In their recent article on the low standard of the technological conversation in the boardroom (“On Technology, Boards Need to Get More Sophisticated“) Michael Bloch, Brad Brown and Johnson Sikes missed the goal but scored the point.
I posit that the paucity of good tech-talk in the boardroom does not require that Directors lift their technological game. Does technical governance and commercial oversight need to improve? Absolutely! In fact I believe that it is the CIOs and the CMOs who really need to improve their conversation.
In summ: Directors, through the caché of their reputation and gravitas of their experience, provide the confidence to institutional investors that their money is being well looked after. Company officers (senior execs) provide the Directors with the facts necessary to delivery that corporate oversight.
To say, therefore, that Directors need tech lessons, to me, points clearly to 2 underlying facts: those companies either have the wrong Directors or the wrong execs – or both. Either way, Directors are the wrong people to be educating. In fact, pointing the finger at the Directors is a commercial abdication by the company. Better information and decision making frameworks are the keys but this does include the focus on governance which the authors allude to.
James Quinn wrote a great article in HBR in May 1985 on the increasing sensitivity of the Board to technology issues. He noted that despite ICT asset spend often accounting for anywhere in the vicinity of 50% of a company’s capital spend, there was still a lack of understanding by the Board on what part ICT actually played in these projects. That was 27 years ago.
Lack of Board understanding equals lack of Board oversight.
Richard Nolan and F. Warren McFarlan wrote a terrific article published in HBR in October 2005. Entitled “Information Technology and the Board of Directors”, the authors argued for differing approaches to oversight depending on the market. They outline that companies either have a Defensive or an Offensive need for IT. For instance, vertically integrated companies with a simple supply chain or businesses with operational computing (such as factories) have little need for strategic IT. These firms operate IT in a Defensive mode which allows a more passive approach to IT investment oversight.
On the other hand, companies which place a strategic imperative on IT (such as banks and insurance brokers) or businesses who are betting on IT to turnaround business (such as the publishing industry) would see an immediate loss of significant revenue if the IT failed. In these cases they operate IT in a Offensive mode which requires that IT investment programs require greater scrutiny and oversight.
The question remains whether Boards need to get more sophisticated on tech? No:
- Boards need to set the strategic posture of ICT investment and oversight,
- Chief Marketing Officers need to be clear about the technology and user profiles of consumers of the company’s products.
- CIOs need to be transparent about the data needed to support decision making, and
- CTOs need to be clear about strategically important technology and opaque about all the other boxes and wires.
- Whoever is in charge of GRC needs to be clear about the integration of business and technical governance.
In the end, technology is but one topic as the Board combs through the technical enablers of critical investments. What does not need to happen is technology become the focus of the conversation.
Technology is fun and interesting but it must not bedazzle the company. Technology is usually a critical enabler but sometimes it can become a strategic instrument. The Board needs enough information to choose which but it is up to the senior execs to provide the information necessary for effective oversight.