Boards Need a New Approach to Technology: From Defensive Posture to Proactive Strategy

Introduction: "Is Your Board Taking a Defensive or Proactive Approach to Technology?"

In the era of rapid technological transformation, it’s no longer enough for boards of directors to focus solely on security and IT infrastructure. While these aspects are undeniably critical, overemphasising overemphasis on them can lead to missed opportunities for innovation and growth. This is especially true in the Banking, Financial Services, and Insurance (BFSI) sector, where emerging technologies like artificial intelligence (AI), blockchain, and quantum computing are not just reshaping the landscape but redefining the game's rules of the game.

As a visionary IT leader with over 30 years of experience in driving digital transformation across multiple industries, including BFSI, I’ve witnessed the profound impact that technology can have when it is strategically integrated into a company’s overall vision.

However, I’ve also seen how a defensive, risk-averse approach can stifle innovation and prevent organisations from capitalising on new opportunities. In this article, I will explore the importance of a more proactive approach to technology governance at the board level, emphasising the need for dedicated technology committees to help companies transition from a defensive posture to that can help companies transition from a defensive posture to strategic offence.

Why Boards Are Stuck in a Defensive Crouch

1. Lack of Technological Expertise on Boards One of the most significant challenges facing boards today is their members' lack of technological expertise lack of technological expertise among their members. According to data from a leading research firm, just over a third of public boards in a developed country have directors with a deep understanding of technology. This figure, while an improvement from a decade ago, is still insufficient, given the pace of technological change. Outside the country, the percentage of tech-savvy directors is even lower, further exacerbating the problem.
   
   Many board members come from backgrounds in finance, law, or general management - areas that, while important, do not provide the necessary insights into the complexities of modern technology. As a result, boards often focus on immediate concerns, such as cybersecurity and IT compliance, while failing to engage with the broader technological trends that could drive long-term growth.
   • Example from BFSI: Consider a leading global bank that faced a significant challenge in implementing a new AI-driven fraud detection system. The board, composed primarily of individuals with financial and legal expertise, struggled to understand the technical complexities of AI and its implications for the bank’s operations. As a result, the decision-making process was slow, and the bank missed the opportunity to be an early adopter of this technology, allowing competitors to gain a foothold in AI-driven fraud detection.
   • Actionable Insight: To address this gap, boards should prioritise the inclusion of directors with deep technological expertise. This could involve recruiting individuals with data science, cybersecurity, or software development backgrounds and backgrounds in data science, cybersecurity, or software development. Additionally, boards can benefit from ongoing education and training programs that help existing members stay current with technological trends and developments.


2. The Rapid Pace of Technological Change Technology evolves at an unprecedented rate, and boards often find it challenging to keep up. Innovations in AI, machine learning, blockchain, and quantum computing are transforming industries at a pace many boards are ill-equipped to manage. This rapid change can create a sense of paralysis, leading boards to adopt a defensive stance focused on mitigating risk rather than seizing new opportunities.
   • Example from BFSI: AI is revolutionising the insurance industry in underwriting and claims processing. However, many traditional insurance companies have been slow to adopt these technologies due to concerns about regulatory compliance and the potential risks associated with AI. Meanwhile, Insurtech startups have leveraged AI to streamline processes, reduce costs, and offer personalised products, gaining significant market share at the expense of traditional insurers.
   • Actionable Insight: To stay ahead of the curve, boards should establish technology committees that continuously monitor technological trends and identify potential opportunities. These committees can provide the board with regular updates on emerging technologies, helping to ensure that the company remains proactive rather than reactive.


3. The Changing Nature of the Scientific Value Chain Technological innovation is no longer confined to traditional R&D departments. The rise of open innovation, where companies collaborate with external partners to develop new products and services, has fundamentally altered the scientific value chain. This shift requires boards to think beyond their immediate industry and consider how advances in other fields might impact their business.
   • Example from BFSI: A global insurance company recognised the potential of genomics to revolutionise health insurance. By partnering with a biotechnology firm, the insurer was able to develop personalised health insurance products based on genetic risk factors. This collaboration allowed the company to offer innovative products that addressed the specific needs of individual customers, setting it apart from competitors who continued to rely on traditional actuarial models.
   • Actionable Insight: Boards should encourage technology committees to explore cross-industry collaborations and open innovation models. By leveraging external expertise and technologies, companies can access new ideas and capabilities to drive competitive advantage.

