Corporate board directors

Boards see transformation as key to longevity 

According to board directors, embracing digital transformation is the most important thing for their companies to stay competitive. C-suite executives say their highest strategic priority in the next three to five years is embedding new technology, and directors agree, according to our August 2023 Pulse Survey. They’re also focused on sustainability, with 71% saying it’s important to link sustainability to business results.

Technology is critical to staying competitive

#1

Directors say embracing digital transformation is most important for their company to stay competitive over the next 10 years

Executives and boards understand that they risk falling behind if their companies don’t transform. According to PwC’s 26th Global CEO Survey, a sobering 40% of CEOs think their company will no longer be economically viable a decade from now if it continues on its current path. Boards recognize that digital transformation is critical, with directors citing it as the most important factor to remaining viable. Close behind are strategic partnerships and M&A. Among the solutions for businesses looking to build digital capabilities is acquiring a digitally-native company. Strategic M&A can help organizations transform faster than organic growth. 

Directors and executives should anticipate what will happen if their company gets disrupted — and how their company can disrupt others. Still, undertaking a business digital transformation can be a heavy lift, and cost is a major consideration. Nearly all directors (91%) worry about the cost of new tech adoption, and 88% of executives struggle to capture value from their tech investments. Boards should actively engage and monitor the success of any major initiatives. 

Your company will want to make sure it has the right digital capabilities to create value, find efficiencies and improve quality — all key to distinguishing itself from competitors. Digital transformation is no longer just an option, it’s a necessity for businesses to thrive in a changed landscape.

What you can do

• Guide management to assess and prioritize new strategic opportunities without losing sight of governance. Reinvention requires transparency, engagement and trust.

• Ask for more frequent meetings with tech leaders and CFOs. Understand how the C-suite is collaborating and embedding risk management into tech transformations.

• Make sure the board gets frequent reporting to monitor transformation success and see if deals make sense. Remember, the quickest transformation may be with a digitally native partner or acquisition prospect.

Your next oversight responsibility: GenAI

62%

of directors agree that GenAI will significantly impact their company’s business model

GenAI has incredible potential to transform companies and industries. And it means the board’s oversight role will be pivotal. It’s key for board members to understand how company leaders are linking GenAI technology, along with other emerging technologies, to drive strategy and  address risks. But they themselves have to get up to speed: Only 18% of directors strongly agree their board has functional knowledge of GenAI.

Still, directors see both the opportunities and risks. More than six out of 10 (62%) directors agree that GenAI will have a significant impact on their business models, revenue or growth. At the same time, 62% also say that new technologies, including GenAI, pose a moderate or serious risk to their company by making their current business model irrelevant. 

Burgeoning technologies that can deliver operational efficiencies and increased value also have the ability to impact economic, social and policy norms. Stakeholder trust hinges on responsible use of technology, including AI. More than half (56%) of directors say their company has or will establish a management-level committee to establish policies and to address GenAI-related opportunities, risks and controls. 

What you can do

• Understand how emerging technologies, including GenAI, are being considered and deployed across the company. 

• Ask management what controls are in place for data security, privacy and responsible use of GenAI.

• Discuss with management its talent strategy to engage and train employees on GenAI tools. This technology can present opportunities to transform the workplace.

Boards make the case to lead on sustainability

71%

of directors think it’s important to link sustainability to business results

When it comes to sustainability, a resounding 91% of directors say it’s important for the board to monitor regulatory compliance. Three-quarters also say it’s important for the board to keep tabs on key sustainability risks, while 73% say the same about establishing which board committee has oversight responsibilities and expertise on the issue. 

For directors, environmental, social and governance (ESG) outcomes are about more than risk. Boards are also keeping business outcomes clearly in mind: 71% of directors think it’s important (40% very important) to link sustainability to business results. In addition, 69% say it’s important to identify key sustainability opportunities.

Directors who see the importance of bottom-line considerations know sustainable investments that do double-duty — mitigating risk and contributing to value creation — are key to growth. Offsetting costs by streamlining overhead, increased energy efficiency and taking advantage of tax incentives makes good business sense — and contributes to carbon emissions mitigation. 

What you can do

• Help guide your company to take advantage of sustainability as it relates to growth, for example, distributed energy, tax incentives and increasing operational cost efficiencies.

• Ask management for metrics to show that ESG activities and investments are aligned to the company’s strategic priorities and long-term value creation goals.

• Encourage management to consider strategies that add value far into the future by investing in innovation that can lead to longevity.