Make sure your board is prepared for the risks and opportunities of the ever-progressing digital age.
A perplexing push-pull effect is stretching organisations as a growing number of new digital technologies emerges and businesses across sectors strive to deploy them for greater relevance to customers or to outpace their competitors. Successful digital transformation is the commonly touted but often-elusive goal that promises countless benefits, from increased efficiencies and productivity to more detailed analysis, deeper insights and better products and services.
Simultaneously, though, it can increase the range of digital risks via projects that fail to deliver, or through broader exposure to the proliferation of cyber threats and reputational fallout. According to recent research by global consulting firm McKinsey & Company, 69 per cent of digital transformation projects fail. Poor planning is a common cause. Yet, CSIRO’s Data61 has predicted that artificial intelligence (AI) and other digital technologies could contribute an additional $315b in economic activity to Australia by 2028.
While some digital transformation growth stories inspire — such as the recent tripling of e-commerce sales for fast-furniture retailer IKEA, a latecomer to the online market — 2023 has highlighted key reasons why boards are facing decision-making tensions as they weigh the risks and the opportunities. Among them, the year-long clamour to harness generative AI like ChatGPT, and the example of tech transformation done wrong, as revealed by the long-awaited report on the federal government’s illegal and now defunct “Robodebt’” scheme. Adding to the heat is an ever- growing list of salutary corporate cyber disasters.
Complexity rules
“One of the challenges in the current business environment is that there are so many choices and opportunities, as well as risks,” observes Margaret Wright MAICD, chair of IoT startup OmniTabz and an independent non-director member of the technology and projects committee at one of Australia’s largest superannuation funds, UniSuper.
Wright’s career spans four decades of digital transformation, commerce and risk management at KPMG and Macquarie Bank, positions on not-for-profit boards and projects for large organisations, including the Australian Securities Exchange (ASX) and NSW government. She sees the impact and value of digital transformation from multiple perspectives through her role with the small team at OmniTabz. The company is using satellites to help mining companies and councils monitor unconnected remote locations where “the need to know what’s happening may save lives, avoid asset damage and keep reputations intact”.
Wright knows the importance of maintaining “a balance between managing risks and realising the opportunities”. Crucial to success is looking deeper than obvious easy measures and quick wins to find longer-term strategic benefits, she says.
New tech adoption and organisational transformation “shouldn’t be about cheaper and faster — saving money and time — but about better outcomes for customers and, in many cases, for frontline workers” who deal with them, says Wright.
Organisations want to get excited by the whiz- bang potential of new technology, but according to Wright, most digital transformation success stories begin with a clear-up period for current systems to provide a strong base for a planned transformation. That’s the opportunity for a reality check on how much work needs to be done organisation-wide to manage legacy systems and integrate new ones, she says. At the same time, organisations can conduct small test-and-learn projects with the new technologies they plan to adopt.
Greg Spencer MAICD, senior partner at Beyond Technology Consulting, notes that for any business to have a successful digital transformation, it’s vital that its IT is set up for success through an enablement program to ensure the digital strategy is sustainable and supported by the appropriate automation, collaboration, data and analytics systems, and infrastructure. “Digital transformation must go deeper than just client interactions and should seek to reduce process friction, improve the capture and use of data, and deliver real improvement to business value,” he says.
Ensuring that cost and cyber risks are correctly understood and managed is critical, he adds. “Directors need to seek independent and vendor agnostic advice from a trusted adviser. Often, an independent IT capability and strategy review can be extremely helpful.”
Big tech game changer
Over the past four years, Cricket Australia (CA) has undertaken a massive digital overhaul designed to put fans and participants, including umpires, coaches and players, front and centre. In the process, CA has built roadmaps and transformed its tech stack with the help of technology partner HCLTech; moved on from a participant platform developed in the late 1990s to a cloud-based platform; reinvented its operational legacy enterprise applications across finance, people and culture; and centralised its IT function.
“It’s one thing to contain costs and become more efficient,” says Donald Elliott, general manager of Australian Cricket Technology at CA, but the organisation set out to prioritise ways to “increase enjoyment and take any pain and friction out of the game” for participants, on and off the field. Meaningful results have come from reimagining digital assets, including cricket.com.au, the Cricket Australia Live app and MyCricket app (now PlayCricket), to give them a new look and functionality while streamlining community cricket processes.
The digital roar of the crowd has made Cricket Australia Live the country’s leading summer sporting app, with yearly sessions of more than 100 million, while App Store ratings have shot up from 2.2 stars to 4.7 stars since pre-pandemic days.
Digital transformation questions
Have you made all the changes you planned and how have these played out?
How do the results compare with expectations? How do you know?
