Governing digital transformation projects

The Institute of Directors spoke with Matthew Wright about working on large scale digital transformation initiatives and the governance of these projects.

Matthew is responsible for delivery of Kotahi Logistic's digital and data transformation strategy and core business technology. He supports Kotahi’s journey to enhance customer experience through creating products, services and solutions that are smart, simple and effective at delivering supply chain efficiencies.

Prior to joining Kotahi, Matthew worked in corporate and institutional banking across a range of roles for a decade, was a start-up COO, and an information architect at consultancies including Publicis Sapient. He has been working with data in many forms since the dot-com bubble of 2000.

What is your top tip for reporting to the board on digital transformation projects?

Make sure the board understand that digital transformation is an enterprise-wide initiative, and as such, it is about how it raises the overall business performance bar. Then put in place key measurements for the project and report on these in a consistent way during the project.

How can a CTO support a board when going through a digital transformation?

Help the board to understand that it’s ok to make mistakes as long as you learn from them and adjust in response. In fact, learning how to do this well without burning time and capital is crucial. Digital transformation is complex and things don’t always go according to plan. The board I currently work with understand this, but what they don’t like to see is a lack of learning on the journey with the same mistakes being made twice.

What are key ways that a board can upskill themselves in digital governance and digital understanding generally? 

I'd suggest getting an independent, board-level tech advisor who sits on the boards themselves to present to and explain project progress in partnership with the CTO. That can help the board to understand what to focus on in a business language that’s well understood.

I would also recommend a couple of practical books on digital transformation:

• Tools and Weapons: The Promise and the Peril of the Digital Age; and
• Product Roadmaps Relaunched: How to Set Direction while Embracing Uncertainty.

Critical topics to upskill on are:

• how/why disruption is coming from non-traditional competitors (mostly digital-native businesses)
• how to manage, protect and use data effectively, and
• the importance of a great digital customer experience.

In projects that you have been involved in, where was the board most effective and what did they do that supported its success?

The most effective boards I’ve encountered are ones that genuinely listen to what’s being said, are open to thinking they might not have encountered before, and have a desire to learn. Technology now dominates most people’s private lives, our share markets and even geopolitics. To understand how to effectively govern, it’s important to realise how pervasive it is.

I also think good boards understand the balance between short-term and longer term value realisation. Some technology work is about stability, risk mitigation and enterprise-efficiency. Payback takes time and often has multi-year funding associated with it. Other technology work requires urgency and the delivery of cheap, fast ‘proofs of concept’. Getting that balance right is key.

How do you get the board and executive team to identify and fully understand the risks of digital transformation?

This is about getting the board to be ok approaching the project in smaller ‘chunks’, then testing and learning to tweak the approach. The risk profile against this approach is much smaller than a ‘big bang’ method. However, in instances where a large single piece to technology work has to be done, it’s important to use the old analogy “if I’ve got 7 hours to chop down a tree then I’ll use 6 hours to sharpen my axe”. For bigger enterprise-wide projects this often involves lots of work ‘under the hood’ to get to a state where you can then start generating value; and that's ok.

What are the top three questions the board should be asking the CTO when undertaking a digital transformation project?

1. How does our technology strategy directly link to our business strategy?
2. What are our key risks and how do we intend to mitigate them?
3. Do you have the right people with the right skills, knowledge and cultural fit to do the job?

What are some practical tips for boards of smaller organisations and NFPs to ensure good digital governance?

• There are quite a few ‘virtual CTOs’ out there who offer a small amount of their time to help with strategy development, architectural reviews, etc.
• Look at moving to the cloud if you haven’t already. Maintaining your own servers is a drag on your business and increases risks. Cybercrime is a key risk as smaller businesses are often unable to continually upgrade software with new security patches. Be sure any cloud migration is cost-effective though.
• Think about your data – does it currently live on paper, in emails, in databases, etc? How much of it is potentially sensitive? What is the best way to look after it and manage any risks associated with data?

Is customer experience, value proposition or the underlying technology the key driver for a digital transformation?

I’d start at your customers’ fundamental 'job to be done'. What tasks are they actually seeking to achieve through your business? Then I’d work back ‘upstream’ to look at your value proposition, your customer experience and your technology (in that order) to see if they support those jobs to be done as well as they can. Wherever the biggest gaps lie in terms of responding to those key jobs to be done - I’d focus there. I’ve found this is seldom at the technology level first.

What is the key to successfully disrupting your current strategy? 

If you’ve done the work and you know your current strategy is a good one that you can defend against existing and new entrants in the markets you operate, then you don’t need to disrupt yourself. You might need to understand how to change your customer experience-layer, or how to move into adjacent markets to leverage your ‘unfair advantage’ but this is normally termed 'incremental innovation'. This is perfectly fine as there is lots of prove of value there.

Disrupting your current strategy and then pivoting as an organisation is extremely hard (even more so for larger organisations). This normally only happens when a business is standing on a ‘burning platform’. The trick here is to understand that you’re standing on one as soon as possible and then drive change unambiguously from the top.

Where do you think New Zealand is in terms of digital maturity and what are the critical next steps for the country?

In terms of its consumer adoption of technology New Zealand is very advanced when compared to other countries. From an organisational perspective however, I’d say we’ve got some work to do at a national level to catch up. As most people know, this is evidenced in our very low BERD (Business Expenditure on Research & Development – of which technology spend is included). Leading organisations globally spend around 5% of revenue on this, with NZ companies averaging about 1.5%. As this compounds, the gap gets bigger.

A key focus area in NZ businesses for me would be in the quality of our data and supporting structures – storage, governance, infrastructure, connectivity, legal frameworks to support innovation, etc.

There is also an opportunity for New Zealand businesses to collaborate and leverage our strengths. With a collaborative approach to data sharing and creating ecosystems that benefit all, we would likely be able to reduce the spend for individual entities.