How much of a role do innovation and digital technology really play in the decisions of boards of directors?

However, the view that digital transformation is primarily a matter of execution is still widespread: so what should change in the way a board assesses a technology investment?

It really is a paradoxical issue: there is a substantial body of long-established literature on the subject, as well as striking examples of companies such as 3M and Caterpillar, which have built up virtually unassailable leadership positions in their sectors thanks to a unique technological advantage over their competitors. However, whilst being aware that technology is precisely the main source of this competitive edge, there is a tendency to be timid and hesitant when it comes to drawing up medium-term plans aimed at achieving this objective. Over recent decades, a belief has gradually taken hold amongst senior management that ‘technical problems can always be solved easily’ and that ‘competition is primarily based on other factors’, such as marketing. Reality tells us that this is not the case: those who are able to bring solutions to market that guarantee customers better performance at lower overall costs manage to succeed; the others do not. But to achieve this, a merely incremental approach is no longer sufficient, and companies are programmed to take one step at a time, taking on as little risk as possible. It is essentially a cultural problem.

Is the presence of one or more directors with a strong digital background sufficient to steer innovation, or is a tech culture shared by the entire board required?

Addressing these issues by appointing high-calibre individuals to the board of directors is a crucial step, but it is not enough. The point is not merely to be able to draw on the expertise of specialists in the digital sector or in new manufacturing techniques, new materials, new formulations and so on. Rather, it is urgent that companies are able to draw on the strong and independent input of individuals on the board who have the ability to assess the quality of all the elements that contribute to the overall innovation process.

When it comes to successful innovation, there are not many manuals to follow or ready-made formulas that remain valid over time or can be rigidly applied from one context to another: rather, one must bring to these forums a wealth of experience and a capacity for critical judgement with which to scrutinise the entire engine of the company’s development, which must navigate ambiguity, uncertainty, complexity, unforeseen events and changes of direction. Generally speaking, a board of directors tends to favour options that minimise risks and optimise known variables: this ‘mental model’ is suitable for the day-to-day management of routine matters, but does not produce breakthrough results in the medium term. In any case, with a few commendable exceptions, boards of directors today are unable to make high-quality decisions in this area, because they do not regard it as a genuine priority.

Are large Italian companies aware that there is a risk of not investing enough and losing their competitive edge? And how should this risk be assessed in governance decisions?

The answer I would give for Italia, based on my personal experience spanning almost 30 years, is ‘no’. The prevailing outlook today is short-term, inherently risk-averse, and geared towards curbing investment, including that linked to innovation. Certainly, the fact that the time horizon for governing bodies – particularly in the case of listed companies – is three to four years at most does not encourage bolder action. It is easy to demonstrate that, in the decades straddling the turn of the century, the propensity of European industries to invest gradually declined: where possible, companies preferred to secure their existing positions or pass the baton to others, thanks in part to the contribution of private equity. And whilst it is true that external factors have also contributed to this attitude – starting with a stable global geopolitical landscape – it is equally true that this balance has now been disrupted and we must make way for new beginnings. What might these be? For example, returning to taking risks and committing to ambitious medium-term projects; otherwise, it will not be possible to compete with those who have already reaped the rewards of this path, China foremost among them.

Looking ahead to the next 3–5 years, how will the relationship between the board of directors and technology change when we are living in a society ‘co-piloted’ by AI?

In time, we will also assess the role of artificial intelligence, which will be integrated – hopefully judiciously – into business processes to unlock its full potential. But the issue of innovation for the survival of our production systems is much broader, and we need to work to ensure that companies change their perspective. How can we manage external innovation at a time of great dynamism and vitality? What makes sense to keep in-house? How can we ensure that the risk profile of new initiatives is progressively reduced through constructive dialogue between start-ups and established groups? It goes without saying that these are unavoidable strategic issues for everyone. Companies on the Old Continent are suffering from an erosion of their established positions, yet they struggle to admit that others have worked harder and better precisely on this frontier. On our boards of directors, we need to give all this more room to breathe, with the help of competent professionals.