It’s time to take AI on board
How can boardroom members embed AI in their insight, foresight and oversight on business matters that drive company’s strategy in the market?
In times of continuous transformation at speed, the role of a company’s board has become increasingly valuable in moving forward the organizational strategic agenda, amid rising complexity, innovation, and periodic crises at macro level. The latest milestone in the advancement of technology, Generative AI, is testament to the importance of future-proofing the business strategy to respond to the revolutionary breakthroughs which can impact organizations’ entire value chain and modus operandi in the market.
According to a study performed by Gartner in 2022, 89% of board directors state that digital is now integrated in all business growth strategies. Considering this view, it becomes essential for the board to understand the digital landscape and support adoption of technologies that drive long term value.
The technologies that BoDs cited in the research as critical to the digital success of their organizations are predominately in the AI sphere:
BoDs are now in a position to weigh in on how the technology investments are linked to strategic objectives and what business opportunities can be unlocked. With an estimated $300 billion AI worldwide spend by 2025 (IDC Worldwide AI Spending Guide, 2022), the stakes are high!
Due to the limited bandwith that organizations have to absorb change, management must carefully identify the initiatives to invest in, considering that technology changes at exponential rate. BoDs can steer companies in selecting the the fit-for-purpose technologies that will deliver the most business benefit and strike the right balance between medium term results and long term growth and competitiveness.
What are some of the critical aspects that the board can grasp in relation to AI, in order to provide such guidance?
1. Digital fluency
Digital fluency is important for Boards to be able to not only support management with the right insight, but also challenge their opinions. In absence of a sufficient level of awareness, the Board relies on the management’s own understanding and assessment of the opportunities.
Furthermore, as AI and automation opened the door for Business to influence Tech adoption, it is an opportunity for the Board to facilitate the alignment between business and technology leadership and to speak a common language that draws on the best of both perspectives.
BoDs can aim to have awareness of the latest digital trends in the industry, but also, to be able to see long term opportunites, stay up to date with outside the industry innovative digital solutions and technology ecosystem.
The goal is not to become experts on technology, but rather understand its implications for purposes such as generating new revenue streams, increasing market responsiveness, or developing new business models.
2. AI value case
Looking at AI investment, BoDs seek clarity on how to define and measure the value that it can generate for the business. This is a challenging aspect, as the mix of qualitative and quantitative benefits is not as straight forward as in the case of implementing a stand alone solution such as an ERP.
AI is a set of multiple capabilities, thus the extent to which an organization leverages it also depends on its wider IT landscape and complimentary technologies that can maximize the value. AI combined with task automation (eg. RPA), process orchestration (eg. Business Process Management), or process mining, to name just a few technologies in the hyperautomation* spectrum, can significantly transform the way organizations operate. Furthermore, considering the maturity of AI technologies, it is fair to also take into account that the ROI is not the only metric to evaluate potential for innovation and long term growth. BoDs should balance the need for strong ROI with the Test and Learn approach, which might not yield results in the short term, but foster a culture of innovation, critical in future-proofing the business.
The BoDs can take a holistic view of the value case presented by AI to their organization, across multiple dimensions: customer, employee, financial, innovation and society value. To achieve that, it is required to engage not only with the CIO/CTO, but with the other C-level executives that can pull together all the perspectives and provide the Board with pieces of the bigger picture. This also helps to cut through the internal politics and achieve endorsement of larger, integrated technology investments.
One important aspect is that boards should be concerned not only to approve the investment in AI, but also to hold the management responsible for delivering on the implementation and achieving the value for the organization.
3. AI risk management
As AI models become more strategic in the near future, IDC reports that 60% of the surveyed CFOs of large global enterprises will incorprate AI risks as part of their enterprise risk programs by 2025.
BoDs might need to develop AI risk acumen to be able to exercise effective oversight. AI related risks such as cybersecurity, regulatory compliance, explainability, bias, reliability, and personal privacy require close attention as they can present ethical challenges for companies and boards.
Balancing the commercial benefits with the potential risks, BoDs can develop a clear position on their risk appetite and require the adequate level of assurance in the effectiveness and efficiency of the AI capability.
To conclude, Boards should aim to have the understanding of the above topics to ask the relevant questions and guide management in the right direction to achieve the organization’s strategy and ambitions for growth.
The Board can asses its own readiness to take on AI conversation by answering some critical questions:
- How does the Board make decisions in relation to tech investments and how much does it rely on management or external advisors? a) Is there a need to change the composition of the Board and infuse more technology talent? and b) How does the BoD get educated and knowledgeable to be able to tackle the complex topics organizations are are facing in these disruptive times?
- How does the BoD collaborate with the management and how does it bridge the gap between the Business and Technology priorities to have shared goals?
- Is the BoD successful at ensuring that tech investments are driven by long term strategy, considering the risks and opportunities?
- How often does it talk about tech investments? Is it a regular point on the agenda?
The answers to these questions can support the Board of Directors in assessing the digital gaps in its own structure and actively becoming engaged in exploring the art of the possible with technology and shape their company’s future.
One of the topics on the next board meeting can be Generative AI – the opportunities and risks of adoption in the bigger context of digital transformation. What does ChatGPT has to say about this?
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