Boards Losing the Plot on Digital Disruption
Governance Institute Presentation 2 June 2016
Sarah at Governance Institute of Australia
Boards must educate themselves about the technology that underpins the very survival of their (and all) organisations and enables great increases in productivity. And all directors should be fully equipped to have a meaningful conversation about technology and be able to confidently play a role in its governance, including dealing with the increasing concerns about IT security. However, boards are dealing with budget constraints, and there is an increasing disparity between what boards consider successful technology and what IT professionals consider successful technology. How do you reconcile the two? And what is really important and, more relevantly, effective.
Ashley Madison: Life is Short, Have an Affair
Is success simply avoiding a bad reputation for security? Many of you would have heard of the great Ashley Madison Scandal. Ashley Madison was a “dating site” dedicated to married men looking for discreet extramarital activities. It had over 37 million users who had been assured of the utmost privacy – understandably, given the nature of their activities. A group of hackers who identified themselves as The Impact Team hacked into the Ashley Madison Website, accessed all the user data and uploaded it to the world wide web. Ashley Madison is now the subject of several lawsuits, but the impact on the users themselves was, of course, extreme. People lost jobs, families and reputations. Without engaging in any discussion of the morality of the company – this is certainly not something a director of ANY company wants to experience. This is an extreme example but not a standalone one. In 2011 hackers accessed the personal information of over 70 million Sony users and the names and personal emails of millions of Epsilon customers. In 2013 hackers made off with over 20 million credit card numbers of Target customers, and in 2014 JP Morgan Chase, the largest bank in the US, was subject to an attack that compromised more than 76 million households.
Occasionally, we need to measure success in terms of simply keeping data secure, but ideally, technology success should be measured by how technology is enabling your company to meet its obligations and take your company from strength to strength. To do that, we are going to talk about why Technology matters in the boardroom. We are not just talking about projectors, laptops, communication devices and the various other means of technology that we use to facilitate and conduct board meetings, but what technology means for your business in the marketplace. Technology is developing at an excitingly rapid pace. I have used “excitingly” on purpose. Most talks, articles and resources on technology that are aimed at boards are of an ‘alarming’ nature. They focus on the power of technology to disrupt and upend business models, they talk about risks and the ever-increasing burden on companies to comply with security and privacy. While we are going to consider those risks today, the purpose is not to scare you away from technology but to encourage you to embrace it head-on, adapt and use it to enhance your business model.
Types of Technology
There are hundreds of categories of technology that may or may not apply to your business model. Today we are going to refer to the generally accepted four categories.
Human Enhancement Technology
Collaboration Technology
Augmented Technology
The Internet of Things
Human Enhancement Technologies
Human Enhancement Technologies are technologies developed with the aim or purpose of overcoming human limitations. They most often involve medical treatments such as organ replacements, pacemakers, genetic engineering, and 3D bio-printing, but they also include technologies designed to enhance human capabilities, such as memory, sight and hearing. Human Enhancement Technology probably won’t feature on your board agenda, and yet many of you are using it daily. How many of you use Evernote or a similar app to store ideas and projects? You are using Human Enhancement Technology. How many of you have an electronic To-Do List or other organizing application which you refer to daily? You are using Human Enhancement Technology. But - how many of you have these types of technology fully operational across your organization?
Collaborative Technologies
Collaborative Technologies are the most likely to feature in your boardroom. You use them daily. There are a plethora of communication applications, peer-to-peer sharing, video technology and data sharing, to name a few. They enable us to work smarter, faster and more efficiently. Uber is the perfect example of collaborative technology which has taken such a simple idea, ride-sharing, and turned it into a multinational, multimillion-dollar organization that has entirely disrupted the taxi industry worldwide. Collaborative Technologies don’t have to be huge. They can be smaller internal applications that enable your company and your employees to engage more efficiently in the workplace.
