Sunday, November 23, 2014

What's in a Word? Digitalization?

"Good governance practices have focused on and strengthened audit oversight and risk oversight. But there's an IT tsunami coming and that spotlight should now shift to IT oversight". 

David Beatty
Smart words from the erudite and articulate David Beatty, Conway Director of the Clarkson Centre for Business Ethics and Board Effectiveness at the Rotman School of Management at University of Toronto (what a mouthful!). David made the comment during an excellent Board Governance Day co-hosted by Stanford's Rock Center for Corporate Governance. And he got me thinking.

I wholeheartedly agreed with his point, but was uncomfortable about the term IT. Since David thinks words are as important as I do, we had a stimulating conversation about what the right word was.  

The term IT primarily connotes back office systems to manage and track a business - particularly to the typical silver-haired denizen of a board room*. Granted, these systems have been the scene of many a corporate debacle featuring functional mismatches, missed deadlines, budget overruns and staggering security breaches. As such, they deserve deep board oversight.

But there's something much more important to worry about. Today, digital information infuses every single product. Nicholas Negroponte foresaw this evolution almost two decades ago, when he said "The change from atoms to bits is irrevocable and unstoppable." He was considered a futurist at the time. The future is here now. 

Companies can serve customers better by embedding smarts and connectivity into their products: think smart thermostats or driverless cars. For some products the smarts and connectivity actually are the product. Companies also need to consider a seismic shift in consumer digital behaviour: think the generation that has 'grown up digital' watching video over the web rather than cable.

Companies need to widen their vision beyond traditional competitors: Garmin has to think about Apple, not just Tom Tom, while trucking companies have to think not just about the other trucking companies but what happens when trucks don't need drivers. And they need to think about disruptive entrants with new business models who could displace them: think AirBnB or Uber.

Boards have a duty to exercise insight, oversight and foresight about all this. So question is whether IT suggests all these things to a typical director.

David is a great communicator and he's worked hard to improve corporate governance in Canada. So he sought a word that would have all the right connotations and raise awareness of this important issue with directors. We bandied about several terms, and finally settled on 'digitalization'. It suggests how every product has gone digital (not just been digitized) and it also makes an implicit reference to to the fact that people  have gone digital too. What do you think?

* A friend has pointed out that, as a silver-haired director myself (albeit one who spent her career in the field of information technology) perhaps I suffer from an outdated view of the term information technology.

1 comment:

Rohan Jayasekera said...

I agree completely. The term IT seems used largely for what used to be called "Data Processing": making existing processes more efficient via automation. And IT departments tend to be charged with enforcing rules. All of which is about maintaining the status quo, not changing it.

"Digitalization" seems like a decent term, but it's a bit of a mouthful, and I wonder whether it suggests that the only change is of turning something analog into its digital equivalent, which doesn't do justice to e.g. Airbnb and Uber.

I still like the term Information Revolution, because a "revolution" is something that everyone understands is about change -- and a lot of it. And it hints that what's going on is on the scale of the Industrial Revolution.

The particular implications of the revolution will however very much depend on the company. In a way the revolution does not even need to be named, as "changing business environment" or something like that is also an adequate description.