The Role of Technology Committees: From Risk Management to Strategic Offense

1. Identifying and Prioritizing Relevant Technologies A well-structured technology committee can help a company move from a defensive posture to a proactive, opportunity-seeking stance. The committee oversees scanning for technological advancements within the company’s core industry and adjacent fields. By prioritising technologies that align with the company’s strategic goals, the committee can help the board focus on opportunities that offer growth potential.
   • Example from BFSI: The Innovation and Technology Committee at a central global bank identified quantum computing as a potential game-changer for financial modelling and risk management. The committee recognised quantum algorithms' transformative potential, prioritising the potential of quantum algorithms, and the committee prioritised investments in quantum research and development. By collaborating with leading quantum computing firms and academic institutions, the bank positioned itself as a pioneer in quantum finance, gaining a competitive edge in an area that few others were exploring.
   • Actionable Insight: Technology committees should develop and refine methodologies for evaluating emerging technologies based on their relevance to the company’s strategic objectives. This process should include regular updates to the board on technological trends and opportunities, ensuring that technology is always on the agenda.


2. Embracing and Managing Technological Risk While boards are typically tasked with mitigating risk, the approach to technological risk often skews heavily toward minimising exposure rather than exploring potential rewards. A well-functioning technology committee can balance this by encouraging the board to embrace calculated risks, especially when adopting new technologies that could offer significant competitive advantages.
   • Example from BFSI: A leading multinational bank invested in blockchain technology to enhance cross-border payment systems. Despite the risks associated with implementing a nascent technology, the bank’s technology committee advocated for the initiative, highlighting the long-term benefits of increased transaction speed, reduced costs, and enhanced security. The successful implementation of the blockchain platform allowed the bank to offer faster and more secure payment services, attracting new customers and reinforcing its reputation as an innovator in the financial sector.
   • Actionable Insight: Boards should empower their technology committees to advocate for strategic risks in technology adoption. This includes setting clear risk management guidelines and ensuring the company can pursue innovative opportunities without compromising its stability.


3. Shepherding Core Technologies Technology committees are also instrumental in guiding the development and implementation of core technologies critical to the company’s long-term success. This involves identifying promising technologies, overseeing their integration into the company’s operations, and ensuring they align with its strategic goals.
   • Example from BFSI: A major insurance company’s technology committee identified AI-driven claims processing as a core technology that could significantly improve operational efficiency and customer satisfaction. The committee worked closely with the company’s IT and operations teams to develop and implement an AI-based system that automates insurance claims processing. This system reduced processing times and costs and enhanced the accuracy of claims assessments, improving customer trust and loyalty.
   • Actionable Insight: Technology committees should work closely with management to ensure that core technologies are continuously developed and aligned with the company’s strategic direction. This includes regular reviews of technology roadmaps, progress reports, and alignment with business objectives.

Real-World Examples of Effective Technology Committees in BFSI

1. A Global Energy Company: Transforming the Energy Sector Through Strategic Technology Oversight A global energy company provides a compelling example of how a technology committee can drive innovation and transformation in a traditionally conservative industry. The company’s Innovation and Technology Committee was critical in shifting from fossil fuels to renewable energy and decarbonisation technologies.
   
   The committee’s approach was both proactive and strategic. It maintained a “technology radar” to identify and monitor scientific and technological advances that could impact the energy sector. This foresight allowed the company to invest early in grid-level battery storage solutions, creating a joint venture with a European Technology Giant that has since become a leader in energy storage solutions.
   • Actionable Insight: Boards in the BFSI sector can learn from the above example by establishing technology committees that focus on long-term strategic initiatives rather than just immediate operational concerns. By identifying and nurturing emerging technologies, these committees can position their companies as innovators.


2. Example of a leading Medical Technology MNC: Driving Innovation Through Cross-Disciplinary Collaboration At the organisation, the Science & Technology Committee has been instrumental in fostering cross-disciplinary collaborations that have led to significant breakthroughs in healthcare. One of the committee’s notable achievements was developing a novel approach for minimally invasive diagnosis and treatment of lung tumours, combining miniaturised imaging technology with robotic bronchoscopy.
   
