David Thodey Catherine Livingstone Alan Kohler

Over just a few short months, Australian businesses saw years’ worth of digital transformation. If digitalisation was gathering pace in the decade leading up to 2020, the global pandemic accelerated it dramatically, unlocking remarkable examples of innovation.

The question is now, how do directors maintain the momentum,build on the digital confidence gained and seize the huge opportunity that digital technology presents? In this episode, we explore the challenges for board directors moving their businesses from survival mode to seize the huge opportunity that digital technology presents.

Guest 1: Catherine Livingstone, AO FAICD, chairman of the Commonwealth Bank
Guest 2: David Thodey, AO FAICD ,chair of CSIRO, Tyro and Xero

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Transcript

Alan Kohler: Hello and welcome to Directors on Digital, a podcast from Microsoft and Company Director magazine where we sit down with Australia’s leading company directors to discover their experiences and insights in driving digital innovation on their boards.

The Federal Government recently released its Digital Economy Strategy, which included research showing the potential benefits to the Australian economy of $315 billion over the next decade. But there are some important things we need to do to keep up the momentum… so what are they? And how do we act on them? That’s what we will answer for you in this series.

I’m your host Alan Kohler, and across the next six episodes we’ll explore digital transformation, revealing how it’s one of the biggest opportunities for boards and directors to unlock innovation and growth. We’ll also discover the opinions and ideas from top business leaders from both Australia and overseas on how they embrace this ever-changing space.

In this episode I share the table with Catherine Livingstone, chairman of Commonwealth Bank, and David Thodey, chair of CSIRO, Tyro and Xero, to discuss how in a world catapulted into remote everything as a result of COVID19 - we go from surviving to thriving - building on the confidence we’ve gained and seize the huge opportunity that digital technology presents. They share how Australia’s future will look in a digitally led business sector.

I started by asking Catherine about the transformation she’s been leading at the Commonwealth Bank since the 2018 banking Royal Commission and whether that, alongside the other tumultuous events that occurred around that time such APRAs prudential inquiry, and multiple court actions made it easier or more difficult to bring about the digital transformation that she clearly wanted to bring.

Catherine Livingstone: Thanks Alan, and obviously I’d emphasise that the achievements of the Commonwealth Bank have been absolutely a team effort. One of the best things that happened to us was the APRA Prudential inquiry, and the fact that we had to stand back from, if you like, our engine room and start again with our policies, our processes, and really think through how we worked on a day-to-day basis. There's obviously a lot more work to do. We're three years into that, but that's enabled us to build on the very strong digital platform that the CBA already had, but with more agility and more flexibility, and if you like, more ability to experiment. So the fact that we'd had to go back and almost start at the beginning with the way we did our business as usual, has meant that we can now have more speed and execution on the strategic side.

Alan Kohler: You came to that job having been a chair of CSIRO, chair of Telstra, and you were also on the government's National Innovation and Science Agenda back in 2008, you came to the job with quite a lot of thought, I imagine, about technology I'm wondering to what extent that informed what you did there?

Catherine Livingstone: I think, informed it hugely, but the very specific aspect is the concept of design, and when we're talking about a digital environment, we just have to remember that there's a lot of art involved in the digital environment, and that comes through design and design thinking. For example, the program that we put together to respond to the APRA Prudential inquiry had a very clear and unambiguous design aspect to it upfront. When we're looking at, for example, on the strategic side and digital and what customers are looking for, we're applying a design thinking approach. So technology is good, but combining it with the art and the human side through design thinking is crucial.

Alan Kohler: David, you were nodding at that. Can you tell us what you think about the addition of design to technology and how important that is?

David Thodey: I think very strongly, technology is the enabler, but at the end of the day, you have to deal with people, and both, that's transformation, cultural change within an organisation, but also how you deal with customers, because technology enables you to do things differently, you know, create a brilliant customer experience, create new revenue streams, do things differently, and you need to really take in that human element as you start to push down into digital. Design thinking is critical for everything, because we get a bit carried away with technology sometimes. We think that it's the answer. It's just a means to do business better, you've got to always be driven by those fundamental principles of business around customer service, innovation, great products, and driving productivity.

