and beyond, as part of every director skill base, even at a minimal level.

The continuing understanding that these technologies have the potential to enhance efficiency, improve customer experiences, and drive innovation should sit on every Board agenda and within each strategic plan.

This includes conversations around anticipating, developing and driving M&A activity, resourcing for process upgrades and revising and updating internal policies, to account for the changes afoot.

A survey from Gartner highlighted that 89 percent of board directors say that digital business is now embedded in all business growth strategies.

However, the report noted that 35 percent of board directors said they have achieved or are on track to achieving digital transformation goals.

They go on to state that “as enterprises increasingly operate in a world of constant disruption, the most future-savvy boards are considering how upheavals and risks can serve as a source of opportunity”.

Their data showed that Boards are looking to invest in ‘breakthrough’ technologies that will drive digital business and enterprise success.

“Forty percent of board directors consider AI and machine learning technologies to be imperative to digital business success in their organisation, the most-cited response,” the authors said.

Then we have the requirement to be continually enhancing cybersecurity measures, with the increasing frequency and sophistication of cyber threats, directors are expected to prioritise cybersecurity and data protection.

We need to focus on strengthening our organisation’s security posture, investing in robust cybersecurity systems, and implementing proactive measures to mitigate risks and protect sensitive data.

Customer-centric digital strategy

A common theme that pops up is: customers are at the heart of every decision. And by customers, that means each and every external recipient of the business's products or services.

It is terrific to note that Directors are increasingly recognising the importance of customer-centricity in their digital transformation efforts. They will likely prioritise understanding customer needs, preferences and behaviours to deliver more and more sophisticated and relevant personalised experiences across every chosen digital channel.

This will likely involve investing in data analytics, the technology mentioned above, and customer relationship management (CRM) systems to effectively gather and leverage customer insights.

However, using, understanding and applying those insights is where the strategic thoughtfulness and debate needs to continue with directors remaining curious and challenging of management.

Brave directors and open-minded CEOs will bring about the perfect solutions and keep their organisations ahead of the game, ready for the agility and nimbleness the future holds to remain competitive and relevant to customers and employees.

Directors understand that a successful digital transformation requires more than just implementing new technologies. It also requires an agile and adaptable organisational culture. They are likely to emphasise fostering such a culture that embraces change and encourages innovation, in a heightened and more specific manner.

This may involve restructuring processes, empowering employees, and promoting a culture of continuous learning and experimentation. It requires rigour, knowledge and flexible thinking.

Board Directors increase risk appetite

Risk-taking is a key component of digital acceleration. The Gartner survey found that 64 percent of board directors are planning to increase their risk appetite.

Boards will need to recognise that embracing digital transformation, at speed, requires a new mindset and new processes when it comes to managing risk.

With data considered such a valuable asset in the digital age, directors must continue to emphasise the importance of data-driven decision-making. We need to focus on implementing robust data analytics capabilities, leveraging artificial intelligence and machine learning algorithms to extract insights from data, and using those insights to drive strategic initiatives and improve business outcomes.

Collaborative partnerships and ecosystems will mean that directors may increasingly look to build partnerships and ecosystems in their organisations in order to accelerate digital transformation.

A recent AICC trade mission highlighted the benefits of a truly robust and working ecosystem and the benefits that it can reap for an economy such as ours.

This will necessarily involve forming strategic alliances, engaging startups and technology providers, and leveraging external expertise to complement internal capabilities. It will also require government and academia to work in collaboration and support the business community as enablers of the outcomes required in this area.

Some boards and their directors are expanding their vision for digital business success to focus on a ‘digital economic architecture’. According to Gartner, 71 percent of board directors report they are pursuing or plan to pursue such an economic structure this year.

Digital transformation framework 

As George Westerman, a senior lecturer at MIT Sloan School of Management has pointed out, over the last decade or so the process and approaches to digital transformation have evolved. 

“In 10 years of researching digital transformation, we have identified ways in which some companies are becoming ‘digital masters’, while others fall behind. In seeking to become ’digital masters’, today’s business leaders should prioritise employee experience, customer experience, and operations,” he said.

As always, it is still important to note that the priorities and focus areas of directors can vary depending on the industry, organisation size, and specific business objectives.

But what should be understood is that digital transformation will continue to evolve and impact every single organisation.