Augmented Technology aka: Virtual Reality
Most of us, when we think of virtual reality, we think of computer games like the Sims, but Augmented Reality is simply a view of the real-world environment whose elements are augmented or supplemented through computer-generated sensory input. Facial recognition software used by Border Patrol is augmented technology. Google Maps World View is a form of Augmented reality. When you “check in” to a restaurant or place on Facebook, you are participating in augmented technology in which you are sharing your experience with your friends despite the absence of their physical presence. Augmented technology is hailed as being THE next big thing in retail shopping. You can “check in” to your local shopping centre and receive alerts and updates about specials from your favourite retailers based on your interests and browser history. This isn’t the future, this is the present, and your board needs to be discussing it.
The Internet of Things
The Internet of Things is a term you have probably all heard before. It refers to the physical network of computers, devices, buildings, telephones, vehicles etc., that have the electronics, software, sensors and network connectivity that enables them to collect and exchange data. If your home security system can independently send a message to either your or a security company, it is part of the Internet of Things. Your car sends you a message when it’s due for a service. Internet of Things. This Internet of Things generates huge amounts of data, businesses shouldn’t ignore that. It can provide valuable data as to how your customers are engaging with your product or service. The purpose of discussing these types of technology is to bring your attention to how something that can seem so extraneous in your boardroom is extremely relevant to your business model. Boards need to make it their business to educate themselves about the technology that not only is a significant enabler to increase productivity and profitability but can, in some cases, genuinely underpin its capacity to thrive in the marketplace.
Factors
It is easy enough to discuss what technology is, but let’s break it down into four smaller categories to see how and where it applies.
One: People
Two: Process
Three: Advice
Four: Leadership
People
We all know that the right staff, be they your business manager, accountant or sales team, form the cogs of a successful business, but these days, for many companies, this isn’t sufficient. Your company should be engaging experienced IT staff capable of managing the IT concerns and aspirations of a business your size – whatever that may be. Your board or a delegate of it should be regularly liaising with your IT manager, listening to their views, engaging them to drive IT projects and inviting them to adopt the concerns of the company to resolve issues, whether they be security or financial limitations.
Process
Technology is sometimes implemented on an ad hoc basis. How many times have any of you heard the following phrases…“This program does what we want. Let’s install it.” “This program is too expensive – let’s not install it.” “That program doesn’t work because no one knows how to use it.” “You want to develop a what?” Boards need to adopt a process that considers technology options in a timely manner rather than in response to crisis and both in relation to immediate needs and long-term goals.
Advice
It is unreasonable to expect every board to have an IT expert, and yet it is imperative that boards understand the consequences of their IT choices. For smaller projects, invite your IT team to present to the board to make sure that it is understood by all board members how the technology is going to affect the company. External advice for large technology projects is always worth seeking – just as you would engage a lawyer for a legal project and an engineer for a building one.
Leadership
Finally, the buck stops with you. Once your board has engaged the right people, followed the process and sought the right advice, they should have the confidence they need to make IT decisions that directly affect the company. Each Director should be fully equipped to have meaningful conversations about technology and be able to play a role in its governance confidently. Whether we are taking technology, sales or financials: That is leadership.
Risk
Of course, we can’t discuss leadership without risk. It is a topic most directors are familiar with, and some of us often feel like it’s the only thing we deal with. Technology risks are no exception. Directors often feel like they must choose between innovation and risk management, but there is another risk at play here. Innovation vs obsolescence.The same four factors can be used to reduce risk.
Engage IT and people to monitor and identify risks.
Implement a company-wide process for dealing with risk factors.
Seek advice.
Lead.
Technology shouldn’t be the elephant in the room at your board meetings. Follow the 4 Steps. Lead your company away from the fear of technology and embrace its capacity to make your business safer, more efficient and ultimately…more profitable!
What Should I Do Next?
Contact us if you would like further legal advice. Our lawyers at You Legal will be happy to assist you in whatever way we can.
* This blog is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.