Relooking at company boards in the digital era
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For over two centuries, land, labour and capital have been the basis of competition across practically every industry. Over time, on the back of “large-scale” thinking, capital took centre stage and became the lever through which most companies have been managed. However, 2017 marks the year when an undercurrent will become the dominant trend in India: that of digital transformation of enterprises. The very basis of competition is undergoing a tectonic shift to technology and talent, and away from capital and assets. In fact, it may be credibly argued that asset-heavy companies are, in fact, disadvantaged in certain cases; hotel companies are a prime example. Most global hoteliers have moved, or are moving, to an asset-light model of operations, which offers a more nimble and scalable option and is certainly more attractive to shareholders.
On a wider note, services industries have already started to feel the heat of this shift, and the general inability of incumbents to combat the attack of the disruptors informs us of the difficulties associated in this new battlefield. The talent-technology wave is now at the doorstep of practically every organization in the economy.
The workforce is amid a seminal shift. This is the first year when school graduates will be young women and men born in the 21st century, signalling a generational shift. Three to four years from now, they will enter the workplace in force, and the change will be profound.
In a talent-starved ecosystem, will you be able to attract the best? Various studies carried out by universities and consulting firms show that millennials seek out firms which have a social purpose, and are driven by the need to “make a difference”. They dislike traditional hierarchies and seek large responsibilities early. Unlike you, they have grown up in an era of abundance, not one of scarcity: they are hyperconnected, always on, always mobile and global in their outlook. Their mindsets are very different indeed. Research conducted by consulting firm Deloitte shows that a significant percentage prefer to be independently employed (as against working for an organization): do you have the processes and structures in place to leverage the expertise and capability of such young professionals? Most organizations do not. Chief executive officers (CEOs) need to take a long, hard look at their talent management approaches, organizational structures, policies and processes, and ensure that their organizations are reinvented to stay relevant going forward.
Information and digital technologies have become a new vector of competition because they are now pervasive, and are impacting core operations. Over the last two decades, information technology (IT) has entered the Indian ecosystem, enabled automation and massive productivity jumps, and is now transforming businesses and industries. The next wave of technologies—ranging from dynamically programmable robots on factory floors to software robots in bank front offices, and from augmented reality headsets where one can virtually tour new homes one wants to buy, to next-generation security which catches “bad actors” by tracking usage patterns— is transformative, and not incremental in nature. International Data Corporation’s India Digital Market Model and associated research show that firms will spend upwards of Rs40,000 crore on digital transformation programmes between now and 2020, signalling rapid acceleration of digital adoption across the ecosystem.
CEOs and boards need to put technology on their agenda. Some high-profile CEOs have done so: most notably, Aditya Puri at HDFC Bank, who has shown sustained and public leadership in his embrace of digital technologies across the bank. Large business groups have also recognized the opportunity, and the threat, these technologies are bringing: witness the appointment of group technology and digital officers across a number of traditional business houses in various sectors, including the Tatas and the Mahindras. It is no coincidence that both groups have large IT services businesses housed within them. However, much more needs to be done: the technology function now needs to be elevated to the same exalted status currently reserved for the finance, and in some industries, the marketing functions.
If the talent-technology paradigm has to be added to the traditional levers of competitiveness, then the organization has to be rebooted, and the change programme needs to be led by the chief human resources officer (CHRO), with the blessings of the CEO.
The most significant challenge here is the traditional (lack of) status of HR leaders and teams in India. Board-level representation of HR experts is rare, and the presence of a CHRO on a company’s board is an even rarer occurrence.
If your HR leader and their team are spending more time in recruitment, administration of appraisals, and performance management-related issues than in learning and development, talent growth, career planning and innovating on the organization’s structures and processes, it’s a sign that things need to change. Is the HR team aware of digital technologies? You need to empower them to drive the required change, visibly and in a sustained manner.
On a similar note, is your chief information officer busy tending to data centres, help desks and applications support? Or is she working with you and your direct team to decode digital technologies and embed new operating models in the business?
Without any disrespect, the fact is that most boards have been constituted for governance in an era which is on the way out, and with assumptions which are increasingly invalid. It may be a good idea to consider younger, technology-aware minds as full-time members of your board. They’ll understand the implications of robots in your factories and software robots in your front offices. Maybe five years from now, humanoid robots will be inducted on boards too!
The talent-technology war is at your doorstep. It’s time to gear up. The digital battlefield awaits.
Jaideep Mehta is managing director at IDC India and South Asia.