Alan Kohler: Around the time you started as chair of CSIRO, the organisation launched what was called Strategy 2020, which I think was a transformational strategy. At the time, Larry Marshall was CEO before you took over. I imagine he cooked that up before you started, to some extent, but you would have then joined the process. Is that right? David Thodey: We're actually now, Alan, moving into what we call the digital agency of the future, which is really interesting because this is the thing. Transformation never stops, and you need to keep designing for the future and thinking about where the business will be, the organisation, and what you need to respond to. So, as we think around how research and science may be done in the next five, 10 years, technology will play such a critical role. So the design of labs, how we collect information in the field, how we use artificial intelligence, how we use the data we collect, all this is really important, but creating that culture and enablement is really important, especially with a national science agency like CSIRO, which is you know, I mean, our scientists are usually about 10 years ahead of where the board or management is at any one time as well.

Alan Kohler: Catherine, it's interesting, I remember reading the various things that Commonwealth Bank was putting out on technology and it was all about, at the time, being the best in the world. How important do you think it is for a company in Australia to think globally rather than to simply measure yourself against your local peers?

Catherine Livingstone: Alan, it's just a threshold condition. 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. I mean the global platform players are in Australia. They have established customer expectations for service, for product quality, for speed of response. If you can't match that, the customers will find and can find other global offerings. It's also a question of aspiration. For companies that, or businesses that start with the aspiration to be global, they will set themselves ambitious stretch goals and that's an underpinning to innovation, is to be really ambitious, to be prepared to fail, to make mistakes, but to think really broadly, that's crucially what the Australian economy needs at the moment, because we are a very un-diversified economy.

Alan Kohler: One of the things that interests me, Catherine, is a global industry that's come out of Australia is Buy Now Pay Later, which Commonwealth Bank has jumped into pretty early on with a relationship with Klarna, the Swedish one. What lessons do you think can be learnt from that experience? What firstly, the bank has done, but also in general what the innovators did in Australia to make that happen?

Catherine Livingstone: They started understanding the problem they were trying to solve. I'll come back to design thinking. They didn't look at what can technology do, they started with the problem. And, if you look at Afterpay, it's a classic case of an overnight success that took years and years and years. So again, staying the course, experimenting. If you look at the history of Afterpay there was a bit of experimentation, there was failure along the way. And then of course they're successful so we all think it happened overnight. The big lesson is: it takes a long time to be the overnight success.

Alan Kohler: The CEO of Data61, David, Professor John Whittle said something like, "We've seen about 10 years of digital transformation in a few months, and there's no evidence that that trend is going to stop." What sort of response do you think you've had to make, and other boards have had to make in response to this acceleration that's occurred?

David Thodey: I think COVID has forced us, Alan, to adapt a lot of technology, like medical consultations, even digital signatures, or having virtual AGMs. So I think that it really opened up people's awareness of what the technology can do, and it wasn't as hard as we thought. This is but the beginning. This is sort of like using technology. Digital transformation, digital enablement is a far deeper change you need to put through the whole organisation. These areas of video conferencing, asynchronous communications, all those things that people talk about, is superficial to the deep transformation. I mean, I know Catherine talking to about the bank, about how you change platforms, we see that at Ramsay Health Care in terms of how we're delivering different health experiences to patients, but it takes a lot of re-engineering, real attention to detail, and then using the technology to enable a different experience, or do it in a more efficient way. So I, I hope that many companies in Australia do take it further forward, but that’s yet to be seen.

Catherine Livingston: So I, I agree. We'll have to stop agreeing David.

David Thodey: We will.

