SUPERVISING DIGITAL TRANSFORMATION
The board’s role
is to challenge
Petri Hofsté is on four supervisory boards and is considered one of the most influential women in the Dutch corporate world.
She has a strong view on the role of board
members in the digital transformation of
the companies they supervise.
This period of digital transformation is ‘insanely interesting’ to Petri Hofsté. We are, she says, in the middle of a period of enormous change and acceleration, which won’t only transform companies but the whole of society.
Hofsté started out as a chartered accountant. During her career she has had various management positions at different financial companies (see box) and is now a supervisory board member at the Rabobank Group, Fugro, Kas Bank and Achmea. She was named ‘the most influential woman in the corporate Netherlands’ by Management Scope magazine in 2016, 2017 and 2018; this year she was ranked fourth in its top 100 supervisory board members list.
How should companies organise digital transformation?
'I see it works well if at least one director is responsible for this within the board of directors. We now often see a chief digital director at board level, or just under it. This is a good thing, but the CDO needs to be careful not to end up isolated. A CDO must work intensively with all directors of different divisions or lines of business, and especially the CEO, otherwise you’ll never get the whole organisation to make the necessary transformation. And once you, as an organisation, are launched on that digital transformation, you have to ensure that digital developments are eventually seamlessly integrated into current business processes or even replace them.'
Petri Hofsté’s previous roles include division director, banking supervision at the Dutch central bank DNB, group controller at ABN AMRO, CFO of RBS N.V. and the APG Group, and partner at KPMG (audit, IFRS). She is a supervisory board member at Rabobank Group, Fugro, Kas Bank and Achmea.
That sounds logical, but how do you do it? Do you design a digital strategy, or just start?
'Every organisation has a number of digital initiatives coming from the ground up. That’s positive, and you should stimulate it. As soon as these initiatives become successful and grow, you can get a flywheel effect. At that moment, it’s time to pull the initiatives together under an overarching digital strategy and from there you continue to develop.'
In your career and current work you have been most active in the financial sector. How far along is it with digital transformation?
‘Pretty far. Partly due to the consequences of the financial crisis, banks and insurers have had to make sure they have a healthier business balance and stronger buffers in recent years. Solvency has been the most important thing, which means that everything that reduces costs and improves efficiency – such as process digitalisation – is welcome. This makes the business case easy, and directors are quickly convinced of the value of investing in digital transformation. But we’re not all the way there yet, and digitalisation is about more than cost efficiency, of course.’
‘The chief digital officer
needs to be careful not
to end up isolated’
Is the case helped by the threat of newcomers like Apple, Google and other fintechs?
‘It is, although there are high barriers to entry for new fintechs, such as regulations and capital requirements. In any case, we live in a time of partnerships and open platforms, and I believe financial firms have to cooperate with others to digitise better and faster. That’s preferable to an established bank just bracing itself for the hit – you’ll be on the ropes before you know it. '
Do you need a completely different culture from a traditional bank to digitise?
‘Sure, but you can do something about it, as long as you stay within your company’s values and norms. Bring in digital talents from other environments and collaborate more intensively in networks and with start-ups, without suffocating them immediately by fully integrating them. You really need that other culture because after an efficiency improvement phase, digital transformation will need to provide added value for customers.
As a digitising bank you have to shift the focus from the cost to the revenue side. Using digital tools, organisations can better measure what their customers want and tailor what they offer in a completely different, digitally-driven business model. Is privacy an issue? In Europe, financial institutions are thankfully limited by the latest privacy legislation, although competitors from countries like China currently ‘don't seem to bother so much.’ But I’m convinced that countries outside Europe will ultimately respect privacy legislation too.’
‘When appointing a new director, the board should really consider whether the candidate has
What is the responsibility of the supervisory board in digital transformation?
‘The board has to ensure it has the right skills available in the leadership team and that the subject is constantly on the agenda. Board members must also challenge the directors on how they will make digitisation an integral part of strategy and transformation. And when a new director needs to be appointed, the supervisory board member must explicitly consider how much digital experience the candidates will bring. '
But does the average board member have enough understanding of digitisation?
‘They don’t all have that, and nor do I. Not every supervisory board member needs the digital expertise of a chief digital officer. But they do have a serious, joint responsibility for the company they supervise. To me, this means that you can’t avoid a subject as an individual board member, and in the field of digitisation, you must also continue to learn all the time – and we do.’
How does that work?
'I regularly see fellow board members at seminars on this subject: we go to these sessions in the context of lifelong learning, and you can also speak with people within the companies you supervise to improve your knowledge base. At Rabobank, the supervisory board recently spent a day with a group of employees who are at the forefront of digitising customer journeys, and you learn a lot from that. It’s nice to see how enthusiastic employees are about the benefits digitisation can bring both customers and the bank. It can also be very valuable for the supervisory board to look at completely different companies and their approach to digitisation.'