Strategic Considerations for Boards in the Age of AI

Practical Application of AI in Business Strategy from the Board’s Perspective

The Nasdaq Center for Board Excellence and international law firm Mayer Brown recently hosted a two-part panel discussion in London focused on key issues and topics that should be on board agendas with respect to artificial intelligence (AI). According to an informal poll of the audience to gauge AI progress indicators and kick off a discussion about how business strategies are evolving, one-third to one-half of attendees indicated by a show of hands that AI is a core component of their organization’s strategy; about one-quarter indicated that someone in their organization serves in an AI leadership position.

AI is moving very fast and with a lot of uncertainty. While most boards are discussing AI, many of those discussions are around proof-of-concept, singular use cases or pilots, rather than on the deeper question of the strategic, long-term implications for the organization or its business model. Boards should be looking at the three- to five-year horizon and talking about AI as a business topic—a technology that is facilitating a new business model.

Because AI has the potential to be so transformative, boards will be more inclined to dive a bit deeper on this topic, but their discussions must remain strategic. Regardless of where and to what extent an organization uses AI, it must regularly be on the board’s agenda—in part because technology is changing so rapidly. AI is no different than any other business risk, and boards need to understand what guardrails are in place and how AI processes are being tested, monitored, and audited.

AI-Ready Boards

As for anything within their remit, boards will need to understand AI well enough to provide effective oversight of their organization’s AI strategy, implementation, and outcomes—and will need to carve out enough time for doing so. According to James Beasley, Head of Board Advisory in EMEA at Nasdaq, being AI ready is “less about getting AI skills on the board and more about doubling down on what a good board looks like today – diligent, careful, interested, and engaged directors understanding and grappling with the problem and using the tools at their disposal.”

Other event panelists agreed that directors themselves do not need to be cloud or AI experts, nor should they rush to fill a board seat with an “AI director.” As one panelist explained, doing so may “put too much pressure on a single person to have all the answers, and 18 months from now that director might no longer be what the board needs.” Boards benefit from having a cross-section of directors from relevant fields to help the board make the right decisions.

Boards are advised to leverage the insights of internal and external experts. So that directors can have effective board-level conversations about opportunity, risk, and strategy, they do need to be able to rely on information and transparency from management, leverage knowledge of internal and external experts, and commit to educating themselves, including through hands-on, experiential engagement with AI. According to Oliver Yaros, a partner in Mayer Brown’s AI practice, perhaps the most critical skill directors can have is their ability to ask the right questions. To this end, panelists offered several board-level questions that boards should be asking when discussing AI:

• Are we as a board thinking strategically about the impact AI could or will have?
• What impact could AI have on the organization’s biggest cost centers and revenue drivers in terms of quality, productivity and service, costs and expenses?
• To move forward successfully, how must we transform our legacy technology, shift investment, and allocate capital?
• What are the potential barriers to effectively embedding AI into the business strategy?
• Are we open to the possibility of changing strategic direction?
• How can AI be used to accelerate our entry into a new competitive environment?
• Do we invest the time gained by using AI for something that is for growth of the company and the betterment of society, a net positive, or is it just a short-term gain?
• How do we deal with disruption that arises from implementing new AI systems and steer through it?
• What resources can we leverage to better understand AI and its potential benefits and risks to our organization, stakeholders, shareholders, etc.?
• If today we were building this business as a new business, how would we be using today’s technology to be successful?

Other best practices recommended by the panel include, ensuring AI is a regular topic on the board’s agenda, inviting external experts to board meetings, creating a cross-functional committee with legal, compliance, HR, and IT expertise, and as stated earlier, and informing the board about all the ways AI is being used in the business.

Looking Further Down the AI Road

The road ahead is anything but straightforward. Complex questions about its use, costs, trust, risks, and opportunities—both positive and negative—will be part of the AI journey for the foreseeable future. Access is also a challenge—and an imperative.

According to the United Nations’ International Telecommunication Union (ITU), approximately two-thirds of the world’s population has access to the Internet, but among low-income countries the number drops to one-third. While augmenting and empowering humans by leveraging AI is a good value proposition, panelists cautioned the need to address the question of access. Generally, populations in the global north with their access to funding, education, and technology are at an advantage, while populations in the global south are at a disadvantage. “The question for us is how to bridge that divide and ensure that developing countries also have access so that they can be included in the ‘future world.’ If we solve the access issue, the more we move into virtual value creation, we create new economic opportunities for a lot of people around the world.”

Whether boards view AI as an enabler, augmenter of human ability, or as a replacer and destroyer of jobs will depend on what we collectively do with AI, according to Marie Lalleman, member of the boards of Criteo, PayFit France, PATRIZIA SE, and Trainline and advisor to Bain & Company. “There is a responsibility help to transform jobs and enable people to contribute differently.” Overall, panelists expressed optimism that AI will augment human capabilities as an enabler that will boost productivity and transform peoples’ roles and peoples’ lives.

This is the second blog post in a two-part series. For more insights on this topic, read the first blog post here: Board Perspectives on Navigating the AI Revolution.

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The views and opinions expressed herein are the views and opinions of the authors and do not necessarily reflect those of Nasdaq, Inc.