Catherine Livingstone: I think we're at risk of mistaking the fact that we are now all communicating on digital platforms and more comfortable with that, mistaking that for true digital engagement and a truly digital environment. And I actually think the exemplar of what it takes, if we can think about it, is Service New South Wales. So if you look at the New South Wales government has invested for years in taking the government platform to a truly digital basis. Then we had COVID, and then Service New South Wales app came in and we're all using it. It's not the app, it's what it's built on that's enabled the truly digital environment. So the communication mechanism is the app, but what's underneath it is the enabler, and that's a model that we should look at in companies, that you have to invest very deeply across your whole business before you can say you truly have a digital environment. Digital is, as David said, it's just the enabler, but you have to understand your business model and the strategy to know which aspect of digital, which tools, where, are going to deliver a better customer experience.

Alan Kohler: David, you're a chair of a couple of companies that are digital natives, Xero and Tyro, how big a difference is that to be a digital native and what does it mean and how do you think companies that aren't digital natives need to approach competing with them?

David Thodey: It's an interesting term, this digital native. These companies were, I think as people were to say, were designed in the cloud, which was sort of in this virtualised world. They're very different businesses, Alan, because the way they build the platform is in a multi-tenant, many users, it's all virtualised, and therefore they have the ability to design for how they want to be rather than having to transition from traditional old legacy systems. But their intent is still the same, you know, it is still around great customer service, product innovation and driving the most efficient service delivery possible. And so if you look at a company like Xero, they build software, just completely differently to the way we did at Telstra. Telstra, as much as we wanted to change, we would work on all these change programs, and then we'd have to deliver a whole new release of software, we'd all hold our breath for the weekend, and then we'd deliver on Monday morning and hope that the call centers still worked, whereas in a company like Xero, we have 200 groups of about 10 people each, all working independently, delivering code every day, and they interact together through, we call them APIs, but they're, there's a standard way of how they talk to other groups. It's very networked, and so these cloud-enabled platforms, or you call them digital natives, just work differently and they have the luxury of coming into that world, whereas a longer term company has to transition. However, let me assure you, Alan, in five years’ time, we will have to redo it again, probably, so we don't rest on our laurels.

Alan Kohler: Has that been similar to the bank, Catherine, in the sense that there's been a whole lot of cloud-enabled businesses, FinTechs and so on and competing with the banks? Have you had to bear that in mind and change the way that the bank does things?

Catherine Livingstone: Absolutely. I mean taking advantage of a cloud-based environment is central to the bank's approach to technology, use of APIs, and clearly because the whole concept of agile and agile software development is increasingly embedded. The bank is taking the approach now of technology first when it comes to looking for a solution. So think about how you could apply technology to a particular product, customer-need process, don't build the process in the old way and then try and reverse-engineer the technology into it. So the mantra of technology first front to back, safe, sound and secure, they're the sort of underlying philosophies now, and just speed. But what people are looking for in a digital environment, customers want speed, they want accuracy, and then they want insight. And that is what is so crucial to a truly digital business model.

Alan Kohler: Technology first must be a big change.

Catherine Livingstone: For CommBank, no, in the context of the current environment. Technology first does mean cloud, it does mean APIs, and it would have meant something different five years ago, and it'll mean something different in the future, as David said, these business models evolve.

David Thodey: These technologies do continue to evolve and change, but the fundamental business problem you're solving doesn't change, and therefore you've got to know what the technology can do to enable you to do it differently and to innovate in that redesign.

Catherine Livingstone: If I come back to the speed issue and the capability issue, because of the compute power, and availability of data, there's actually a whole other dimension now, which is the ethical dimension, over the top. And that is something that boards, companies, universities, we now have to be really alert to, because using these tools, we've got to be very well-informed and careful users of the new technological tools.

David Thodey: Yeah

Alan Kohler: And is there much more to that than data privacy?

Catherine Livingstone: Oh, absolutely. David Thodey: Absolutely. Look, just because it's possible doesn't make it the right thing to do, because what you do use the data for, Alan, how you interpret it, if you analyse something and you know something about a client, what you do with the information is as important as actually doing it, and having an ethical framework that you can apply to that application. I actually thought that Woolworths articulated that very well when they were talking about what they're going to use the data on consumer expenditure about and how they would always seek permission, and they were actually pulling back from where they were. I thought Brad was really great in that.

