When the COVID-19 pandemic upended our lives in March 2020, little did we know that it would usher in a new wave of digital transformation and technology adoption for companies across nearly every industry. Suddenly, many office employees completed their work from home and needed access to tools and resources that enabled remote collaboration. Online grocery sales increased exponentially as many shoppers looked for ways to avoid crowded public spaces. Movies were brought straight to streaming platforms and entertainment companies provided virtual experiences in lieu of in-person ones. 

 

As COVID-19 spread throughout 2020 and into 2021, more companies began including digital transformation objectives in their overall business strategies. In a Harvard Business Review study, 86% of those surveyed said their organizations accelerated digital transformation during the pandemic; of those, 91% said their organizations were planning to continue with these efforts beyond the pandemic (“Digital Acceleration Redefines the Future of Work,” Harvard Business Review, Sept. 2, 2021).

 

Corporate boards are seeing a renewed focus on technology expertise as well, especially as organizations face more technology-driven risks, such as cybersecurity and privacy. As an example, the National Association of Corporate Directors found in 2021 that 43% of S&P 500 company board directors mentioned their technology background in public disclosures (Aman Kidwai, “Corporate boards are putting tech expertise higher on their hiring wish list,” Fortune, Dec. 21, 2021), compared with 34% in 2018. A 2021 report on U.S. boards compiled by Heidrick & Struggles predicts that this trend will pick up in 2022 as companies offer permanent hybrid or fully remote workplace options (Heidrick & Struggles, Board Monitor US 2021). 

 

This trend, and the proliferation of tech-driven risks for companies, is what led Deloitte’s Center for Board Effectiveness to leverage a study completed by Deloitte Consulting LLP in 2021 that analyzes how tech-savviness was addressed at the board level and if it was having an impact on business performance and goals. (Irfan Saif, Rich Penkoski, Nick Alimchandani, Dogan Eskiyoruk and Bob Lamm, “Tech-savvy board members: A common language for transformation and the impact on performance,” Deloitte, February 2022).

 

To identify tech-savvy boards, the study focuses on the educational backgrounds and technological experience of board directors using the following criteria: 

• The percentage of directors who had held technology executive roles, such as chief information officer, at any company. 

• The percentage of directors with a degree in an area of technology, such as computer science, or in a technology-related field.

• The percentage of directors holding a technology role, whether with the company they currently serve as a director or with another company. 

 

The study, which analyzed the boards of Fortune 100 companies by market capitalization as of June 2020, found gaps between companies with tech-savvy boards and those without. Of those 100 companies, 31 had tech-savvy boards. Such companies generally were higher performers, experiencing 5% greater revenue growth on average over a three-year period as well as 8% better stock performance year over year, over three-, five- and 10-year periods. 

 

The pandemic underscored the need for tech-savviness, according to the study’s results. Over the course of the first three quarters of the COVID-19 pandemic (the second, third and fourth quarters of 2020), companies with tech-savvy boards saw 10% more revenue growth than those without, along with 26% better stock performance. This was true across several industries; financial services organizations with tech-savvy boards experienced 6% revenue growth during those three quarters, while those without tech-savvy boards saw revenue decline by 7%. 

 

Since the study was conducted in 2020, the Center for Board Effectiveness is working with Deloitte Consulting LLP on updating the results. These updates will likely include new companies in the top 100, particularly as digital-commerce services continue to grow. While the pandemic’s impacts seemed apparent in this first iteration of the study, a further study may provide additional insights about the importance of technology skills in corporate boardrooms as companies consider business risks and opportunities in a world disrupted by COVID-19. 

 

While most companies have prioritized digital transformation, it appears not all have developed a strategy that leverages the board’s expertise. This is a critical next step for companies hoping to navigate the increasingly digital landscape and its risks.  

 

With the study’s findings in mind, boards can evaluate whether their directors have skills and experience in technology that enable them to understand the risks and opportunities associated with it. Board skills and composition are important, but the board’s approach to harnessing that knowledge as it oversees and advises management is equally critical. 

 

For boards at companies that are driving digital transformation to address risk and growth strategies, tech-savvy directors can provide valuable insight and oversight, which will enable companies to build resilience in the face of continuing disruption.

 

Carey Oven is national managing partner at Deloitte’s Center for Board Effectiveness. Rich Penkoski is deputy CEO – markets for Deloitte Consulting.
 

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