Almost half a billion mobile devices and connections were added in 2016. Smartphones led a large part of that growth followed by M2M modules. Over 600 million of application downloads would have taken place daily in 2016. Interestingly, Gartner had predicted in 2016 that the demand for enterprise application development will outstrip supply by five times capacity. Citizen development (a user who creates new business applications for consumption by others using development and runtime environments sanctioned by corporate IT), is poised to significantly grow in the next five years. What this means is that business users across departments can develop their own applications using the infrastructure and environment sanctioned by IT.
The introduction of agile development process, DevOps, service oriented architecture, virtualization and cloud, are all supporting the huge growth both in terms of volume and complexity in application development. In the face of these trends, there are multiple challenges from a risk and corporate governance point of view. According to some recent reports, majority of the CEO’s (over 75%) recognize that technology is going to be a major influencing factor to drive the future of their organization. It is probably as influential as market or economic factors, if not more influential than that.
While digital adds immense opportunities to create new business models, improve agility and customer engagement, it also brings with it several risks. While this is true for every organization, for companies that operate in a regulated market, the need for digital governance gets only more critical. Several enterprises are putting digital governance into their corporate agenda that takes into consideration aspects of regulatory requirements, cybersecurity risks and implication on the brand reputation.
The old ways of addressing corporate governance may not be valid entirely in the new order. Yet, placing too many restrictions to stay overly safe from a corporate governance standpoint may not allow the enterprise to fully leverage the opportunities.
Enterprises have adopted their own ways to manage corporate governance. Each of these methodologies have typically been variants of the following framework:
Setting of a digital governance model:
Creation of a flexible system to maintain accountability, roles and decision making for all the digital initiatives taking into consideration regulatory, legal, compliance and market risks. Once in place, this really forms the foundation of all digital initiatives which should confirm to the stated governance model.
It should be flexible for process owners initiating such a change to understand the impact and also, perhaps to see the output in the form of adherence to metrics to ensure compliance. For instance, in the case of posting online assets, this could include a set of bare minimum and non-negotiable guidelines, that provides a direction based on which employees can act thereby leading to greater process agility.
Creating a governance delivery structure
Several enterprises have created a shared organization to work with the local units and deliver the various digital initiatives. While this ensures adoption of the defined governance model, it also brings down the overall costs and reduce redundant activities. The shared unit can bring in good practices and learnings from the various initiatives they execute from time to time. Some initiatives could be corporate wide and can be executed centrally.
Think of the shared unit is a boutique specialist arm for the enterprise that can potentially also act as a strategic think-tank for new business models and innovation across the enterprise. Such a shared unit model can also bring the required digital skills into the workplace and contribute to training and knowledge sharing. Several companies have created digital subject matter experts / Chief Digital officer roles who spear-heads the organization’s digital priorities and is responsible also for execution of the governance model. They typically work with SPOC’s from the respective business units who acts as a liaison for that respective unit to interact with the CDO and the shared unit.
Like Louis Gerstner once said “The real mechanism for corporate governance is the active involvement of the owners”. Over 95% of corporate boards across industries, have no technology expertise. Many board members recognize these deficiencies. In a 2015 survey by PwC of large company directors, almost 79% of large company directors said their boards did not sufficiently understand technology. This represents a huge opportunity. The board could be enriched with independent directors who bring significant digital knowledge and experience and who can provide strategic direction to the board from an overall digital strategy and corporate governance standpoint. Boards can no longer postpone this imperative. It would also be a good practice to open more than one board seat for such expertise, as people with specialized experience across strategy and execution will add more flavor and value to the board. Such a board re-composition should be done hand in hand with changes in the management structure along the lines of the digital delivery structure.
Digital governance is a sine-qua-non to corporate success. Making this change happen requires serious work to put a structure in place, whereby nothing is left to chance. Creation of a governance model, a robust delivery structure including an optimal board composition is primary to make this change happen. This needs to be combined with continuous review and fine-tuning of the delivery and execution model to keep pace with changes. Like Jim Jones (Business day) says “Corporate Governance is not something that is put in place and then left. Ensuring its effectiveness depends on regular review, preferably regular independent review. And, in the end that comes down to the shareholders. Outside assessment and self-assessment need to be regular events.” Corporate governance in the context of digital requires its fair share of attention in driving overall growth in revenues and profitability for any enterprise.