AI for Non-Executive Directors
A Strategic Guide to AI
According to Dealroom, global VC investment in Generative AI is projected to hit $40B in 2024. There are over 33.5k start ups and scale ups in this space. The corporate value expected to be unlocked by AI technologies is estimated to be an additional $2.6 to 4.4 trillion in global corporate profits annually (McKinsey). As a non-executive director and corporate innovator, this is a critical time for strategic evaluation of the opportunities, risks, and use cases for AI. Fundamentally, this is not an area which can be ignored by any modern company board regardless of size.
The role of Non-Executive Directors (NEDs) and boards has never been more challenging or more crucial. As artificial intelligence reshapes industries and business models at an unprecedented pace, NEDs must develop a sophisticated understanding of AI's implications for corporate governance, strategy, and risk management. This post explores the essential knowledge NEDs need to effectively oversee AI initiatives and ensure their organisations harness AI's potential while managing its risks.
AI 101 for Board Chairs and NEDs
The majority of Chairs and NEDs in public companies come from a general management or CFO background. They will be skilled at overseeing implementation of complex initiatives but most will not have a digital or technology focused background or be a daily users of advanced technology or AI. I have been to a number of networking events over the last six months. Many SIDs and Chairs acknowledge that there is a steep learning curve in this area and are keen to better understand the evolving landscape.
Education and training should be a priority for senior leaders
I have seen first hand the benefits that can be unlocked for businesses who embrace AI. As a start up over ten years ago, I first worked with Machine Learning as part of the product development for the candidate matching engine we developed for the tech company I founded over 10 years ago. We had grown our hiring platform to 75,000 graduate and student candidates and added semantic and other kinds of data analysis to enrich and improve our matching recommendations for our employer clients. We were awarded an Innovate UK grant and I worked with occupational psychologists and PhD data scientists on upgrading our technology. The work we did landed us contracts with larger clients including engagements with government departments.
More recently, as a corporate innovator, I worked on 23 AI, Data, and Cyber innovation accelerator pilots alongside leading start up teams who have raised over $400m in external funding. It was clear that working with the right teams could unlock interesting new capabilities and value streams. The explosive use and interest in generative AI and LLMs like ChatGPT has really opened up huge possibilities for both personal and professional productivity. I personally now use AI tools every day.
Understanding AI's Strategic Impact
Artificial intelligence represents more than just another technology investment decision. It is fundamentally transforming how businesses operate, compete, and create value. For NEDs, understanding AI begins with recognising its role as a strategic imperative rather than merely an operational tool.
Leveraging AI is similar to any type of innovation and for boards the top three considerations are:
Alignment with Business Strategy: Boards must ensure that AI initiatives align with the overall business strategy. It should be used to drive core objectives, and will likely centre on improving customer experience, operational efficiency, or opening new revenue streams.
Risk Management and Ethics: Boards need to oversee the ethical implications and risks associated with AI. This includes ensuring data privacy, avoiding biases, and preparing for any regulatory compliance or legal issues. Large digital transformation projects are often challenging to deliver and cost more than anticipated. Appropriate governance and oversight will be a key consideration in addition to choosing the right operating model.
Investment and Capabilities: It is crucial to evaluate and scrutinise any proposed investments and ensure the organisation has or can develop the necessary capabilities, including talent and infrastructure, to effectively capitalise on the opportunities of AI. Most businesses do not necessarily need radical restructuring around emerging technologies. There will be a fair share of consultants who will look to capitalise and potentially missell the need for large teams in hot topic areas.
Focusing on these areas will help boards provide the strategic guidance necessary for successful AI integration. Modern AI systems, particularly machine learning models, can process vast amounts of data to identify patterns, make predictions, and automate or improve complex decisions. This capability is enabling organisations to optimise operations, enhance customer experiences, develop new products and services, and create entirely new business models. However, it also introduces novel risks and governance challenges.
Monitoring AI use in Organisations
Most boards are now seeking to better understand the use of AI and the stakeholders who are responsible for delivering the strategic benefits and implications of its use. Many large companies have adopted responsible AI frameworks and are thinking about how new technology use will change their industry and impact customers. Regulatory updates and the latest information on compliance is also an essential area to keep on top of how best to navigate how best to achieve appropriate oversight. Some common questions include:
What AI initiatives are being undertaken within the business?
What is the current use and adoption of AI by employees and how is this being monitoring?
What is the current training under offer?
What are the latest legal and regulatory updates in this area?
