directors on digital ep 1

Podcast Episode 1 


Innovations won’t stick unless they are designed for and by the people using them

Even domestically focused businesses must think global to survive and thrive

Technology is the enabler, not the endgame


Digital upskilling

UTS Microcredentials courses are designed for those seeking specialist knowledge at university level on subjects including machine learning, design theory and data analytics.

MIT Sloan Executive Education’s non- degree executive courses cover topics such as digital learning and digital business strategies.

Further reading:

The Design of Business: Why Design Thinking is the Next Competitive Advantage by Roger Martin (Harvard Business Press, 2009)

For inspiration on technology adoption, David Thodey AO FAICD cites a somewhat unexpected source: grain growers in the NSW agricultural belt of Narrabri.

The chair of Tyro and Xero admires the way these farmers are using machine learning, artificial intelligence (AI) and big data to analyse and improve the productivity of their paddocks at a granular, square-metre level.

“This is the real world that we’re going into and those that grab it will drive enormous value and jobs,” says Thodey, speaking during the first episode of the Directors on Digital podcast with Commonwealth Bank of Australia chairman Catherine Livingstone AO FAICD. “This is not about inner-city tech precincts. This is about enabling every Australian.”

In the podcast, Livingstone and Thodey highlight five ways to maintain the cracking pace of digital transformation.

1 Don’t accept failure – embrace it

The Morrison government’s Digital Economy Strategy estimates that the benefits to the Australian economy from digitalisation could hit about $315 billion during the next decade. As a result, companies will be under pressure to build on their digital confidence and performance.

Livingstone urges Australian business leaders not to fear failure. “Experimentation is a core part of strategy,” she says.

“Organisations that have already tried and failed are actually in the best position to innovate successfully into the future. It will involve failure but that’s the only way you learn.”

She says that if it wasn’t for the repercussions of the Australian Prudential Regulation Authority inquiry in 2018, CBA would have missed a once-in-a-generation opportunity to reinvent the way it worked.

2 Start with the human, not the technology

The ‘people factor’ cannot be ignored with digital adoption, Thodey insists. Technology may be the enabler, but people are at the heart of a digital transformation that can create a brilliant customer experience and new revenue streams.

At CSIRO, where scientists work at the cutting edge of research in fields from climate change to space exploration, technologies like AI are playing an increasingly critical role. But Thodey says these tools are there to support the scientists – not the other way around.

“The design of labs, how we collect information in the field, how we use AI, how we use the data” is important, he outlines in the podcast. But equally important, he says, is having a culture that empowers employees to use digital tools in the way that works for them.

david thodey

David Thodey AO FAICD

3 Benchmark against the best

In a world of perpetual digital transformation, Australian businesses must think globally if they want to excel, instead of simply measuring themselves against domestic peers. Major platforms, such as Amazon, have set the standards that customers expect, Livingstone points out. “They have established customer expectations for service, for product quality, for speed of response. If you can’t match that, the customers can and will find other global offerings,” she says.

“If you, in your business, don’t feel that you are globally competitive, even if you are fundamentally a domestic organisation, you won’t survive.

“For companies or businesses that start with the aspiration to be global, they will set themselves ambitious stretch goals, and that’s an underpinning to innovation.”

4 Stay vigilant, keep learning

Both Thodey and Livingstone acknowledge that the further an organisation travels on its innovation journey, the more risks will emerge. “Every director needs to make sure they’re keeping current with the latest trends and investing time to do that,” Thodey says.

Cybersecurity looms large. Ransomware attacks, for example, can quickly bring otherwise thriving businesses to their knees and erode public trust. What do you do when, Livingstone posits, someone says, “Hey, we’ve got access to all your customer information... and the next minute they’re asking for $5 million in Bitcoin”?

Thodey believes a blanket rule of ‘No, I will never pay’ could hold back the enterprise. “But there are times when… the potential impact on the company and its people and its customers could be so high. I’ve been through some simulation examples where, based on the values we had in protecting our customers, we concluded that we would pay.”

5 Make a realistic assessment

For true digital transformation and enablement to occur, Thodey thinks it has to filter through an entire organisation. Using video conferencing or embracing asynchronous communications is not enough.

Livingstone agrees, adding that the promise for Australian businesses lies not in digitalisation but in the true transformation that digitalisation can enable.

Change requires re-engineering, attention to detail and using technology to enable a different experience or to do things more efficiently. “It’s about what it does to the business,” Livingstone says. “You’ll be amazed at the exciting things you create.”

catherine livingstone

Catherine Livingstone AO FAICD

What is design thinking?

Design thinking – as highlighted by David Thodey in the Directors on Digital podcast – is helping many of the world’s biggest companies shift to more innovative processes and, ultimately, to reinvent themselves.

Stanford University’s defines it as “a methodology for innovation that combines creative and analytical approaches, and requires collaboration across disciplines”.

Design thinking typically involves three to seven repeatable phases. favours five:

  • Empathise with your users
  • Define your users’ needs, their problem, and your insights
  • Ideate by challenging assumptions and creating ideas for innovative solutions
  • Prototype to start creating solutions
  • Test the solutions

Airbnb credits a design-thinking approach for helping it discover that the terrible quality of its images of rooms was the chief reason for its poor revenue when it started out.

Procter & Gamble also famously used the methodology in the 2000s. With Claudia Kotchka, a renowned strategy designer, at the helm, the company observed shoppers in retail stores, developed and tested new products, and won over a new generation of customers.

As Kotchka, now a board director, states: “Purpose is the starting point to innovation. When companies truly care about their customer, they will be able to innovate.”

Director perspective

How the APRA inquiry helped CBA’s digital revolution

The Commonwealth Bank is not holding back with its digital strategy – its stated goal is to give customers ‘not just the best digital experience a bank can offer, but the best digital experience any financial-services company can offer’.

As part of that agenda, CBA is delivering highly personalised digital products and services. It is also focusing on continuous improvement and that businesses must be prepared to experiment and fail if they want to succeed, as outlined by Catherine Livingstone AO FAICD in the Directors on Digital podcast.

A focus on continuous improvement and customer-centricity are key components in the bank’s response to the 2017 inquiry into its governance, culture and accountability by the Australian Prudential Regulation Authority (APRA).

Scott Wharton, group executive program delivery at CBA, says the bank’s Remedial Action Plan (RAP) has been at the heart of its reforms.

Employee commitment to continuous improvement takes a number of forms. Staff are encouraged to test and learn, ask questions including ‘Should we?’ when developing new products and processes, constructively challenge and share stories of near misses, lessons learned and personal growth.

Wharton says there has also been a call for staff to have a sense of  “chronic unease... With that comes a mantra of escalating early and escalating often” – encouraging employees to raise issues or suggest how to do things better.

This culture of customer-centricity has paved the way for a range of unique digital offerings. Harnessing artificial intelligence (AI) technology and machine- learning techniques has led to initiatives such as providing customers with tailored support solutions in the event of natural disasters, as well as detecting abusive behaviour in transaction descriptions within the CommBank app and Netbank.

“This new model... allows the bank to proactively identify instances of technology-facilitated abuse, a targeted form of domestic and family violence,” explains Wharton.

CBA’s reforms seem to be working. In its final report, the Independent Reviewer of CBA’s plan, Promontory Australasia, noted that the bank has changed as an institution and the weaknesses called out by the APRA report have been addressed.

The reviewer put the success of the program down to two key drivers: strong leadership in managing non-financial risks; and the “rigorous program delivery disciplines applied to the RAP”.

“But we recognise there is still much more for us to do,” says Wharton.