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White Paper Study on Digitization on Board Reports
White Paper Study on how boards still lack the key competencies they need to handle digital disruption, Amrop Study Finds
The flow of digital know-how into Executive Management Teams is increasing, (CDOs, CIOs, CTOs). In light of this, Amrop has examined the digital competencies of the Boards of the 110 largest stock-listed companies in 11 countries (in Europe and the US), and the professional backgrounds of 1280 Non-Executive Directors (NED’s).
36% of Board Members in technology companies have digital competencies.
Finland has the highest percentage, France the lowest. The US ranks third-lowest. ‘Employee Representatives’ account for 23% of tech/digital competencies.
5% of Board Members in non-tech companies have digital competencies.
Denmark and Spain rank lowest (2%), Sweden highest (8%).
Sectors in which digitization is critical are under-equipped.
Consumer Goods & Retail (5%), Financial Services (4%) and Life Sciences (7%), have strikingly low proportions of digital profiles on Boards.
Financial competencies are 3 times more common than digital.
Outside the Financial Services sector, 16% of Board Members have financial competenciesAmrop’s interviews with selected Board Members revealed the following insights:
Only 4 listed companies have an official Technology/Digital Committee.
Nominations Committees have a major role to play.
Amrop’s interviews with selected Board Members revealed the following insights:
Digital Disruption and Innovation Demand ‘Corporate Garages’
Digital Board Members are role models and catalysts. They create innovation, new business models and new partnerships, and integrate fresh leadership talent. Some are building ‘corporate garages’ : characterized by openness and entrepreneurship.
Digital Transformation and Online Security Risk Go Hand in Hand.
Online security is a priority for Boards, but they lack full understanding. Breaches in security damage IT infrastructure, corporate finances and reputation, whilst rapid innovations are taking place in the areas of ‘cloud computing’, data aggregation, mobile technology and social media.
Digitization and Disruption Demand a Risk-Tolerant Culture.
If they are to stay relevant, Boards must balance risk management with digital innovation.
The Digital Path is Being Followed Step by Step.
Many Board Members want to simplify processes and optimize their existing IT systems, (such as ERP). Two goals emerge: the need to more efficiently deploy products and services, and to better engage with customers.
Boards Are Under-performing, Say Chairs.
Digital change is often driven bottom-up by IT and/or Finance. Yet Boards must take the lead, connecting strategy making, executive management and operations. Coaching and annual strategy days are two solutions.
Digital Investments Are a Balancing Act.
Companies are directing their financial resources to different points along a spectrum. This spans digital security at one end and service innovation at the other. Performance optimization (and streamlined data gathering/processing), are a constant theme.
Digital Board Members Need Breadth and Gravitas.
Individuals with a pure digital profile in their early 30s are exceptional, (although digital Board profiles tend to be 10-15 years younger than average). The best profiles are ‘T-shaped: professionals with experience of large-scale IT- and culture change, international leadership and sufficient Board experience to challenge the status quo.
Niels Bentzen, Global Leader of Amrop’s Technology and Media Practice Group states: “The status of digital representation on Boards is still in its infancy. We predict a substantial rise over the coming 3 years. Board composition must evolve, and this means integrating new, often unfamiliar, profiles.”
With 75 offices in 53 countries, Amrop is one of the world’s largest retained executive search partnerships.
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