I recommend you open the post and at least look at the questions posed under each of the 9 topics to see if your board is addressing them. Here are the 9 topics – all very pertinent to both for profit and community good organisations:
1. How will IT change the basis of competition in our industry?
2. What will it take to exceed our customers’ expectations in a digital world?
3. Do our business plans reflect the full potential of technology to improve our performance?
4. Is our portfolio of technology investments aligned with opportunities and threats?
5. How will IT improve our operational and strategic agility?
6. Do we have the capabilities required to deliver value from IT?
7. Who is accountable for IT and how do we hold them to account?
8. Are we comfortable with our level of IT risk?
9. Are we making the most of our technology story?
McKinsey & Co published this article back in 2015. In its original form it’s quite lengthy so I’ve taken the key points from it including the valuable questions asked in the article.
Some organisations are creating new technology forums, building the expertise of corporate directors, and strengthening IT governance – all with the aim of allowing boards to guide management by asking the right questions about technology. But what are the right questions at a time when digital technologies are beginning to disrupt industries and mastering these technologies may be the key to long-term survival and success?
The particulars of each enterprise’s situation will, of course, determine the focus of the discussion and the detailed questions to ask. However, across industries, every corporate director – IT savvy or not - will benefit from reviewing the following questions as a starting point for shaping a fruitful conversation with management about what the company needs to do to become a technology winner.
- How will IT change the basis of competition in our industry?
Technology is making boundaries between industries more porous and providing opportunities for attacker models.
For incumbents in many sectors, technology is becoming an arms race. Companies are harnessing technologies such as social media and location-based services to reinvent the customer experience and capture market share.
Questions to ask:
Who are our emerging competitors?
How is technology helping us win against traditional and new competitors?
How can we use technology to enter new markets? - What will it take to exceed our customers’ expectations in a digital world?
Customers are being educated by e-commerce leaders like Amazon and Apple to expect an ultraconvenient experience, personalised in real time.
As a result, customer expectations are rising quickly. Simply meeting these enhanced expectations can be a major effort for organisations that were not born digital.
Questions to ask:
How does our customer experience compare with that of leaders in other sectors?
What will our customers expect in the future, and what will it take to delight them?
Do we have clear plans for how to meet or exceed their expectations? - Do our business plans reflect the full potential of technology to improve our performance?
Technology expenses can be high, but they are relatively small compared with their potential to boost the operating performance of the business.
Ultimately, the strategy that emerges from an assessment of opportunities and threats should be an integrated plan that shows how the business will beat the competition using information over a multiyear horizon, not simply a revised annual IT budget. With the right agreement on the scale of the opportunity and threat, the level of investment in IT becomes an outcome rather than a constraint.
Questions to ask:
Has the P&L opportunity and threat from IT been quantified by business unit and by market?
Will our current plans fully capture the opportunity and neutralise the threat?
What is the time horizon of these plans, and have they been factored into future financial projections for both business and IT? - Is our portfolio of technology investments aligned with opportunities and threats?
Companies should balance short-term P&L opportunities (e.g. upgrading digital channels), medium-term platform investments (such as customer data bases), and carefully chosen longer-term bets (for instance, piloting new, digitally enabled business models).
Regular portfolio rebalancing is needed as assumptions can change quickly. Many companies, for instance, recently cut investment in the Internet channel, as customers have switched to mobile apps.
Questions to ask:
How well is our IT-investment portfolio aligned with business value with regard to opportunities and threats?
How well does the portfolio balance short-term and long-term needs?
Do we have effective value-assurance processes in place to mitigate execution risk? - How will IT improve our operational and strategic agility?
Leading businesses are continually using IT to improve business agility. Business agility is underpinned by the agility of the IT function itself – its ability to design and implement changes to systems rapidly at low cost and risk.
Question to ask:
How does our business and IT agility measure up with that of our competitors?
How do our IT plans increase our business and IT agility?
Are our sourcing relationships increasing or reducing our agility? - Do we have the capabilities required to deliver value from IT?
Technology alone delivers no value. It’s the combination of a clear strategy, the right technology, high-quality data, appropriate skills, and lean processes that adds up to create value. Any weak link in this chain will lead to poor value delivery from IT.
Questions to ask:
Do we have the capabilities needed to drive full value from our existing IT systems?
What are the weakest links in our capabilities?
Do we have enough IT-literate executives?
What is our plan for upgrading capabilities? - Who is accountable for IT and how do we hold them to account?
Leading organisations define a clear IT operating model, which determines exactly who is accountable for IT activities such as developing apps, managing data quality, or implementing IT solutions in business processes. The operating model must be aligned with business priorities.
Questions to ask:
What is our operating model for IT, and is it aligned with our business priorities?
Who is accountable for delivering business value from IT – both overall and by activity?
Are those accountable being measured using business-friendly scorecards that create the right incentives? - Are we comfortable with our level of IT risk?
Cybersecurity is a significant and growing IT issue? Every large company’s security has been breached, and most executives have a poor understanding of the risks. But cyberattacks are just one category of IT risk. A failure of a small software component can cost a company a lot of money in customer compensation. IT systems can also cause business-conduct risk- for instance, if automated recommendations to cross-sell products conflict with regulatory requirements.
Companies need a comprehensive system for managing IT risk that assesses the full range of risks (e.g., hacking attacks, vendor failure, and technical failure) and addresses the root causes, which include redundant technology, incorrect policies, poor processes, and insufficient oversight.
Questions to ask:
Do we have a comprehensive understanding of the IT risks we face?
How is our level of IT risk measured, and is it aligned with the company’s overall risk appetite?
How are we reducing our IT risk on an ongoing basis?
Who is responsible for overseeing the level of IT risk? - Are we making the most of our technology story?
In many industries, digital is likely to become the predominant sales channel. Companies should therefore be ready to communicate their IT strategies externally.
Questions to ask:
What are the key messages we should communicate?
How, when and to whom should they be communicated?