A Massachusetts Institute of Technology (MIT) study has found that companies with experienced technologists on their board deliver better financial results than others.
That is because IT-savvy directors strengthen the hands of CEOs willing to exploit new technologies in order to streamline operations and improve customer experience.
As part of the study, the institute analysed around 1,200 publicly traded companies with revenues of over US$1 billion.
In information industry, around 57% of company boards are digitally savvy, but board members with a broader understanding of technology account for only 24% in retail, and less than 10% in transportation, construction, and mining.
Considering the report, companies need to have at least three technologists on board, and it is better if they had previously worked as chief information officer (CIO) or chief technology officer (CTO).
“We saw little difference in financial performance between companies with one or two digitally savvy directors and those with none. But companies with three or more digitally savvy directors had 17% higher profit margins than those with two or fewer, 38% higher revenue growth, 34% higher return on assets, and 34% higher market cap growth.”
These days, every business is trying to employ some or the other technological tool to bolster or ease its operations. But there is no proven playbook. Wasteful investments often undermine the companies.
Therefore, the institute says, the active involvement of a savvy board can give companies a performance edge over competitors that are facing similar challenges.