It pays to have a digitally savvy board – Peter Weill, Thomas Apel, Stephanie L. Woerner, Jennifer S. Banner

Peter Weill, Senior Research Scientist and Chair of the Center for Information Systems Research, MIT Sloan School of Management

Stephanie L. Woerner, Research Scientist at the MIT Sloan Center for Information Systems Research, MIT Sloan School of Management

From MIT Sloan Management Review

Boards of directors have many issues competing for their attention, but being digitally conversant in an era of digital transformation is quickly rising to the top of the list. Nearly all companies are looking for ways that technology can be used to improve their business models, customer experience, operational efficiency, and more — and boards must help them move forward at a sufficient pace, advocating for change by supporting and sometimes nudging their CEOs. Those that do are likely to see better financial results than those that don’t.

That’s what we discovered when we did a machine learning analysis of the digital know-how of all the boards of U.S.-listed businesses. (See “About the Research.”) Our research shows that companies whose boards of directors have digital savvy outperform companies whose boards lack it. We define digital savvy as an understanding, developed through experience and education, of the impact that emerging technologies will have on businesses’ success over the next decade. We measured it by analyzing data from surveys, interviews, company communications, and the bios of 40,000 directors, extracting key words that signal exposure to digital ways of thinking and working.

Our discoveries are striking: We found that among companies with over $1 billion in revenues, 24% had digitally savvy boards, and those businesses significantly outperformed others on key metrics — such as revenue growth, return on assets, and market cap growth.

Doing business in the digital era entails risks ranging from cybersecurity breaches and privacy issues to business model disruptions and missed competitive opportunities. When a board lacks digital savvy, it can’t get a handle on important elements of strategy and oversight and thus can’t play its critical role of helping guide the company to a successful future. But companies can fix that by understanding what characteristics to look for in existing and new board members, managing board agendas differently, and cultivating new learning opportunities.

Read the full post at MIT Sloan Management Review.

Peter Weill is a Senior Research Scientist and Chair of the Center for Information Systems Research (CISR) at the MIT Sloan School of Management.

Stephanie L. Woerner is a Research Scientist at the MIT Sloan Center for Information Systems Research.

Thomas Apel is chairman of the board at Stewart Information Services Corp.

Jennifer S. Banner is CEO at Schaad Cos. and lead director of BB&T Corp.

The first law of digital innovation – George Westerman

MIT Sloan Research Scientist George Westerman

From MIT Sloan Management Review

By now, most of us have heard of Moore’s law. The “law,” coined more than 40 years ago by Intel cofounder Gordon Moore, has helped to shape the pace of innovation for decades. Originally focusing on the computing power of semiconductor chips, Moore stated in 1975 that the transistor density doubles roughly every two years. As technologies and computing architectures have changed, the doubling time and the performance measure have changed, but the nature of the law has not. Computing power grows exponentially. This has been true for digital technologies in general, from processors to networking to DNA sequencing. While people are now predicting the end of Moore’s law, exponential growth in computing power continues as new technologies and architectures emerge.

The relentless march of technology is very good for companies that sell technology, and for the analysts, journalists, and consultants who sell technology advice to managers. But it’s not always so good for the managers themselves. This is because Moore’s law is only part of the equation for digital innovation. And it’s a smaller part than many people imagine.

I’d like to propose a new law. It’s one I know to be true, and one that too many people forget. We can call it the first law of digital transformation. Or we can just call it George’s law. It goes like this:

Technology changes quickly, but organizations change much more slowly.

This law is the reason that digital transformation is more of a leadership challenge than a technical one. Large organizations are far more complex to manage and change than technologies. They have more moving parts, and those parts, being human, are much harder to control. Technology systems largely act according to their instructions, and technology components largely do what they are designed to do. But human systems are very different. While it’s relatively straightforward to edit a software component or replace one element with another, it’s nowhere near as easy to change an organization.

Organizations are a negotiated equilibrium between the needs of owners (or leaders) and the needs of individuals. This equilibrium is difficult to attain and even more difficult to change. Just think of the last time you launched a major new transformation in your business. Or when your boss did. Simply saying that you’re transforming doesn’t make it so. You need to convince people that they need to change, and then you need to help them change in the right direction. If you do it right, you get them excited enough that they start to suggest ways to make even better changes.

Read More »

Leading digital transformation — George Westerman

MIT Sloan Research Scientist George Westerman

From TechCrunch

Digital technologies — from social media to mobile computing to big data to the Internet of everything — are transforming businesses in every industry.

Do you want to have conversations with your customers in ways that surveys and focus groups never could? Social media can make that happen. Do you want to make your employees more productive anywhere and anytime? Try mobile computing. Do you want to understand what’s really happening in your company so you can make informed decisions rather than just working by instinct? Big data analytics can do that. Do you want to kick the pants off your competitors through digital customer engagement or business model innovations? That can happen, too.

In my research on digital transformation, I’ve been amazed to see how many digital activities companies are undertaking, especially in non-digital industries. But despite all of this activity, relatively few companies were really doing it well. Why are some able to do amazing things with digital technologies, while others just do “more of the same”? What makes some firms “digital masters” while the majority of them lag behind?

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Why digital maturity matters–“Digerati” drive true value from investments — George Westerman

MIT Sloan Research Scientist George Westerman

For all of the talk about how social media, mobile and analytics are transforming our lives, the majority of big companies still have a long way to go in their digital transformation. However, two years of study with more than 400 firms around the world shows that a quarter of firms are already achieving a measurable “digital advantage” over their peers.

This research, conducted by the MIT Sloan Center for Digital Business in cooperation with research sponsor Capgemini Consulting, shows that the digital advantage is not about luck or about the industry your firm is in. It is not just about how much cool digital stuff firms are doing. Companies that manage their digital activities in a certain way are 26% more profitable than their industry peers, and outperform on other measures as well. Read More »

Leading Your Company’s Digital Transformation — George Westerman

From Sloan Management Review


George Westerman (MIT Center for Digital Business), interviewed by Michael Fitzgerald
October 29, 2012

Big traditional companies get overlooked when it comes to digital transformation. But companies across all industry sectors are remaking their operations, their customer interactions, and even their business models. George Westerman tells us how they’re doing it, whether they are technology champions or beginners.

Read more from MIT Sloan Management Review about Digital Transformation

George Westerman is a research scientist at the MIT Center for Digital Business