Board, senior leadership alignment needed around digital innovation

  • Traditional businesses may lose market share, but there will be new opportunities to tap
  • Digital transformation should be everyone’s top priority, to be driven by the CEO

Board, senior leadership alignment needed around digital innovation

SOMETIMES making it personal packs a bigger punch than keeping it factual and professional.

At a retreat two years ago, for the board of a large listed company that was in the process of making the transition to digital, what hit home about the impact of digital was not all the presentations made. Rather it was when an engineer demonstrated to the board members how easy it was to hack into their phones. That’s when they realized  the power of disruptive technology and also the importance of being agile and ‘always on’ to take advantage of the continuously changing environment.

Needless to say, that company’s board is now fully aligned and supportive of management’s digital strategy. Two years later, with almost every company facing digital disruption, no phones need to be hacked for any board or leadership team to recognize the importance of riding the wave of digital and seizing the opportunities that the disruption is creating.

That came across strongly when Accenture brought together, for a discussion on digital disruption, Ir Megat Jalaluddin, Chief Strategy Officer of Tenaga Nasional Bhd; Muzzaffar Othman, Chief Technology Officer, Permodalan Nasional Bhd; Ahmad Azhar, Chief Digital Officer, Telekom Malaysia Bhd. Rafiza Ghazali, Head of Group Innovation & Business Performance Management, Sime Darby Bhd chipped in her thoughts separately. Azwan Baharuddin, Country Managing Director, Accenture Malaysia and Lim Yin Sern, Managing Director of Accenture Malaysia led the discussion.

The following discussion is a continuation of the conversation with Corporate Malaysia around the latest ideas and thinking of the impact of digital on Malaysia and its corporations. In tandem with these discussions, Accenture is also conducting a new piece of research that analyses different Malaysian companies against 117 digital metrics to benchmark and identify leading practices. The results of this research will be shared in an upcoming article.

Yin Sern: What organizational aspect do you think needs to be changed when talking about digital transformation? And are there barriers you foresee in this process? For example, some companies are changing to become more lean and agile while others take a different approach and set up innovation units. And then, you have the workforce that is trained to do tasks in certain ways, now challenged by new ways of working that requires new skills.

Ahmad: I think the single biggest hurdle to overcome is mindset, especially in a traditional organization. This demonstration for the need to change has to start from the top and includes everyone in the senior leadership team. Because when I hold digital workshops for them, everyone acknowledges what needs to be done and why it is important but when they go back to their respective teams the actions taken are different or there is resistance. This mindset change requires changes in how we work and demands the ability to work in cross functional projects and some find it difficult to cultivate this new way of working. That is always the challenge at TM.

Having said that, we are changing and trying different things. For instance one part of TM is trying to adopt radical change by becoming more cross functional, agile and open. We are trying to embed design thinking as a new tool into all our 31,000 employees as it inspires looking at creating solutions, products from a customer’s point of view. In fact, we got 15 of our staff certified by the D-School at Stanford and they are leading this design thinking drive for us.

Megat: I concur that change starts with your people and feel that this requires the catalyst of 20% changing within the organization. Once this happens, this 20% can influence the next 60% and you will get your organizational mindset change then.

In terms of how we are approaching digital, we can either go for a digital strategy or focus on how TNB should operate in a digital world. At the moment we are inclined to lean towards the latter approach. But definitely from a strategic view, we see lots of opportunity for us to adopt digital to increase efficiency and achieve profitability.

And we have actually started on our digital workforce some time ago but the intensity was not there. But now we are looking to ramp up the intensity of digital adoption within TNB.

Rafiza: There is no quick or standard rule and it will depend on the ‘state of readiness’ of the companies in implementing their digital strategies. I think large companies that existed from the industrial era, will face more challenges. Various checks and balances and governance processes exist in them that create challenges in the implementation of any new business process, including executing digital strategies.

Because of the costs (including write-offs of older systems) involved as well, there will be lengthy processes and extensive due diligence involved (at the expense of speed of execution). 

On the other hand, smaller companies, especially those geared for the digital age will be more nimble and agile in adopting digital strategies though they will need leadership commitment and stakeholders’ buy-in because digital adoption ROI are normally not immediate and difficult to measure.