Now the project/program is live, what have you learned?
Whatelsedoyouneedtodoto further improve the outcomes?
How can the organisation further leverage what you have done?
The current season’s launch coincided with the final leg of a holistic rollout of PlayCricket, an application that takes care of sometimes onerous back-end administration for the NFP sporting organisation’s volunteers, as well as front-end enjoyment. Members of 680 community clubs around the country can access live feeds of their on-field performances so the players and their families have records of the glory moments.
Balancing risk and opportunity
After moving on from old systems to bring on the new, the CA board is now considering a further pipeline of transformation involving automation, analytics, AI and machine learning to support growth plans for the next five years. In the mix are innovative digital products, like products in the metaverse. In 2022, CA embarked on an NFT test, signing a multi-year licensing deal with Singapore- based collectibles platform Rario and NFT trading company BlockTrust. “How can we bring those into cricket with diversified revenue streams to help fund our vision to grow the game?” asks Elliott.
He adds that ChatGPT has created an incredible amount of interest, with the board and executive interested in AI and machine learning broadly. Discussion is moving beyond current use cases, including video analytics for elite athletes, slicing up highlights in video streams for community cricket, and AI and natural language processing enabling chatbots for FAQs.
“So many innovators are knocking at our door with different ideas,” says Elliott. “We funnel those into a well-governed pipeline and take new technologies through a series of stage gates to understand where to invest. How do we co-invest and partner with great companies that can bring experience from other markets and customers to accelerate our journey?”
While the upside opportunity is huge, Elliott says security is his number-one consideration. CA holds personal data for 600,000 registered participants and nine million people interact with its websites annually (and three times that number globally). Those figures are reflected in substantial increases in the CA cybersecurity budget year on year for an accelerating protection program. “That hasn’t been a hard discussion with the board, given the large volume of data breaches that have been seen in the market over the past year,” says Elliott. “It’s front of mind for all our directors.”
Double-edged sword
The escalating sophistication of cyber threats is preoccupying directors as they forge into digital transformation projects. Coming into view are the exponential capabilities and speed of quantum computing. It’s not mainstream yet, but some big organisations are already dabbling, mindful that quantum technology in the wrong hands could bring catastrophic consequences.
Large organisations and governments are already zooming in on Harvest Now, Decrypt Later (HNDL) attacks. State-sponsored actors are believed to be stockpiling data for the longer term, in preparation for the high-speed decryption that will come in the post-quantum era.
In May 2022, the US introduced National Security Memorandum 10, requiring US federal agencies, including defence and other sectors, to plan quantum resilience pathways. Likely targets include critical infrastructure, big pharma, banks and telcos. Any data that needs protection into the future is potentially vulnerable, says Vikram Sharma, who founded quantum company Quintessence Labs in 2008. The Canberra-based business is globally recognised for producing the world’s fastest true random number generator, which runs at a billion numbers per second and is used by governments and large organisations in 20 countries around the world. “Random numbers are the fundamental building blocks of encryption keys,” says Sharma. Among its solutions, the company also delivers the software stack to integrate quantum and cybersecurity software.
Planning for the long term
The 2023 World Economic Forum wrapped with sobering foresight from managing director Jeremy Jurgens that 93 per cent of cybersecurity experts and 86 per cent of business leaders surveyed for its Global Cybersecurity Outlook believe a “catastrophic” cybersecurity event is likely in the next two years.
While the quantum threat is nascent, boards need to be planning, insists Sharma. “For larger platforms, it takes considerable time to transition to new technologies,” he says. “Three to five years is not an unreasonable expectation.”
Like Wright, Sharma suggests beginning by evaluating the status quo and running a test- and-learn process. In the cybersecurity context, it’s about the sensitivity and longevity of data and current measures deployed to protect it. “What might be at risk to a HNDL attack?” His advice is to assign a small team to analyse the risk and run a pilot with various quantum solutions. “So you understand the capabilities available and how they will integrate with existing systems, and to identify any friction points that might exist for adopting a new technology.”
Cybersecurity has become a vital differentiator. Recent research from Accenture, drawing on insights from 3000 executives across sectors in 14 countries, revealed organisations that embed cyber protection into digital transformation from the outset are nearly six times more likely to beat the odds and successfully transform.
Before starting a digital transformation
Margaret Wright MAICD advises mapping out the systems involved in your digital transformation, showing how they are linked, with assessment of the scale and complexity of change required for each. “This provides an understanding of what’s involved and an excellent context. It also enables perspectives and conversations around time, degree of difficulty and costs in achieving outcomes and benefits.”
This article first appeared under the headline 'Tech Transformation’ in the December 2023 / January 2024 issue of Company Director magazine.
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