Alan Kohler: One of the good things that Brad Banducci at Woolworths did was to be transparent about it, to actually talk about what they're doing. How important do you think that is?

David Thodey: Critical. I mean we have to be open and frank because in this area, we don't know all the answers. So transparency is sort of like step one, and then we can move from there.

Catherine Livingstone: It's important to think, what are the unintended consequences here of use of data in a particular way or use of particular data? As David said, just because you can doesn't mean you should. And thinking through that is, again, it's part of the art and the design of using technology, and it's a second and third order issue, whereas the first order issue is boots and all in, because I can do this. I think that's where we have to pause, and boards have a particular role to ask the question, have people thought through? Have they thought through the algorithms that are being applied? The particular models that are being used? Do they know how they work?

Alan Kohler: And another aspect of the same thing, I guess, is that you've got to be careful of hacking, cyber security. To what extent do you need, as a director, to do that hand in hand with the digital work that you're doing in other ways?

David Thodey: I think I've done five cyber test situations, been through a ransomware attack, Alan, and they're not pleasant. And so you really need to be vigilant. Suddenly you can be attacked, they can say, "Hey, we've got access to all your customer information," they put a little bit out on the dark web, and the next minute they're asking for $5 million in Bitcoins and what are you going to do about it? This is just a reality of the digital age. So we all have to be vigilant, be aware of it, work with management, because it is the world we live in, just like theft has gone on for years, ransoms have gone on for years, but the bank would be very big in that, Catherine, wouldn't they?

Catherine Livingstone: I hasten to say, not at the bank, but in another smaller organisation, I've been through a ransomware attack, directors are increasingly being faced with this situation. Two things. One, if we talk about truly digital environments, the problem with cyber is it undermines the trust and the confidence in those environments and that diminishes the value, and in fact, makes people very nervous, it makes them want to disconnect from those environments, which is, of course, going in the opposite direction from what usefulness and productivity, et cetera, could do. The other side, which comes back to technology versus humans, is that much of the cyber weakness is through people. People passwords, people clicking on attachments, people just not being careful, and cybercriminals using what they can find in the digital environment such as through LinkedIn, putting two and two together, finding access into a system, then finding passwords. The weak link is we, people, actually. [DT: I’m afraid it is] You can have all the technology in the world, but we are the weakest link.

David Thodey: That is so true. [laughs]

Alan Kohler: What should you do with ransomware? Should you pay them or not?

David Thodey: Well, really good question. I've been through some simulation examples where, based on the values we had and in protecting our customers, we concluded that we would pay, which I would start normally, Alan, by saying, "No, I will never pay," because, you know for the normal ethical standards, we all hold, that, why would you ever pay the bad guys? But there are times when I could see that the potential impact on the company and its people and its customers could be so high, and you've ascertained that it is a real threat, not an attempt. Yeah, I could, but with great thought before I did it.

Catherine Livingstone: The first thing that's troubling is that many of these players, such as the dark side with the colonial pipeline, they're just providing ransomware as a service. So there's a whole value chain in this cybercriminal world. So you don't actually know who's attacking, if anyone, it's just various people along that value chain, taking some value out of the chain. The lesson from it is where you hold your personal data, employee data, customer data, patient data, whatever it is, and how protected that is. It's back to the crown jewels and making sure that it's back to the “five knows” of what you've got, where you've got it, who's responsible for it, who can change it and access it. That just becomes crucial. And your backups, too, and making sure that they're effectively air gapped, because if they're on the system, then they're as vulnerable as your primary system and data.

Alan Kohler: So from ransomware to responsibility of the board, and how much searching and learning should directors be doing on an individual level to make sure they’re fully informed? It’s a question most directors would be asking themselves every day...

David Thodey: Every director needs to make sure that they are keeping current with latest trends and investing time to do that. There's some you do at a board level, but that's what a director's role is. No matter what industry you're in, and you need to keep across technology. It's like accounting. I know how to read a balance sheet. I need to know about technology as well, because they are so fundamental to where companies are going.

