This is first published in The Business Times on 19 July 2018.
For companies to succeed today, they need to be both disruptors and innovators.
A key critical enabler of disruption and innovation is technology, with success increasingly shaped by how human capital adapt to new technology implemented.
Boards recognise this and in recent years, have made technology and people as two key boardroom agenda to drive competitive performance and superior returns.
While many companies have since adopted disruptive technologies such as big data, predictive analytics, process robotics, machine learning and artificial intelligence to enhance operational efficiencies and value creation, 62 per cent of Singapore CEOs surveyed in our KPMG Global CEO Outlook have expressed that they found it difficult to align and transform the digital and non-digital aspects of their businesses, and manage multiple stakeholder expectations concurrently.
The same survey also found that 44 per cent of Singapore CEOs rate cyber security as the biggest threat to their growth. However, only 31 per cent said they have the ability to identify new cyber threats that will impact their business.
In addition, half of Singapore CEOs felt boards also had unreasonable expectations of investment returns from digital transformation.
With technology as a core driver of deal success, companies also face challenges in extracting synergies from their mergers and acquisitions when technology is not properly utilised.
Besides technology and people issues, companies also grapple with how to provide adequate and effective oversight when it comes to entering new, untapped markets and launching new products and services.
Over 60% of CEOS are now prioritising emerging markets for expansion, preferring the Central / South America and Asia Pacific regions.
Yet, we found that only 40% of leaders are ready to oversee the radical changes facing their companies today.
Clearly, a host of internal and external pressures are adding up and confronting boards in an unprecedented fashion as they embark on innovation and disruption.
So what does the board need to do differently?
To address these shortcomings, the starting point will be to evaluate the boards' role, ensuring there is clarity when it comes to their involvement in developing, approving and monitoring the strategic initiatives.
In the area of transformation, boards can no longer abrogate responsibility for risks to the chief information or chief risk officer. They must take the driver's seat when it comes to understanding how technology is enabling their business strategy, what the business case for using certain technologies are, and finally, how to embed a digital culture successfully in their companies.
The boards also needs to cultivate a shift in their mindset and understand that any corporate investment, including IT transformation, takes time.
They need to be patient, accept failure and understand that innovation does come at a true price.
In spirit, this does not mean giving teams the power to do whatever they want and fail spectacularly.
Rather, it's about facilitating the end-to-end freedom and 'licence' to experiment and pursue a specific platform, channel or product innovation from concept to fruition.
Besides fostering a dare-to-try and dare-to-fail culture, a more constructive dialogue around board diversity is needed.
The dialogue needs to move beyond gender to focus on the skills and competencies of the board members.
After all, a balanced, active and high-calibre board allows for more forward-thinking, agile decision-making and greater shareholder returns.
For example, instead of senior hiring directors with traditional expertise in audit, legal and corporate finance, boards can consider bringing in directors of varied backgrounds such as technology, human resources, marketing or communications.
Having a director with a background in technology may help the company accelerate digital transformation, address business-technology gaps and mitigate cybersecurity risks.
A director well-versed in communications, on the other hand, can better add value in managing investor perceptions in both local and overseas markets and even help in successful fundraising.
Meanwhile, younger directors from a different cultural background will also provide direct insights into new demographics that the company is targeting, and help to penetrate into emerging markets where the opportunities are nascent.
Beyond the composition of the board, directors should also move into more constructive dialogue and engagement around the strategic direction of the company and the business landscape.
For one, they need to ensure that they keep a finger on the pulse of emerging global megatrends and differentiate between short-term fads and long-term trends to create the greatest financial impact.
It would also help them avoid missing important signals and making incorrect assumptions about the future.
When it comes to managing the complexities of global expansion and transformation which are now plaguing boards across the globe, boards should also exert greater influence and independence, questioning information and due diligence that they receive, and seeking assurance from all functions of the organisation before approving an investment in opaque jurisdictions.
Appropriate due diligence should include conducting regular site visits, reviewing regular quality and insightful risk reports, data analytics and seeking external counsel outside of their fields of domain as and where required.
Boards that take time to reflect and review these aspects will help their companies build a defensible moat, drive long-term shareholder value and establish a strong sounding board that will steward the company ahead in good and bad times.
The article is contributed by Irving Low, Partner, Deputy Head of Advisory, KPMG in Singapore. Views expressed are his own.