Guest Contributor: Don Springer

After the pandemic accelerated the use of technology, companies are facing technology-driven disruption, innovation, and value creation opportunities in every facet of their strategy. For some, it is a natural progression of their pre-pandemic business model. For others however, it is a recurring reaction to market fluctuation and outdated business models, further compounded by the lack of technology expertise and its alignment with business strategy. Either way, the opportunities are ripe for digital governance with a technology committee.

In pre-pandemic 2017, a Deloitte study revealed that 48 percent of board technology conversations centered on cyber risk and privacy topics, while less than a third were concerned with technology-enabled digital transformation.¹  Two years later, Deloitte found that many boards still took the approach of “protecting and preserving” technology at the expense of discussing technology-enabled initiatives that supported business growth and expansion, such as developing new capabilities, business models, and revenue streams.²

Today, as COVID-19 accelerates the shift to multiple digital activities, companies that have cultivated digital capability combined with leadership capability have widened the gap between themselves and their competitors. Digital capability enables these companies to use innovative technologies to improve the business. Leadership capability enables them to envision and drive organizational change. Combined, these two capabilities allow a company to transform digital technology into a strategic business advantage.³

In an earlier article, I discussed how boards of directors can partner with management to become the engine of digital transformation. By forming a technology committee, boards can further enhance their contribution of developing a business advantage through digital technologies while overseeing risk.

How do boards use a technology committee to oversee digital opportunities and risks? What is a technology committee? What is the composition of a technology committee? What are the roles and responsibilities of that committee?

What is a Technology Committee?

Historically, few boards have used technology committees. Certainly companies form Risk, Audit, Compensation, and Nominating/Governing committees before others like strategy, technology, M&A, etc. When talent and funds are available, technology committees have been formed and given the function of overseeing the development of the company’s technology, as well as considering how external technological developments and trends may affect the company. Some are simply focused on research and development.

Vetting technology initiatives and issues in the technology committee can allow the board time to explore topics in more depth and focus. That can also enhance presentations to the full board and provide for more targeted and efficient discussions. When members of the full board ask questions, committee members can provide informed answers that are in alignment with the CIO, CDO, CISO and other management. 

Technology Committee Composition

When the National Association of Corporate Directors (NACD) polled directors on digital governance in 2019, 64% of respondents agreed that the next member recruited to their board should have strong technology expertise.⁴ Obviously, the first issue of the technology committee composition is having one or more directors on the full board that are digitally experienced and have a commitment and curiosity for continued learning in the field.

If the board has a technology experienced director, that person is usually recommended as chairing the technology committee. It is usually advantageous to also have a member of the risk committee as a member since several risk issues will require cognizance of both committees. Like other board committees, additional members may include the Chairman, Lead Director, and other directors according to the industry served and the specific board culture.

The technology committee will also engage key technology management team members (CIO, CISO, CDO, etc.) in executive sessions from time to time. Additionally nondirectors and external experts are used as advisors for continuing education on changing technologies and trends.

Technology Committee Responsibilities

Today’s technology committee addresses as much strategy as performance and risk. Where boards have historically had a tendency to look at technology from the perspective of risks, the technology committee can explore and guide the opportunities of value creation as well. Some of the responsibilities are as follows: 

Strategy

The members can foster strategic discussions about various technologies that deliver business growth. They can surface opportunities to: 

• use data for better insights and decisions, 
• enhance customer experience and engagement, 
• identify multiple stakeholder interests, 
• explore leveraging technology ecosystem partners to increase value,
• promote technology leadership that instigates change and cocreates business,
• align initiatives to support the business purpose and strategy.

Performance

Focusing on value creation does not remove them from the responsibility of understanding and guiding the performance aspects of technology. The technology committee can: 

• transform business operations,
• surface improved financial outcomes, 
• monitor stakeholder outcomes, 
• oversee investments in technology stack elements aligned with strategy,  
• attract and develop inside and external technology talent.

Risks

Of course, risks and compliance are the traditional category of oversight. The technology committees can:

• focus on cyber risks, 
• surface regulatory compliance risks,
• highlight technology staffing trends,
• monitor changing technologies, platforms and business models,
• identify industry and geo-political disruptions. 

It is noteworthy that with the increase of new technologies like artificial intelligence, for example, the questions of risk will include ethical and social issues as well as traditional technical and financial issues. In fact, some of the most difficult questions a board will face about AI usage are likely to be “Should we use AI in this way?” and “What is our duty to understand how that function is consistent with all of our other values, missions, and strategic objectives?”⁵

Summary

Regardless of seeding the board and the technology committee with technology savvy directors, it is strategically important for the entire board to acquire comfort and knowledge with digital issues over time. The technology committee can provide a key influence for that evolution as well as perform the responsibilities of oversight for technology strategy, performance, and risk. 

In doing that, the technology committee, in partnership with the full board and company management, becomes a key catalyst for the governance of digital transformations.

References

1. K. Kark, J. Lewris, and C. Brown, Bridging the boardroom’s technology gap, Deloitte Insights, June 29, 2017.
2. K. Kark, M. Puranik, T. Leatherberry, and D. McCormack, Technology and the boardroom: A CIO’s guide to engaging the board, Deloitte Insights, February, 2019.
3. D. Bonnet and G. Westerman, The New Elements of Digital Transformation, MIT Sloan Management Review, Special Collection on How to Embrace Digital Transformation, Spring 2021.
4. K. Silverman, Why Your Board Needs a Plan for AI Oversight, MIT Sloan Management Review, Winter 2021.
5. Ibid.