DO BOARDS HAVE TO WORRY ABOUT DIGITAL BEING MATERIAL
Directors may not fully comprehend the magnitude of risk posed by a company's digital infrastructure or the impact that digital investments can have on future strategies. Although digital spending may only represent 5% of sales, it supports the entirety of a company's operations, including e-commerce sites, CRM martech, enterprise applications like finance and HR, manufacturing, distribution, and warehousing systems. It is essential to ensure that investments are allocated to the right projects, as digital investments are far-reaching and all-encompassing. However, board directors seldom have access to data that allows them to understand how the digital portfolio is weighted.
So, what can a digital director do to help the board understand the materiality of digital investments?
Firstly, the digital director must have a comprehensive understanding of the scope of the digital infrastructure and the functions it supports. One approach is to obtain information from budgets related to digital or IT spending, such as customer experience, product design, sales, order management, manufacturing, warehousing, distribution, billing, and collection.
Secondly, the digital director should divide the digital and IT investments into separate buckets, such as customer experience, operational efficiency, or product/service excellence.
Thirdly, the digital director should compare the investments in the different buckets and determine if they align with the company's short- and long-term goals. This analysis may uncover surprising findings, such as an overemphasis on internal efficiency projects and a lack of focus on enhancing customer experience or introducing new products or services. While internal efficiency projects may be the right focus, understanding the digital portfolio and how spending contributes to the company's goals and competitive position is crucial.
By taking these steps, digital directors can help the board fully appreciate the materiality of digital investments and their potential impact on the company's future success.
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