Now, the barriers are from the lack of prioritisation. Most companies see digital transformation as the responsibility of IT, Chief Digital Officer etc, whereas it should be everyone’s top priority, and that includes HR, legal, operations, business etc and to be driven by the CEO.

Yin Sern: Given the size and scale of the funds you manage and the wide portfolio of companies you oversee, what are some of the challenges you see from an organisational perspective for PNB and are there any unique challenges?

Muzaffar: Let me answer this in two parts. First, it’s important to remind your people why the organization is embarking on a digital journey. I always use my mother as an example to drive home the ‘why’ reason.

Imagine her going into a branch, getting a number and then waiting her turn to take money out. How can we make her life and the lives of all our members easier? My example is to drive home to them that digitization is about the customer journey, about making their life better. It cannot be just “work” for us.

On the second part, to be honest there are lot of challenges at PNB. The organisation has been very conservative for a long long time. The challenge is to get 1,500 people attuned to a new way of working that embraces digital, is more open with robust processes and is customer focused.

We just migrated to a new system over the Hari Raya festive season where members can now come in to the branches without their ASB account book. We even have a portal in trial mode where you do not need to go to a branch to check your balance. This gives you an idea of the direction we are moving in where you will see a lot more innovation coming from digital initiatives.

Azwan: When you talk about innovation coming from digital initiatives, I have to say that at Accenture, we consume and create a lot of digital and should ourselves be a primary example of how a company should operate in the future. And just like our clients, we are changing and having change thrust upon us.

From being a pure consulting and system integrator we now are targeting to pivot 40% of the business to offer cloud, mobile, analytics and security and we are now, because of various acquisitions, the world’s largest digital advertising agency! At the same time the market is shifting with some customers wanting us to demonstrate to them our solutions in action versus describing outcomes. And all this is new.

So, change for us is in having the right balance between technology and the human touch and my view is that digital cannot take away the human element in running a business.

Ahmad: A question I get very often from staff is on whether they will lose their jobs to automation. I tell them that if a role is repetitive and does not require a lot of thinking then with or without digital it will be automated so it is important that we move up to develop news skills because if we remain stagnant, we are under threat.

Megat: I describe this as the unintended consequence of trying to embrace digital. We try to balance this against the social responsibility we have by emphasizing that digital is the new work function and has to be embraced. We start by introducing digital in areas where the work is repetitive and people don’t want to do it. On the other end of the spectrum, we also introduce digital where a certain level of depth and accuracy is needed in the role that humans have trouble achieving.

To me one of great opportunities around digital is in the customer space where we can deliver better services through various channels.

Yin Sern: I want to pick up on the point about putting customers first and the customer experience. One of the things we are hearing in this space is on design thinking and what we can do to make their lives easier and you also hear about the value of partnering and not reinventing the wheel. What do you see in your organisation that you feel you need to do differently?

Muzaffar: I believe in strong partnerships and will embrace this approach as we want to shift from a vendor approach with our suppliers to a partnership approach. Where we think of getting better from a cost point, they will be looking at it from a product and tech aspect. Combine these approaches and you get a hybrid approach.

Azhar: At TM, we realise we need to partner with someone that fills the gap and we are finding that a lot of the innovation comes from small companies, from startups that are more focused. But the challenge is that it is not easy for us to engage with them. As a result, I am putting forward to the board a special program on how we will engage and partner with small companies to bring in innovation and fresh ideas.

Azwan: I would add on that we too realise the need to work with smaller companies which is why we have 5,000 startups in our radar and have invested in 18 so far. And thatthis collaboration requires an ecosystem approach and here I want to engage with the Malaysian Global Innovation and Creativity Centre (MaGIC) which has startups from all over the world that come with all these new ideas and ways of doing things.

We would also want to work with national organizations like Mimos and with universities where the young undergrads think very differently from the rest of us. We want to combine these parties with our ecosystem with its global capabilities and our customers to collaboratively come up with workable solutions.

You are all already saying this. Everything is changing and we have to figure out a place in this new world.

Megat: In the past we provided solutions to our customers but now we want to provide value to them. Unlocking this will get our organisation to a new level. For example we have customers who want a green lifestyle. How can we, in a dynamic manner understand their needs, deliver green energy to them and capture the value of their business.

