Consumer& RetailDigitization on Boards 2nd Edition

Are Boards Ready for Digital Disruption?

About Amrop

Amrop advises the world’s most

dynamic organizations on

identifying and positioning

Leaders For What’s Next – adept

at working across borders, in

markets across the world.

Executive Search, Board and Leadership Services

Scale

Formed in 1977, Amrop is one of

the world’s largest retained

executive search organizations by

geography, with over 70 offices in

50 countries.

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Amrop Global: Who are we?

Aligned globally and regionally, our 7 practice groups have a full suite of sector teams, offering the highest level of executive search services.

Industrials

Energy & Infrastructure

Financial Services

Consumer & RetailLife Sciences

Technology & Media

Professional Services

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Amrop’s Technology & Media Practice Group

Technology & Media

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FinancialServices

Digitization on Boards - Methodology

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In the 2nd half of 2016, Amrop’s Global Technology & Media Practice Group analyzed board member profiles (supervisory or equivalent) of the top 20 stock listed companies by revenue in 15 countries (14 Europe + the US).

A board is considered as havingtechnology/digital competencies when it hasa digital/technology committee, or if 1 ormore board members are categorized as technology/digital profiles.

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Definitions

Technology/Digital ProfileTechnology/Digital/Innovation

Committee

A board member with professional operating experience from a company within software, hardware, infrastructure, internet, digital, online, telecommunications, social media, etc.

S/he has worked in such a company within minimum the past 5-10 years. Alternatively a CIO or CTO from other companies.

Guiding and advising the Board on issues related to software, hardware, infrastructure, internet, digital, online, etc.

FinancialServices

The pressures surrounding digital disruption and security are intensifying.

Yet when it comes to exactly how organizations are addressing digitization, the picture is fragmented and questions surround its role. To what extent is digital an agent of change for your organization?

Should you continue with business as usual? Or deliberately engineer digital into specific parts of your supply chain?

Should digitization have a higher purpose, driving innovation or business model transformation? If so, in what time frame, and with what resources?

Crucially, to what extent is your Board equipped to ask the right questions, find the answers, and implement solutions in the right place, at the right time?

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FinancialServices

What the Numbers Say

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FinancialServices

5% of board members in non-tech companies have digital competencies.Almost nowhere do we see any

significant movement.

Looking only at the digital

representation of the countries

analyzed over our past two editions,

the overall average rose from 5% in

2015 to 6% in 2016.

Non-tech CompaniesDigital representation in non-tech companies is low and slow-moving

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FinancialServices

Tech Companies

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43% of Board Members in tech companies have digital competencies.

Unsurprisingly, digital

representation on the boards

of tech players is far higher

than for non-tech.

With 79% representation,

Poland is the clear leader.

Digital representation is rising in the tech sector

FinancialServices

Tech vs. non-tech

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The gap between tech and other sectors is widening

Digital on tech sector boards is now nearly 9x other sectors, vs 7x last yearIn our last analysis the penetration of digital competences at board level was 7 times higher in

the tech industry than in others. So the gap is widening.

FinancialServices

Committees

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Only 3% of Boards have a Technology Committee. Traditional committees still dominate

Examining 300 Boards of listed companies we found only 9 official technology committees, (in 6 countries). Their rarity contrasts strongly with other committees.

FinancialServices

Committees

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9 Committees found overall

Newcomers 2017

FinancialServices

Gender Diversity

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Digital is a catalyst for gender diversity

Women now hold 35% of all board positions with a digital/technology profile – a significant uptake since last year

FinancialServicesThere is a correlation

between boards with tech profiles and higher female representation.

In Sweden and Belgium, all new tech profiles entering boards in 2016 are women.

Turkey, USA, UK, Spain named no new female digital/tech board members among the 133 new non-executive directors appointed in 2016.

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Gender DiversityDigital is a catalyst for gender diversity

FinancialServices

Views From the C-suite

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Amrop conducted confidential interviews with 19 board members from listed organizations during 2016 and 2017.

Few saw digital as having a primary role in their business.

So the next findings mainly give insights into companies for whom digitization plays a secondary role.