Catherine Livingstone: The whole point of a board is you have a discussion and you can't have a discussion unless you're informed. And if you just have the one person who understands what's going on, well are they going to discuss among themselves? Increasingly the responsibility of directors to be broadly informed is becoming a very significant responsibility.

Alan Kohler: So I'm just wondering whether the change in the responsibilities that the boards have, does it mean that boards have to reach further into the organisation than perhaps traditionally they've done?

Catherine Livingstone: I don't think so, Alan. I think it's more a question of board and management together being much more outward looking and reaching out into the environment to understand the dynamics, what's going on, customers, technology, and doing that together so that, when decisions need to be made as to the direction of the business and so on, everyone is really at the same information, knowledge, and understanding level.

Alan Kohler: Does that mean that the relationship to some extent between the management and the board has to change?

Catherine Livingstone: I think it doesn't have to change, it just has to be a very good working relationship, and an understanding of risk, strategic risk, and the potential for failure along the line. Because experimentation is a core part of strategy, and it will involve failure, but that's the only way you learn. And especially when you're dealing with fast moving environments, environments where you have to learn together, the board and management has to learn together. You need to be prepared to experiment, prepared to fail, and that's how you'll succeed.

Alan Kohler: Catherine you've argued I think that Australia needs broad-based up-skilling of the workforce to provide familiarity and capability and so on, and to deepen the intellectual capital infrastructure. How should we go about that?

Catherine Livingstone: I can use an example. At University of Technology (UTS), the universities developed various modules, basically micro-credentials and it's working with a number of different organisations, some corporations, some government, to provide those modules developed with those organisations, to the people in the organisation as skill relevant. So, there are some entry skills, some more sophisticated skills in data and data analytics versus just basic digital literacy. But anyway, applying those modules across an organisation to up-skill hundreds of people at a time. All online, all accredited so that they can take those micro-credentials with them wherever they might go into other organisations, but they themselves have been up skilled.

Catherine Livingstone: And I think it's that broad-based up-skilling is the responsibility of corporations and of universities to provide some of the raw material for that. But unless we make that sort of intervention and intervention at scale, Australia does not have enough of the required skills and the overall skill level to truly participate in fundamental digital environment. And getting there bit by bit hoping we graduate enough people from either the vet sector or from universities, we will not do it. So, it's this more significant intervention and broad base that will be absolutely crucial to maintaining our competitive position in the global economy.

Alan Kohler: But I think you probably saw that when you were on that panel about the national innovation and science agenda, which was quite a while ago, do you think that it means that the ball has been dropped since then?

Catherine Livingstone: Well, I certainly think that we have such a shortage of, shall I say the STEM skilled individuals. We've got companies, I mean like CommBank and others, we can't find the people we need in Australia. We have to bring them in from offshore. So, the tragedy is we have plenty of the jobs available in Australia. We just don't have the skills to match. And that's a very unfortunate situation to be in. So yes, to answer your question, we obviously didn't do enough of what we should have done 10 years ago. And we now are in this difficult situation. That's why I'm suggesting that we do need to make a more significant intervention.

Alan Kohler: Do you find the same thing David?

David Thodey: Yeah, I do. Alan. In a way it's not surprising. In another way it's disappointing. But the fundamental issue is when you’ve got such a transition going on around the world, around technology enablement, we both need the skills and technology, but they then seep out into every industry. And I mean, whether I talk around agriculture or health, or I talk around mining, or I talk around financial services. Every industry needs tech skills and often they can come from mathematics or wherever. So, we need to keep equipping people to be able to adapt to this new world. Otherwise we will fall behind. And I think that's what we really need to focus in on. It's not the tech industry, it's technology skills within all the existing industries. I was with a group of grain growers from Narrabri the other day. I tell you, they knew more around machine learning, AI, big data, than people I talk to in the office, I mean, because that's their world of analytics, trying to understand the productivity per square meter in the paddock, how they’re using satellite imaging. This is the real world that we are going into. And those that grab it will drive enormous value and jobs, and you know, in a very real way. So, this is not about inner city tech precincts. This is about enabling every Australian.

