Boards and management committees alike have increasingly expressed interest in technology investments that improve operations, enable customer relationships, and support virtual workforces—especially in light of COVID-19 challenges.

Boards charged with overseeing digital transformation projects need to be equipped with the right questions for their management teams. Based on our experience working with organizations across many industries, the following five can help a board understand and 'sponsor' a project successfully.

1. Is the organization ready for the scope of the planned transformation?

A true digital transformation goes way beyond technology. There are three key areas that can be involved: changing the technological 'plumbing', such as moving from on-premise data centres to cloud-based storage; automating processes; and digitizing interactions with customers. Some organizations think that digital transformation just involves their front-end (e.g., their websites) and although this can be part of a plan, it will typically go deeper into back-office processes and data.

Many teams and departments will be affected, including IT, operations, and supply chains. Boards need to examine their digital capabilities, consider, and plan for business continuity. For example, this could involve considering whether the finance function is proficient at data analytics to carry out a 'virtual financial close', a set of financial statements produced on-demand.

Boards should also ask whether the transformation involves the organization acting as a disruptor or if it's being disrupted. The latter can include regulatory changes which require changes to how data is handled or much broader events – think of ride-hailing services which have pivoted to delivering food during the COVID-19 pandemic.

2. Who will carry out this transformation?

It's of paramount importance to fully understand if the in-house technology team has the appropriate capabilities to project manage, execute, and implement a digital transformation that's aligned to business priorities. Boards need to understand the requirements, their capabilities and consider if outside consultants are necessary at various phases or along the entire digital journey to ensure success. For example, it is particularly important to ensure that there is cybersecurity expertise available from the start of the project, as early choices including whether to own or rent technology will have a major impact.

Even if the in-house team do most of the implementation work, digital transformations often make organizations more reliant on technology suppliers, such as the ongoing subscriptions typically used for cloud-based services rather than outright purchases of data centre hardware. Sometimes it may make more sense to 'rent rather than buy', but boards need to understand the implications of doing so. They should also examine the suppliers involved: cloud services are dominated by a few very large vendors, but automation can involve much smaller niche suppliers who may be less likely to be able to maintain products or provide the required service over a number of years.

As well as considering individual suppliers, boards need to think about the technology 'ecosystems' – the set of interdependent components, which may be provided by a range of companies – that the digital transformation plan proposes to use. A first step is to realize that when management teams pitch plans that sound like they involve a single 'black box', such as when technologists refer to a data lake (broadly defined as a repository of structured and unstructured data), they may be oversimplifying the solution. In fact, they're likely referring to a complex collection of technologies that leverage an ecosystem of vendors. And when that ecosystem is in place, it's important to bear in mind that, while there may be potential to move between suppliers, changing the ecosystem itself is likely to be harder.

3. Can agile development help fund this transformation?

Boards need to ensure that a digital transformation plan is properly funded. This is an area where good communication is vital; with cost overruns more likely where partnership and transparency are lacking. For example, it may make sense to question digitization of processes such as planning, that people are doing well and that could be difficult to automate.

An agile development approach that delivers results incrementally could help fund a project while it is taking place. For example, you can enable analytics and reporting capabilities in a series of sprints with the data you source through temporary technology solutions and while still in the process of developing a strategic architecture. The benefit of this approach is that valuable insights can be generated early in and throughout the transformation, allowing the organization enough flexibility to adjust their plans. However, agile development needs careful management: team members accustomed to traditional processes may wrap it in too much structure, while others may see it as a way to avoid accountability. Balance is key to avoid chaos.

A board should question if a digital transformation plan guarantees what it will achieve.

4. Does the plan allow for unforeseen challenges and mistakes?

A board should question if a digital transformation plan guarantees what it will achieve. A good plan should be transparent about uncertainties and risks and how these can be mitigated.

As with funding, it is vital that the board establishes good communications with those running the project to manage the project process. Such transparency should apply from the start of the project, with managers helping the board understand the technology concepts involved, then being quick to discuss issues that develop. Equally, boards have to accept that mistakes happen, and problems occur and be ready to make decisions to adjust accordingly. It should be a process of give and take.

5. Are those involved ready to collaborate rather than compete?

If the project team involves people from several different organizations, boards need to make sure that they collaborate well. Our KPMG team worked on a four-year digital transformation project for a Canadian insurer that was completed on-time and on-budget, involving a major technology provider and other suppliers. It delivered in small chunks with transparency over uncertainties. When issues arouse, the project team and key executives were informed, and approaches were adjusted. It worked well because we left our badges at the door. The project was a huge success.

We help boards and management teams define and effectively implement their digital transformation strategies. Contact us to find out more.

Related resources

KPMG's Board Leadership Centre hosted a webcast in association with CPA Canada on The Board's role in Digital Transformation. Stephanie Terrill and Gavin Lubbe defined what digital transformation means and outlined the complexities to help boards oversee digital transformation for their organizations. Check out the recording.

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