The one thing missing from your board of directors — and why it matters

Steaming cups of coffee and baked goods smeared with frosting might not be the first products you think of as having the potential to be transformed by digital technologies, but thinking outside the Box O’ Joe — and beyond the physical world — allowed one coffee and baked goods giant to do exactly that.

In 2012, Dunkin’ Brands — owner of Dunkin’ (formerly Dunkin’ Donuts) and Baskin-Robbins — launched a mobile phone app designed to allow customers to pay from their devices and connect to the company’s DD Perks rewards program.

The app solved a range of problems plaguing the company’s vast network of franchisees by shaving time off of service speeds, increasing cross-selling, raising the size of an average customer’s order, and making payment processing easier by reducing credit card fees. It also gave the company an avenue to acquire better data about customer preferences and create deeper relationships with them.

The result? The app was downloaded 18 million times by the first half of 2017 and was responsible for almost $500 million in sales originating on mobile devices in 2016. The coffee giant saw a 22.9 percent net profit margin that year, well over the 9.7 percent industry standard.

Such transformative digital efforts are often underpinned by the vision and digital know-how of a company’s board of directors, according to a new study from MIT Center for Information Systems Research scientists Stephanie Woerner and Peter Weill.

Dunkin’ was among the 295 companies making more than $1 billion in revenue that the pair identified as having a “digitally savvy” board of directors — meaning three or more members that “understand through experience how digital technologies such as social, mobile, analytics, the cloud, and the ‘Internet of Things,’ will impact company success in the next decade.”

Weill and Woerner used machine learning to analyze data from 1,233 companies earning more than $1 billion in revenue annually and found that only about a quarter of them had three or more board members who were considered digitally savvy.

Those companies, Weill and Woerner wrote, significantly outpaced their peers on key metrics, including 38 percent higher revenue growth, a 17 percent higher profit margin, 34 percent higher market cap growth, and 34 percent higher return on assets.

Woerner said digitally savvy directors:

• Have a deep technical understanding of what technology is available to their industry and how it works.

• Have a sense of how technology could improve their business model and processes, and how it could disrupt them.
• Consider those technologies early in their decision-making processes.
• Understand the challenges that come with pursuing digital initiatives.

“Digitally savvy directors know what digital is going to do for their organization and how it’s going to change [their industry],” Woerner said. “They know how digital will allow them to interact directly with their customers, and it’s helping them learn more about their customers. If [a company’s directors] are not digitally savvy, they’re really putting the future of their company at risk.”

To increase your own digital expertise, or that of your board:

• Engage in self-directed learning, using online or in-person courses and case studies, attending technology conferences, or finding digital natives to learn from.

• Commit to board-wide education through “digital tourism,” visiting and engaging in conversations with boards and leaders of other successful, tech-driven companies.
• Have an annual strategy retreat that focuses exclusively on digital threats and opportunities.
• Seek out new directors who have digital experience to add to the board.

Use your company’s technology personally, taking the customer’s journey yourself to understand their experience.

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