Yin Sern: What do you think corporate leaders overseeing a company’s digital strategy can do to enable and accelerate the change towards digital?

Rafiza: Prioritise and ensure that the company stays focused on the outcome. Corporate leaders need to instill the sense of urgency to everyone in the company in the digital adoption journey they are driving.

Yin Sern: How do you prioritize digital which is a new tool coming into the corporate playbook and how do leaders instill a sense of urgency to everyone in the company?

Rafiza: In Malaysia, most leaders still tend to look at what others are doing, or if it’s being demanded by either regulators and or customers.  Other leaders tend to react when they start to lose to their competitors, or declining earnings/market share before any initiatives get urgent attention.

I feel there needs to be validated findings to support the urgent need to undertake digital transformation either through product delivery and improved customer experience, which then can be linked to positive impact to earnings.

Yin Sern: Given that you have short term vs long term challenges while most boards are focused on yearly, quarterly results, how do you achieve this two speed balance with short term sprints versus long term planning?

Azhar: Board awareness for TM started last year. In the course of this, we realized that it was more effective to demonstrate to them versus just telling them.

In terms of digitizing the customer experience, we are in the process of implementing an omnichannel strategy that will improve and make the customer experience seamless. While waiting to roll that out, the board is already seeing how our internal processes and productivity have been improved through digital.

One example here is how our Unifi installers can now handle 4 to 6 customer installations a day from 2 to 3 through using tablets with their daily work schedules on it, saving them the time of coming to the office first.

We are also demonstrating how we can create new business opportunities through digital and webe is a perfect example of digitising the enterprise where customers can get their webe service online without going through any resellers or speaking to a contact centre support staff.

Rafiza: Draw out a long term blueprint and break it down into shorter term outcomes. The process is a continuous cycle, and involves constant reiteration.

Yin Sern: Getting that buy-in from the board is key to ensure that the change from digital is sustained. From the study we have done, only 6% of companies have realized sustained value from digital innovation.

Megat: I think the board and management are on a journey where we are learning together. Within our sector, we are seeing disruption in other parts of the world and it is driven by digital, be it positive or negative. The experience elsewhere shows the board and management what can happen if we do not do anything. And actually, at TNB, it is the board that is putting pressure on us to ensure we adopt the right approach to digital. Btw, I should tell you that we see the disruption as a positive because while we know traditional businesses may lose market share, there will also be new opportunities for us to tap.

Muzzaffar: I have a different approach to managing the board where I do not wear a tie when going for meetings. The message is that things are changing and I am doing things differently. Don’t expect people to come in tie and suit. We need to have people who dress and think differently and who will tell you different things.

Yin Sern: Given all these changes, the traditional ways and metrics of managing business are becoming less relevant. In your minds, what is the definition of success for you when you think of digital transformation?

Muzaffar: For financial institutions, the number of failures you have means that you are moving forward, experimenting, trying new things. Now, you can’t put a value to this but for talent who want to work for your company this is a very important and attractive trait for them. Otherwise new talent won’t join you if the organization is a boring, risk averse place.

I also happen to think that the future value of a company will be partly premised on how fast you move and that depends on how many times you have tried and failed and learned. It’s all changing.

Azhar: I think many traditional metrics of managing businesses will still be relevant but not in their current form. They will be adjusted and contextualised to reflect the increasing digital environment. Take customer experience. Digital allows you to deliver a more holistic experience on the customer’s journey and it is about growing the share of the customer’s wallet. From that perspective the basic measurement of average revenue per customer is still there. 

Megat: I think you can look at this from a shareholders, employees and customers point of view. Shareholders want to see the ROI from your digital journey. For employees, on the other hand, success in this journey is when their work becomes more efficient and they are able to better engage with our customers and we can attract new talent to join us.

And for our customers, success will be measured through their [better] experience with us.

Rafiza: I see success when being digital is no longer a transformation process, and activities towards becoming more digital is inherent in the companies’ DNA and considered a business as usual activity.

This discussion is a continuation of the conversation with Corporate Malaysia around the latest ideas and thinking of the impact of digital innovation on Malaysia and its corporations. In tandem with these discussions, Accenture is also conducting a new piece of research that analyses different Malaysian companies against 117 digital metrics to benchmark and identify leading practices. The results of this research will be shared in an upcoming article.

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