   The committee’s focus on innovation at the intersection of different disciplines has been vital to the company’s success in developing new medical technologies. By encouraging collaborations between its Innovative Medicine and MedTech organisations, the committee has helped the company stay at the forefront of medical innovation.
   • Example from BFSI: A similar approach can be applied in the BFSI sector, where cross-disciplinary collaboration can lead to innovative financial products and services. For instance, a bank could create a technology committee that brings together AI, data science, and behavioural economics experts to develop personalised financial products that better meet individual customers' needs.
   • Actionable Insight: When establishing technology committees, boards should consider the potential benefits of cross-disciplinary collaborations. Companies can foster innovation and develop products and services that address complex customer needs by bringing experts from different fields together.


3. Example of a Manufacturing MNC: Leveraging Digital Twins for Strategic Advantage A Manufacturing MNC, a leader in virtual twin technology, provides another example of how a technology committee can drive strategic innovation. The company’s Scientific Committee has been at the forefront of developing and applying digital twin technology across various industries, from aerospace to life sciences.
   
   The committee’s work has been instrumental in helping the company extend its core capabilities into new areas, such as decentralised clinical trials for pharmaceuticals. By leveraging its expertise in virtual twins, the company has streamlined complex processes and created visibility into the systems of which they are a part.
   • Example from BFSI: A bank could leverage digital twin technology to create virtual models of its operations, allowing it to simulate and optimise processes such as risk management, fraud detection, and customer service. By using digital twins to gain a deeper understanding of its operations, the bank can identify areas for improvement and make more informed decisions.
   • Actionable Insight: Technology committees should explore the potential applications of digital twin technology in the BFSI sector. Companies can gain insights that drive operational efficiency and innovation by creating virtual models of complex systems.

Building an Effective Technology Committee

1. Composition and Expertise The effectiveness of a technology committee largely depends on its composition. Members should bring technical expertise, strategic insight, and a deep understanding of the company’s industry and emerging technological trends. Ideally, the committee should include individuals with experience in technology-driven industries such as software development, data science, or biotechnology.
   • Example from BFSI: A leading global bank’s technology committee includes members with cybersecurity, fintech, and artificial intelligence backgrounds and backgrounds in cybersecurity, fintech, and artificial intelligence. This diverse expertise allows the committee to comprehensively oversee and -provide comprehensive oversight of the bank’s technology strategy, ensuring that all relevant aspects of technological innovation are considered.
   • Actionable Insight: Boards should carefully select technology committee members based on their expertise and ability to contribute to strategic discussions. Consider including external advisors or rotating committee members to bring fresh perspectives and new ideas.


2. Agenda Setting and Strategic Focus A technology committee’s agenda should be closely aligned with the company’s strategic objectives, focusing on immediate technological needs and long-term opportunities. This requires balancing exploring emerging technologies and ensuring that current initiatives progress as planned.
   • Example from BFSI: The technology committee at a major insurance company meets quarterly to review progress on AI-driven claims processing initiatives. The agenda also includes discussions on emerging trends, such as wearing wearables for health monitoring and their implications for insurance products. By maintaining a strategic focus, the committee ensures that its work directly supports the company’s long-term goals.
   • Actionable Insight: Technology committees should establish a regular agenda-setting process that involves input from the board, management, and external experts. This ensures that the committee remains focused on the most critical technological issues while responsive to new developments.


3. Education and Counselling for the Board An essential role of the technology committee is to educate the rest of the board on technological trends and their implications. This includes providing regular updates, facilitating discussions on emerging technologies, and offering recommendations on how the company should respond to technological challenges and opportunities.
   • Example from BFSI: At a global financial services firm, the technology committee regularly organises workshops for the entire board on topics such as AI ethics, cybersecurity threats, and the future of fintech. These sessions help demystify complex technologies and ensure that all board members are equipped to make informed decisions on technology-related issues.
   • Actionable Insight: Technology committees should take a proactive approach to educating the board, using a variety of formats such as workshops, guest speakers, and site visits. This ongoing education helps build the board’s confidence in its ability to oversee and guide the company’s technology strategy.

Conclusion: The Time for Board-Level Technology Committees Is Now

In an era of rapid technological change, the traditional approach to technology governance - focused primarily on security and IT - no longer suffices. Boards need to adopt a more proactive stance, embracing the opportunities presented by emerging technologies while managing the associated risks. Establishing a dedicated technology committee is critical, enabling boards to move from a defensive posture to a strategic offence.

Technology committees can help companies navigate the complexities of the modern business landscape by prioritising technological innovation, fostering cross-industry collaborations, and guiding the development of core technologies. The message is clear for boards that have yet to establish such committees: the time is now.