Alan Kohler: During the initial Covid crisis in 2020 Catherine Livingstone laid out a challenge - referencing parallels to the Spanish Flu pandemic of 1918, which infected an estimated 500 million people worldwide - about one-third of the planet’s population. She noted that in the same way electricity drove dramatic transformation after the economic shock of the Spanish Flu, that pervasive digital technology must do the equivalent in the 2020s So how can we be more purposeful in how we build out a national digital technology architecture?

Catherine Livingstone: It was not just electricity, but it was the real deployment of what electricity could enable. Here we have a COVID pandemic, and everyone has become more familiar with a digital environment, because they've had to, through basic communication and getting some things done. What we could and should do now is leverage that greater awareness. And also the reduced fear. There were a lot of people who would be saying, "Oh look, I don't know. I don't know about computers," and all of a sudden everyone's using everything. They're ordering online. Not just business, but families. They're using your Menulog, Deliveroo. They’re totally familiar and comfortable with the digital environment. So let's leverage that.

Catherine Livingstone: I actually think government could be a real catalyst here, because applying or generating and developing a truly digital environment in government, I've spoken about New South Wales, but doing that at the federal level could be an incredible catalyst in terms of exposing the data that government has, on which business models could be built. Just the productivity in the national system by dealing with government and finding it far more efficient and easy and speedy and accurate. It could be an extraordinary catalyst to take the community with that new awareness, and this is the way we engage with government, because government has such a breadth of interface with the community. And the other side I come back on, the business side, is back to the skills. If we were prepared to invest in the skills, again, this could be the step change for Australia.

Alan Kohler: And when it comes to digital transformation, what do you think are the key blockers for Australian companies, and the enablers on the other side of that?

Catherine Livingstone: One of the blockers I think we've spoken about already is the cyber risk, and the consequent loss of trust. So how we do our best to unblock that. And the enablers, again, I would come back to skills, skills, skills. And skills developed through experience, through upskilling, through new graduates, through using post-docs and PhDs in business. Through immigration. We haven't touched on immigration, but I would say looking at bringing younger, skilled people in as part of our immigration policy will be crucial. People who are hungry to make a mark, who are ambitious and have the skills to deploy, that they bring energy. We don't need the money, we need the energy behind those skills. So I think this would be a crucial aspect of any immigration policy going forward.

David Thodey: Board directors somehow think that this digital technology transformation is all a different language and that they're not well positioned to steer into it. I don't think that's true. I think the principles of good business apply. Yes, you've got to spend time understanding the language and understanding a few of the principles. So I think that we need confidence and we need people to allocate time to it, both in the education and also understanding the implication. So the blockers is a lack of confidence, lack of time and the enablers is getting in, giving it a go, and seeing how you drive to outcomes. I want to stress. This transformation must be about driving business outcomes. It's not cool technology. It's about what it does into the business and then you focus there. You'll be amazed at the exciting things you create.

Alan Kohler: How important is it for a company going through a digital transformation in this way to be a good citizen to meet community expectations?

David Thodey: The expectations of society, of citizens is far higher about the responsibility of boards and of executives, and you need to recognise that and steer into it. Now, at the end of the day, you are there for shareholders. You look at how their money has been invested and how they're getting a return, but it's in the context of being a responsible citizen in the wider community and therefore they go together. I've never found them in any way antithetical. I've always found them as quite harmonious really. And it's really important that companies take a stand and are engaged in all the social issues that we find ourselves in today and should be leaders in it.