FinancialServices

Satisfaction

Of 19 board members who invited Amrop into the digital kitchen, half are on the journey, with much work done, and a long road ahead. A third are dissatisfied, hardly any fully satisfied.

Low Satisfaction indicates work in progress

Complex, fragmented organizational structures

Low or questionable ROI of digital, and other pressing priorities on the board agenda.

Digital initiatives have a short shelf-life and ‘good enough never is’

Boards’ understanding of digitization, citing the ‘Kodak example’ may mask digital illiteracy

For digital evangelists, realism and patience are the name of the game

FinancialServices

Threats

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Cyber security is a burning red thread -the most often-cited threat. And there’s more…

Cyber security is one of several threats

Regulation impeding progress in e.g. financial services, slowing recruitment of new board members or the digitization of critical processes.

Several fear drowning in excess data, with customers dissatisfied with their data access.

However, digitization

is a double-edged

coin.

With threats come

opportunities for

agile organizations

who adopt a clear

strategy, and get the

timing right.

FinancialServices

Investment

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Despite cyber security threats, investment in streamlining processes (often in multiple zones of an organization) are most common.

Emphasis more on exploitation than exploration.

Business model transformation rarely in the picture.

Process is first in line for digital investment

Little change since our last visit

Organizations still taking a step-by-step approach

Digital primarily an operational enabler.

The customer interface is a high priority.

FinancialServices

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InvestmentProcess is first in line for digital investment

Process streamlining/ infrastructure

Customer interface

Cyber security

Analytics

Recruitment Sales support R&D11% 11% 11%

47%

53%

21% 21%

FinancialServices

Profiles

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Boards face hiring dilemmas – agile thinking can solve them

As in 2015, the T-shaped profile is most wanted: broad business shoulders + digital incisiveness.

Cyber attacks aside, the stakes are high, e.g. using Industry 4.0 data to anticipate and prevent serious production blockages.

Dilemmas: youth (fresh digital knowledge, often in the heads of digital natives in successful start-ups) and maturity (seasoned hands, large-scale transformation experience in a corporate setting).

One solution, if the Board can accommodate it, is to compose the T-shape from more than one profile.

Or take existing senior talent to Silicon Valley, and engage in aggressive training and development.

FinancialServices

As seen, their scarcity contrasts vividly with other committees.

CommitteesQuestions surround the relevance of Technical Committees

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Yet another committee would be superfluous at this stage.

The digital strategy is often undercooked.

Other committees are already doing the job, (risk management, strategy. innovation).

Digital is an over-arching concern; bigger than a single committee.

Or a management task: management feed into, and/or are steered by, the board.

FinancialServices

Management Messages

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Our interviews reveal digitization can often end up chasing its own tail. Here are some potential traps (paraphrased). These may partially explain the low

representation of digital board profiles in non-tech organizations.

Chicken or egg? Digitization creates vicious circles

If we don’t know our digital strategy, how can we decide what if any digital profile/s to

bring to the board?Yet, how can we define a strategy without them?

Our infrastructure and processes are heavy and fragmented. How can we integrate digitization into

outmoded structures?Yet without digitization, how

can they be updatedand streamlined?

Technology evolves fast and dynamically. So systems quickly go obsolete, absorbing massive

resources and providing insufficient ROI to justify

further investment.

“

”

FinancialServices

Management Messages

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Costly mis-hires, strategic paralysis, risky re-designs….Boards can avoid vicious digitization circles with development and coaching programs for members, also working with their CHROs. With this knowledge in hand, the thinking can start. Here are some suggestions, shared with us by board members.

Board education can pre-empt them

Tap into internal

knowledge

Learn from tech

companies

Look beyond Silicon Valley

And also go to Silicon Valley

Combine digital and diversity

Engage in reverse

mentoring

FinancialServices

More on the digital journey | www.amrop.com

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Cyber Security | How boards can safeguard digital assets today for success tomorrow

From Disruption to Daylight | Travelling the digital change curve

Customer Experience 2017 | Retail executives deliver their verdict

Embracing Technology is About Innovation | Technology expertise is not just about IT

Thank you