Today’s investors demand bulletproof digital strategies—are you prepared?

by | Oct 19, 2017

Investors and the boards that represent them are becoming increasingly savvy when it comes to assessing digital transformation strategies. “Where are you in your digital strategy” is being asked with greater frequency and urgency across the business landscape. Successful and transformational managers know they need to arm themselves with rock-solid answers, backed by forward-leaning digital visions. They know failure to do this will invite skepticism, empower detractors and lead to disintegrating confidence even in historically capable managers and well-run companies. And while it sounds like common sense today, many companies and top managers are not as prepared as they need to be. That can lead to turmoil.

A proxy battle, a company’s loss

To see how a lackluster digital strategy contributes to investor dissension, one needs to look no further than the recent high-profile, epic proxy battle waged by Trian Partner’s Nelson Peltz to secure a seat on the board of directors of iconic brand marketer Proctor & Gamble. This proxy fight was narrowly defeated—in a twist of irony, it was shot down by employee-shareholders resistant to change. It was also expensive to wage and defend, with some estimates pegging the costs at a whopping $100 million.

It’s instructive to examine Trian’s white paper to shareholders to see the level of analysis as well as the root causes of investor frustration. The paper attributes P&G’s loss of market share and lagging financial performance, in large part, to failure to adapt to the digital economy and nimbler digital competitors. P&G’s response to the digital economy and a disruptive marketplace was summarized by Trian as follows: “P&G management’s public tone seems uncomfortably dismissive of the long-term opportunity & threat.” Further, one of the eight core initiatives proposed by Trian that they believed necessary to turn the P&G ship around: Winning digital.

The perceived lack of digital acuity in one of the nation’s most revered Fortune 500 consumer products conglomerates must be taken in the context as one side in a hotly contested battle. However, the lesson here is P&G could have avoided these criticisms and the costly and distracting proxy battle by taking the initiative to answer valid questions about its digital transformation before having to be asked. They could have bulletproofed their strategy by closing gaps before they were evident to investors.

Strength through strategy

Tensions between investors and corporate management over the pace of digital transformation is playing out today in public and private sector companies of all sizes. Management should be on notice. Boards and investors that might have been previously forgiving (or naïve) on digital matters are no longer going to give them a pass. The tough questions will be asked and expectations are at a higher standard.

It’s prudent then that business leaders elevate their game by sharpening their digital vision and building solid strategies they would be confident presenting to their boards. There are many prescriptive solutions, techniques and processes to build a digital strategy that can withstand the scrutiny. Here are six essential tenets to beginning the process:

  • Embrace that you are not immune from change driven by digital innovation. Respond proactively to market and competitive disruptions on an ongoing basis. This will open new opportunities to grow your business.
  • Establish a clear baseline vision for your digital future (often a five-year outlook). Understand that this is an iterative plan that rolls forward each year. It can adapt to unforeseen technological, competitive and market developments.
  • Discover and catalog your vulnerabilities early. Be candid assessing your current position in the marketplace and capabilities.
  • Digital is not a single department, job function, or line item in IT. Digital is an enterprise-wide mindset. Establish a corporate culture that will embrace the vision and work cross-functionally to achieve it.
  • Visibility, measurement and accountability are essential for innovation to succeed. Establish tools and processes that allow top management to readily see progress in real-time, and report to the board and investors with confidence and clarity on the work completed on key initiatives.
  • Anticipate the tough questions and take them head-on.

Once your strategy is developed or fortified, considering moving it to the front of your management discussions at your board and shareholder meetings. Prioritizing digital will demonstrate to your board and investors that you have a clear vision for your company’s future in the digital economy. You may even get some well-earned applause.

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Paul Bonington


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