Alan Kohler: Stay with me as we head into space for a moment and take a look at the NASA Technology Readiness Level (or TRL) framework. It’s a type of measurement system used to assess the maturity level of a particular technology - and it’s a very useful tool for directors facing digital transformation, Catherine explains more here. Catherine Livingstone: So it's a very simple framework and it's got nine steps, but you can really divide it into three zones. And the first three steps, zone one, developing the idea or the concept, the middle zone, another three steps, is taking that concept, proof of concept, prototyping, demonstration, scale up, and then the last three steps is really the zone of commercialisation. The value in the TRL scale is it becomes a vernacular that businesses, researchers, policymakers can use to understand exactly what we're talking about. Our problem is not commercialisation, our problem is not the research, our problem is that middle zone, which is translation. That's our problem in Australia. That's where we should focus, and policymakers at the moment, we're actually looking at that and how can we improve our performance in that translation zone. But it stops researchers thinking they've got a brilliant idea that's worth lots of money. And it stops companies thinking or underestimating what it's going to take in time and money to translate an idea into a commercialisation reality. It just puts a discipline in the conversation across groups that wouldn't normally be talking to each other, or might be talking at cross purposes.

David Thodey: I agree with Catherine, that's where we need to focus. And that's why something like main sequence ventures I think, has been a great initiative where we took some of the money that I should quickly say Catherine got for Australia from the WiFi project. We got some wonderful royalties and we reinvested that to the venture capital group, but it's very focused on trying to get the science from the lab, into that translation phase, through that death of despond. And if we can do that and then as we can collaborate across universities, across CSIRO, across venture capital, that's where we need to be and look at it for how we can be more effective as a nation. I like the TRL scale and I like that we work better together as well.

Alan Kohler: Now, you’ll probably realise that my guests in this episode are very busy people, and unfortunately Catherine had to leave on time, however - we were able to keep David around for a few extra minutes, so I asked him a bit of a cheeky question...

Alan Kohler: You and Catherine obviously had a partnership with Telstra where she was the chair, you were the CEO. How important is that partnership, and the effective working of that, particularly when you're trying to drive a transformation?

David Thodey: It's absolutely fundamental. If the chair-CEO relationship is not strong, everything will not work as effectively. And that means the chair needs to be very clear about what their role is, as does the CEO. And I think that there's really three things that I've always looked for in those relationships. Firstly, it's trust and when I say trust it's not a blind trust. It's based on delivery and understanding where each other is coming from. And you get that trust right then and it gives you the permission to go and do things. Then there is a ruthless honesty and integrity in the relationship where there's always times you're not quite on your game, or you're not quite hearing what the board's saying, and the chair's got to be able to really lay that out to you. And there's times when it goes the other way, too, which is done between the two of you, but being able to have those honest discussions is really important. And that doesn't mean agreeing on everything. It means having a meaningful relationship that you're always looking for what's the best outcomes for the business in the environment in which you're working. You get all that right, you'll really do well, so clarity of role and disciplined folks. I've got to say, Catherine is one of the great chairs in Australia. She is disciplined and rigorous, and sets up that environment for success.

Alan Kohler: Is she ruthlessly honest?

David Thodey: Yeah, she is. Yeah, in a one-on-one situation. I mean, you pick your time, but she always puts it out there. If things are going well, it's recognised, but if they're not, then there's some tough discussions and that's the way it should be. So yeah, she is.

Alan Kohler: And if you can't agree, who wins?

David Thodey: Look, the chair wins. There's no question or, I mean, as a CEO, you always have the right to say, "Hey, thank you very much. I'll move on." But no, I've never been in a situation like that. Usually you work it through, you try to understand each other's perspective on what the issue is and agree your way forward. I don't think it ever needs to end in a complete separation, but no, the chair plays a critical role. As you know, the one thing that boards do and chairs do is appoint the CEO.

Alan Kohler: Well that’s it for this episode of Directors on Digital, thanks again to Catherine Livingstone and David Thodey. So as a director, what do you need to do now?

  • Although technology is great, you need to combine it with art and the human side.
  • Design thinking is crucial. Start with your customers and some problems that need investigating.
  • Get yourself up to speed - allocate time to educate yourself and the board, the language and the implications of it all. Your job as a director is to ask the question - have we thought this through?
  • And finally, but crucially, cyber security starts at home - it’s the key to building trust.

Remember the “five knows” - know what you've got, where you've got it, who's responsible for it, who can change it and who can access it.

There’s a bright future ahead for digital technology transformation - it’s about confidence - if you don't give it a go, you'll never find out.