Reflections on the GUBERNA Director's Day 2019 - Philip Verhaeghe

Personal reflections by Philip Verhaeghe

The 2019 Directors’ Day provided the many GUBERNA-members with a strong and clear wake-up call, combined with a precious call to action. Digital transformation and innovation are everywhere and therefore certainly affect the way companies should be governed. Directors have an urgent duty to become more “tech-savvy”, to be more in touch with what the latest technologies can offer. As digitisation and innovation have an impact on all businesses, they can no longer be a blind spot on the agenda of a board of directors!

The well-balanced afternoon programme served some serious ‘food for thought’ mingled with a lot of fresh insights, sometimes wrapped up in compelling rhetoric or direct questions such as: (How) Do we have to redesign corporate governance to match the new technological challenges? Do you, as a director, understand the role of IT in your company? How should a board of directors look at digital challenges? How can corporate governance mechanisms nurture innovation? How do boards lead and govern digital assets? How can an organisation direct any technology to serve its specific business challenges or needs?  How to create a better business (which directors, agenda, scope, information, mechanisms, and speed)? Lastly, what will be the impact of for example blockchain, artificial intelligence and IT?

From the introductory remarks by GUBERNA’s CEO Sandra Gobert we surely remember the thought-provoking questions and considerations on the role of (future) boards. The third wave in corporate governance is indeed approaching but which new recipes do we need?  There is one certitude: the essence of corporate governance is here to stay; companies still must be governed. It remains the objective to promote long-term value creation and the practice of universal principles (accountability, independent checks & balances, adequate transparency, ethical behaviour, and sustainability). We should however not limit the scope of the director’s duties to 'value protection' governance such as monitoring, supervision, control, and compliance. This is at odds with the demand for organisational flexibility that requires more innovation, more entrepreneurial creativity and bigger risk appetite.  This ‘value-creating' corporate governance model should be the driver of growth in the digital era. 

Steven De Haes, dean of the Antwerp Management School, presented some clear ideas on how boards can address the digital challenge. Let us summarise his sometimes-worrisome message.

If your IT fails, your business can be seriously impacted as it can cause not only chaos but also immobilism. Therefore, board-level IT-governance is a necessity and directors should not abdicate IT-decisions. On the contrary, they should include IT-matters in their debates. Indeed, in our digital world, every business challenge has a technological component. This turns IT into a board topic.

When talking about digital transformation it is important to combine "business-savviness" and "IT-savviness". Business-savviness means understanding strategies, operational models. Being IT-savvy, on the other hand, is being able to detect how emerging technologies can be connected to the needs of the company. Where IT used to only have a technical purpose, it now touches upon everything. It is indeed a fascinating task for the board of directors to define the (technical) objectives as well as the strategic direction in an era of ICT, big data, cybersecurity…

You need IT knowledge in the board to be able to ask the right questions and to challenge your management in the field of technology.  The right leadership can cause a change in mentality. It is therefore important that all directors can bring economic, social or environmental added value to the tech debates. The board of directors should be the pre-eminent body to steer innovation and digital transformation. The idea that only the CIO or CTO should be responsible for IT-management is wrong.

Research shows that there is a positive correlation between more board-level IT governance and organisational performance. Alas, there seems to be a knowing-doing gap. Most directors already seem to understand what they should do, but still, they fail in doing it. You cannot talk about long-term strategies if you do not clearly define the role of technology for your business. In a few years, your business model may be completely outdated by disruptive technologies. Therefore, it seems obvious that a board of directors should be dedicating time to the role of technology in the company, but in practice we see that (certainly in incumbent organisations) less than 20% of the boards of directors do so proactively. Only when an incident occurs, they will pay attention to it.

Dean De Haes suggested some possible reasons for this default: maybe there is no expertise in the board due to the abundance of finance and legal profiles? Maybe there is not enough interest or awareness due to the small number of real outsiders in the board? Maybe the company is too ‘old’ or mature and lacks agility? Maybe the board considers technology as something operational for a CIO, even though it is strategic by nature and importance. Maybe boards need specific governance instructions to comply with? (The King IV governance code in South Africa is the only one presenting some tech-related recommendations).

The tone at the top must be right! If a board of directors does not actively take up its digital responsibilities, it will be very difficult to get a company fully into digital transformation. In this scenario, the CIO or CEO will always hit a barrier at a certain moment. A technological strategy and a business strategy are no longer two separate things; they need to be properly aligned. So, adapt your structure to your strategy. If you need a trustworthy IT-infrastructure for your innovations, you must act accordingly. When your strategy is rather defensive you should at least be able to ask the right risk questions. If your strategy is offensive you need IT and tech-expertise in your board or even an IT governance committee to assist the board. And beware to not just invest as much as possible in the latest technologies, but to invest strategically. The success of a digital transformation does not lie in choosing the most impactful technology, but in being able to translate technological evolutions into specific business challenges...

Boards, you get the IT you deserve! A lot of awareness still needs to be raised about how impactful digital transformation will be for Belgian companies. Corporate governance and IT governance are mutually reinforcing. Technological and scientific innovation is a major driver for long term value creation We need to find ways to take our boards to a higher level to make our Belgian companies perform better in this global world. In that line of thought, it was later announced that GUBERNA considers developing ‘governance and technology’ courses for directors with the assistance of the Antwerp Management School. 

Danielle Jacobs, the CEO of Beltug, reinforced these messages while focussing on data and artificial intelligence: If you do not engage with data, you will lose markets. Digital data empower people in every business. Invest in the right technologies and make sure that these new technologies do not form islands in the organisation but are integrated to support the long-term objectives. In other words: break down the data silos and collaborate to create new value through your data. As business strategy and technology strategy go hand in hand when it comes to data, we will also have to invest in data infrastructures, privacy and cybersecurity!”

As the last keynote speaker before the closing debate, Felix Van de Maele, founding CEO of Collibra, entertained the public with a fast-paced but also compelling inside growth story: from an academic spin-off and start-up towards one of the rare unicorns. How to scale a company from a bold idea to a billion-dollar valuation? He enthusiastically shared his insights about product and market fit, capital raising, governance processes and so on. And yes, data is truly the new oil for our economy.  

Philip Verhaeghe, 23 October 2019