Friday November 28, 2014

The Upside of IT Is Innovation

Over one-third of directors surveyed by PwC want to spend more time discussing IT in the upcoming year.

It can be difficult to keep up with the pace of change in information technology. And as IT evolves, so too do the risks associated with adopting emerging technologies. Corporate boards are increasingly concerned about them—38 percent of corporate directors want to spend more time on IT in the coming year, according to PwC’s 2011 Annual Corporate Director Survey.

Donald P. Keller

Managing IT risk is critical to a board’s oversight role. But directors should not simply focus on the potential downside of risks related to IT. It is also important to consider the strategic role IT can play in generating innovation. Nearly half (46 percent) of directors believe their board’s ability to oversee the strategic use of IT is less than effective.

A company’s business strategy forms the blueprint for its operations; directors play a role in overseeing how that strategy is shaped and implemented. Effective use of IT should be an integral part of a company’s overall business strategy, and directors should understand how IT may be leveraged to enhance the company’s competitiveness. Advancements in IT, particularly the use of social media, mobile computing devices and cloud computing, can better enable companies to perform numerous activities—enhancing company performance and brand, measuring customer sentiment, contributing to capturing new markets and even potentially overtaking unsuspecting competitors.

When boards discuss their companies’ strategies, more than 50 percent of surveyed directors do so in terms of one- to three-year time frames, while 39 percent use a four- to five-year time frames. Those time frames are appropriate for certain areas of a company’s operations. However, boards must recognize how dramatically information technology can evolve in one year, let alone three to five years—and how new technologies can radically transform the way a company does business. The phenomenon of social media tools, such as Facebook and LinkedIn, exhibits how quickly the means by which customers and vendors transact business can change.

Consequently, while reviewing the company’s proposed business strategy, the board should ensure that management has considered the potential advantages that emerging technologies can provide. Indeed, 80 percent of CEOs see opportunities to leverage social media and consumer mobile devices, according to PwC’s 2011 Global CEO Survey.

Companies are finding numerous ways to use social media—for example, to conduct market research by gathering customer opinions about products and services, or to recruit employees. Social media tools can also be used internally for collaboration and communication, connecting experts with customer teams, and expeditiously responding to customer questions and issues. External social media sites, blogs and tweets are being used to communicate business decisions almost instantaneously. Consumer mobile devices are being leveraged to market and advertise products and services, and to drive revenue by generating customer leads.

Another emerging technology is cloud computing. Similar to a shared service center, the cloud can allow companies flexibility and agility in responding to their IT needs if their business operations expand rapidly or unexpectedly. Cloud-based service delivery is empowering companies to simplify their infrastructures and potentially reduce costs through standardized platforms. It is also helping to provide customers with more flexibility in terms of price, performance and access to enhanced solutions.

Companies that best take advantage of an effective IT strategy will likely differentiate themselves from competitors that do not. Directors should probe management about their company’s IT strategy and ask about the role emerging technologies play as part of that strategy. Questions to ask include:

  • To what extent are we leveraging emerging technologies like social networking, consumer mobile devices and the cloud? What emerging technologies are planned for in the future? What are the goals of these technologies, and how might we take advantage of them?
  • What processes within the company could be streamlined with better collaboration using a social media platform?
  • How do we expect our competitors to leverage social media and the cloud? Are the advantages we enjoy today threatened by their plans?
  • Are trade-offs involved in adopting new technologies (i.e., write-offs)?
  • How are we monitoring what is said about our company on social media sites?
  • If we are not currently using cloud computing, should we be? If we are, do we have an enterprise-wide cloud adoption strategy?

Donald P. Keller is a partner in PwC’s Center for Board Governance with significant experience in IT.

Comments on “The Upside of IT Is Innovation”

  • Kathy Crawford says:

    IT is a great tool for promoting innovation. It is helpful if IT directors are included on board discussions. One area that can be extremely helpful to protecting the company’s infrastructure is continuous automated auditing. Monitoring social media is a full-time position. It is interesting that many companies have hired social media experts and consultants to handle this task.

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