Boards of Australia’s biggest companies have often put a premium on stability over speed, believing this to be the prudent strategy. They might be kidding themselves, according to a leading Australian technology executive.
This failure of boards to appreciate the changed conditions of the market wrought by digital disruption — and the increased need for speed — is putting Australian businesses at risk.
- Which-50 and ADMA are introducing a one day classroom-based digital transformation education program for senior executives lead by visiting US subject matter expert Courtney Hunt PhD. Places are strictly limited.
That’s the impression we took away from a presentation by Claire Rawlins, Group Executive — Digital & Technology, IAG, who was speaking at a recent Harvey Nash event in Sydney on the topics of digital disruption and inclusiveness.
The event also included research data from a Harvey Nash study that suggested that almost a third of Australian directors regard their companies as disruptors. That’s a figure that raised eyebrows in the audience with one non-executive director later observing to Which-50, “At least we can relax knowing only a third of Australian directors are kidding themselves!”
The study also found digital occupying two of the top three priorities for the directors surveyed, with digital innovation, strategy, and cyber-security filling the top spots — followed by diversity and inclusion.
In her discussion with Harvey Nash’s Australian Managing Director Bridget Gray, Rawlins said it was important for directors to keep up with the latest technology. “What I’m seeing in some of the boards is because they don’t understand the digital economy it’s actually slowing them down.”
Boards, she said, are constantly debating speed versus stability.
Traditionally, boards have worked on the idea that the slower you work the more stable things were. “This is not true anymore,” she said.
“In the 21st century it’s kind of paradoxical, but the faster you are the more stability you get. If you look at some of the big Internet companies they’re releasing 150 features each week.”
Speed and stability now come hand-in-hand, she said.
“We need to get boards to understand that slow does not mean more stable, and more secure and fast does not mean more risky and more dangerous.”
According to Rawlins, directors she talks to often react with an audible intake of breath at this idea.
“Directors need to be educated about these changes so they can really support the business going forward. I know it’s a really overused analogy that traditionally big fish ate small fish, and now the fast fish eat the slow fish. But that’s the reality.”
Rawlins said the good news is that the message is getting through to some of the boards she works with. Reverse mentoring in particular is proving quite popular.
“It helps these directors to understand what the digital world is doing in terms of the business models and innovation at the edge. When we talk about things like the sharing economy, there isn’t a common understanding about what that actually means.”
Peter Reichwald, from Harvey Nash’s London office, also presented on his company’s Engage program, which seeks to widen the diversity agenda beyond simply a discussion of gender into the broader issue of inclusiveness.
For business, inclusiveness is a bottom-line issue. Studies like Diversity Matters from McKinsey clearly demonstrate that companies with a more diverse leadership team make more money.
According to that paper, “The analysis found a statistically significant relationship between a more diverse leadership and better financial performance. The companies in the top quartile of gender diversity were 15 per cent more likely to have financial returns that were above their national industry median. Companies in the top quartile of racial/ethnic diversity were 30 per cent more likely to have financial returns above their national industry median.”
Contrast that with the laggards. McKinsey found that companies in the lowest quartile for both gender and ethnicity/race were statistically less likely to achieve above-average financial returns than the average companies in the dataset.
“The results varied by country and industry. Companies with ten per cent higher gender and ethnic/racial diversity on management teams and boards in the US, for instance, had EBIT that was 1.1 per cent higher; in the UK, companies with the same diversity level had EBIT that was 5.8 per cent higher. Moreover, the unequal performance across companies in the same industry and same country implies that diversity is a competitive differentiator that shifts market share towards more diverse companies.”