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ON BOARDS AND GEN AI
What are a board’s responsibilities regarding generative AI?
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| Boards are increasingly discussing generative AI (gen AI), but they tend to focus more on the risks than on the business opportunities. The risk side of gen AI is important, of course. In addition to the fundamental risks of business model disruption, there are multiple regulatory, compliance, and governance risks relating to intellectual property, privacy, and data security. There are concerns about the “AI black box”—that is, the lack of transparency around how gen AI arrives at results—and about social biases that may be perpetuated in the data used to train AI algorithms. Accountability for accuracy, the potential for gen AI to stoke misinformation, and even the environmental impact of gen AI’s energy use for data processing all pose additional risks. Given these wide-ranging concerns, boards need to be satisfied that management continually reviews, measures, and audits gen AI activities.
However, it’s even more important for boards to understand the opportunities gen AI presents. This technology has the potential to affect every industry and every part of a company’s operations, including finance, marketing, and strategy. While I do see that some management teams want to move faster on gen AI opportunities than their boards are prepared to, that’s not the case everywhere. Today, boards can catalyze change in the institutions they govern. Often, managers have grown up in one industry or even one company, which gives them a certain view. The board can bring perspectives from other sectors or parts of the world that encourage management to be bolder. By asking the right questions—without crossing the boundary into operational issues—boards can raise management’s aspirations.
Key questions include the following: How will gen AI affect your industry and your company? What is the value at stake? There are already proven, bankable use cases, such as programming, customer engagement, and content creation, in which we see significant productivity increases. Board directors need to understand how this technology affects the competitive environment, because being a front-runner can deliver sustainable advantages.
Another important question boards should ask management is, how will the organization scale gen AI? Here, we can learn from past experiences with technology adoption. In earlier digitization efforts, including process automation and advanced analytics, for example, only one in ten use cases were implemented at scale. This was largely due to people ultimately finding it easier to perform certain tasks the traditional way. We believe the number of scaled applications of gen AI will be even lower. So how do you identify them? How do you organize the leadership structure to guide these initiatives?
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| | | “In earlier digitization efforts, including process automation and advanced analytics, only one in ten use cases were implemented at scale. We believe the number of scaled applications of gen AI will be even lower.” | | | | |
| | | | | | | | | | | | Ari Libarikian on business building | | | Now more than ever, CEOs are making the creation of new revenue streams their top strategic priority. Generative AI is a big part of the reason why. | | | | |
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