News

Rethinking The ''Digital Director''

 


The Corporate Board | November 3, 2016


The Corporate Board article, “Rethinking The 'Digital Director,'" was authored by Russell Reynolds Associates consultants Rhys Grossman and Tuck Rickards. The piece looks at the importance of digital directors in boardrooms. The article is excerpted below.

The past several years have seen an explosion of interest in how all companies today are digi­tal companies, and need digital directors in their boardrooms. This trend is real, but not enough thought has been given to definitions, job descriptions and strategic plans.

The need for boards to incorporate a digital perspec­tive has been well established. Indeed, in 2009, Rus­sell Reynolds Associates recruited Sheryl Sandberg, COO of Facebook, to the Disney board as a "digital director." It was recognized at that time that the media industry was going through a significant change, and it would be valuable to bring someone with a fresh industry view onto the Disney board.

Since that time, the topic of digital directors has been front and center for boards across every industry sector. Now, as we talk to CEOs and boards today regarding transformation and leadership, the ques­tion we hear most frequently is "how do we drive an integrated approach to digital transformation and change across the organization?"

Companies are recognizing that there are mul­tiple areas in which their boards can increase their digital quotient.

This requires not only digital savvy board mem­bers but broad board engagement in strategy, change management, and technology platforms by the entire board. Such enterprise transformation requires strong support at the top.

A recent article from McKinsey & Company notes that companies are recognizing that there are mul­tiple areas in which their boards can increase their digital quotient. They need to close the insights gap, understand how digital can upend business models, engage more frequently and deeply on strategy and risk, and fine-tune the onboarding and fit of digital directors. These digitally savvy directors bring important perspective regarding today's products and services as well as future business models.

Russell Reynolds Associates has done extensive research in the area of digital directors. In our latest report, "Digital Directors 2016: Diverse Perspectives in the Boardroom," we define the digital director as any non-executive board member who meets at least one of the following criteria:

  • Plays a significant operating role in a digital company (primary business function based on a web-based, social, mobile/device, cloud/Saas or big data platform).

  • Has a primary digital operating role within a traditional company.

  • Has two or more non-executive board roles at digital companies.

The report analyzed the backgrounds of every board member at the global 300 companies to uncover the prevalence and background of digital directors and understand how they differ from other directors.

While digital directors still make up less than five percent of board seats across the global 300, their number has increased by six percent over the past two years. These digital directors are found across all industry sectors, including digital laggards such as healthcare and industrial. While only four percent of industrial board members are digital today, we expect this figure to change significantly as the impact and opportunities of the Internet of Things (IoT) grow over the next three years.

The United States accounted for the majority of digital director placements over the past two years (76 percent of all new appointments). Simultaneously, the general population of board leaders in the United States is becoming increasingly savvy about digital topics, blurring the distinction between digital and non-digital non-executive directors. Such change has been slower to come to European companies, with a slight increase of the amount of digital representation in the Asian Pacific, from three percent in 2014 to eight percent in 2016.

Certain industries are far more likely to add a digital director. Fifty-five percent of technology boards have a digital director, the highest rate for any industry. Consumer (at 49 percent) and healthcare (at 50 percent) also seem to recognize the value of adding this perspective. However, only 14 percent of financial services and four percent of industrial companies currently have a sitting digital director on their boards.

There is evidence that some boards hget" digi­tal to the point of doubling or tripling down, while others still remain hesitant.

Notably, when grouping boards by number of digital directors, from "Highly Digital" with two or more, down to zero digital directors, the "Highly Digital" group is actually larger than the "Digital" segment (a single digital director) in the United States (now 26 percent of United States boards). This is evidence that some boards "get" digital to the point of doubling or tripling down, while others remain hesitant.

Women comprise a very high percentage of digital board members. Our analysis revealed that they ac­count for 58 percent of the digital directors recently added to boards. As a result, while only 19 percent of global 300 directors are female, women represent 37 percent of digital directors. The United States leads the way, with 38 percent, but Europe (36 percent) and Asia/Pacific (33 percent) are close behind.

Furthermore, of the digital directors who bring transformational experience, 67 percent are women. Women are also more likely to be the sole digital voice on their boards (40 percent versus 27 percent of male digital directors).

As boards consider naming new digital directors, they typically seek at least one of the following four digital perspectives for the company:

Customer perspective-an understanding of marketing, data, customer insight, products and analytics and digital engagement.

Vision and strategy-insight on market dynam­ics, the latest digital trends and their implications for the business.

Leadership and culture-the capability to enure the business is developing a pipeline of digital talent, advise on the transformation, and recognize that digital businesses have different aspirations and paces of development than traditional businesses.

Commercial and investment acumen-the ability to contribute to board debates on appropriate investments in complex, capital-intensive technology projects.

Being good in one of these areas does not mean the digital director will be good in others. For example, directors who stand out for their consumer perspec­tive or vision may not always be good at investment oversight. 

As companies move from developing a digital strategy to actual implementation of digital platforms and technologies they are also beginning to look for a broader definition of "technology" in the boardroom.

A digital director steeped in tcchnology, for example, but without the experience of run­ning a traditional business, will likely be a "digital disruptor."

Digital directors can bring a range of experience and competencies to the boardroom. These bring distinct tradeoffs in terms of functional experience and "disruption" versus "transformation'' experience. Many bring a strategy consulting background in ad­dition to operating credentials.

These directors fall into seven basic archetypes:

  • Digital industry specialist-with broad cross­functional expertise. They offer broad contributions, with particular ability to ask the right strategic questions regarding digital opportunities and risks, especially for large companies.

  • E-commerce leader-skilled at building digital operations through brands, merchandising and fulfill­ment, with expertise in the use of data analytics (web traffic, customer metrics) to push product innovation and revenues.

  • Chief marketing officer-able to lead sizeable, multichannel marketing organizations, and oversee digital marketing, including the migration of tradi­tional media budgets to digital. This director can drive a digital vision that aligns the overall company strategy with key stakeholders. He or she is capable of ensuring a compelling digitally-enabled consumer experience across all touchpoints.

  • Mobile/social specialist-a best-in-class change agent in the ways that people interact, organize, consume and share information. Expect a tech-savvy view on where digital technology is heading and its potential impact on the business and consumers.

  • Data analytics guru-an expert at using sophis­ticated analytic tools to identify insights, better serve and target customers, refine operations and create monitizeable products. They align analytic capabili­ties for customer/client focused strategic direction to drive company growth and performance.

  • Consumer packaged goods/brand expert-digi­tally savvy in the areas of channel sales, branding, PR, digital awareness, social media and mobile.

  • Expert in general consumer or services busi­nesses-with expertise in director-to-consumer sales, and is skilled at driving customer acquisition, retention, and conversion as well as effective use of data analytics, mobile and social. He or she can play a key role in driving and leveraging digital across all levels of the company.

To get access to the full article, click here.

Sign up for our newsletter

Get the newsletter that prepares you for what's next with valuable insights across industries and geographies.
Rethinking The ''Digital Director''