Why digital transformation success depends on good governance

The COVID-19 crisis forced businesses everywhere to fast track their digital transformation efforts. Faced with the stark choice of becoming a digital-first business, or having no business at all, companies that were previously behind the curve had to implement everything from remote working to entire digital storefronts in a matter of days.

According to research by McKinsey, the digital initiatives unleashed in response to the pandemic leapfrogged seven years of progress in a matter of months as companies acted 20 to 25 times faster than they had believed was possible. In the process, this acceleration of digital during the crisis brought about a sea change in executive mindsets with regard to the role of technology in business.

Fast forward to today, and corporate leaders are now investing in technology for competitive advantage, refocusing their entire business around cutting-edge technologies, and initiating a business culture where experimentation and innovation is actively encouraged.

As organisations go all out in pursuit of digital transformation that addresses changing customer needs or expectations, increases collaboration, and enables enhanced data-driven decision making, delivering sustainable success will depend on making principled choices. That includes acting in an ethical manner.

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Defining governance parameters – who are we, and what does the company stand for?

With digital services and disruptive technologies such as AI, big data and robotics enabling organisations to respond to internal and external events faster and more efficiently than ever before, governance will be critical. Digital doesn’t just enable you to do the same things faster – it also changes what you do and how you do it.

Failing to define the missions that will deliver on the business strategy, together with the metrics needed to track and evaluate progress, risks jeopardising the achievement of successful or intended outcomes. So organisations will need to be certain that their governance models are up to the task of prioritising and accelerating the right digitalisation projects and that appropriate risk management is applied.

With trust and reputation now high on the consumer agenda, organisations will also need to make informed strategic choices about how they plan to drive revenue and market growth, because stakeholders, both internal and external, are becoming increasingly intolerant of companies that blur or ignore ethical lines. The recent high profile whistleblower revelations about Facebook’s lax handling of user data and its attempts to cover up the damaging impact of its products is a case in point.

Achieving a robust oversight of the digital transformation strategy is therefore crucial, because digitisation is so much more than a technical exercise. Indeed, its transformative nature touches every aspect of the business and embraces a variety of issues. Everything from cyber security and data governance across the supply chain, to ensuring regulatory compliance.

Ultimately, delivering authentically on corporate purpose and innovation intent will also depend on organisations being able to infuse their transformation projects with the pursuit of measurable environmental, social and governance commitments and goals that raise industry standards and enhance business performance.

For this reason, there are some key governance questions that should be top of mind for business leaders from the outset: what are our controls for this process, how will our digitalisation strategy be monitored, what does success look like, and how will we know when things are going wrong?

Mitigating risk: understanding the bigger picture

Digital transformation that includes ethics by design is a must-have – not a nice-to-have. For example, in terms of the ethical principles underpinning digital transformation, organisations must ensure they use data in responsible and ethical ways that are not intrusive, manipulative, or disrespectful to others. That includes being transparent about how they collect, use, or monetise data and evaluating how consent is managed when giving customers access to digital services.

Similarly, robust governance and audit procedures will need to be in place so that issues like algorithmic bias can be identified and addressed. As organisations become increasingly reliant on machine learning algorithms to make millions of decisions every day, digital professionals that develop and deploy digital services will need to be on high alert for hidden biases that will prove damaging for individuals or the organisation itself.

Board directors can set the tone here by ensuring that conversations about what ethics, transparency and inclusivity mean take place across the organisation and inform the planning phase of every digital transformation project. That includes ensuring that management teams adopt a methodical approach when applying governance to digital transformation programmes to reduce the likelihood of omissions or inaccuracies.

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Defining a digital transformation governance framework

Since digital innovation is by its very nature new, business leaders should ensure that the policies, processes and governance models used support digitalisation, rather than block it, and are commensurate with the technologies that are being utilised.

Appointing a core team of accountable leaders will help create focus and clarity around governance responsibilities. As governance champions, they can ensure every transformation project begins with a governance mindset and is governed by behaviours that include a desire to ‘do the right thing’. As part of this process, the digitalisation of governance processes and control mechanisms will help reduce any risk of compliance failures. Today’s governance platforms can help remove the guesswork from digital governance programmes, making it possible to devise highly structured frameworks that reduce systemic risk. Enabling organisations to rise to the challenge of becoming digital-first in a truly ethical and streamlined way.

At the end of the day, digital transformation involves understanding how digital technology enables an organisation’s business model in a way that delivers an enhanced customer experience, that in turn positively impacts the organisation’s relevance and long term sustainability. Involving IT, data and technological innovation, appropriate oversight will need to be applied to ensure that privacy and security concerns are addressed, and that duty of care responsibilities to all stakeholders – employees, customers, business partners – have been upheld.

For some organisations, this shift to measuring what matters most will inevitably involve moving from today’s dominant profit-oriented focus to adopting a broader, longer-termed definition of what constitutes reliance and success.

Aligning digital transformation with strategic priorities

Leveraging digital transformation requires a systematic approach to evaluation and prioritisation that will ensure implementation objectives are achieved in an effective way. For some firms, achieving digital innovation at scale will begin with standardising data rules so that processes can be rolled out centrally – and customer feedback captured so that initiatives can be measured and refined. Ensuring that unsuccessful initiatives are stopped before becoming embedded in business operations.

By adopting a systematic approach to digital transformation governance, organisations will be able to create the clarity and accountability needed to assure the successful achievement of digitalisation goals. Ensuring that purpose-related goals guide decisions and that governance strategies and processes can be constantly adapted in line with the rapid evolution of today’s digital environment.

Written by MarKeith Allen, senior vice-president and general manager for mission driven organisations at Diligent

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