Artificial intelligence (AI) and digital transformation have become central to business strategy, challenging corporate boards to foster innovation while managing unprecedented risks and ethical implications. Given the speed at which technology is evolving, directors must be adept at asking the right questions to understand the implications of these trends.
Here are the critical questions corporate boards should be asking about digital transformation and AI:
How well does our organization understand and embrace digital transformation and AI?
Before delving into the specifics, it’s essential to assess the organization’s general understanding of digital transformation and AI. Consider both awareness and application: Are these terms just buzzwords in the boardroom, or do we understand their implications for our business? How are they integrated into our business strategies and processes? Have we invested in digital skills and literacy across the organization?
What is our digital transformation strategy, and how does AI fit into it?
Digital transformation should not be a detached initiative, but a core element of the company’s overall strategy. The board needs to know what the company’s digital transformation strategy is, how it supports the broader business goals, and where AI fits into this plan. This includes understanding how AI can improve existing processes, create new products or services, and contribute to strategic differentiation.
Are we using AI ethically and responsibly?
AI technologies have incredible potential but also raise ethical and legal concerns, including privacy, bias, transparency, and accountability. As AI becomes more integrated into business processes, boards must be vigilant about these risks. What measures are we taking to ensure ethical AI use? How are we addressing potential bias in AI algorithms and data? Are we transparent about our use of AI, and do we have accountability mechanisms in place?
How are we managing data privacy and cybersecurity risks?
Digital transformation projects and AI require vast amounts of data – oftentimes, customer data – which heightens the risk of cyber-attacks and data breaches. Boards must understand how the company is managing these risks and protecting valuable data. This includes understanding the security measures in place, the company’s cybersecurity maturity, and the incident response plan if a breach occurs.
How are we fostering a culture of digital innovation?
True digital transformation goes beyond implementing new technologies – it requires a cultural shift. This includes fostering a culture that encourages experimentation, risk-taking, continuous learning, and cross-functional collaboration. Boards should ask how the company is encouraging this mindset and what measures are being taken to overcome resistance to change, including ensuring efforts are made to skill up every department in the organization.
Are we measuring the right things?
As the adage goes, “what gets measured, gets managed.” Boards need to ensure that the company has relevant KPIs to measure the progress and success of its digital transformation and AI initiatives. These should cover operational efficiencies gained, customer satisfaction scores, revenue generated from new digital services, and the impact on employee engagement, among other things.
How are we preparing for the future?
To stay aligned to the fast pace of digital change, boards need to ask how the company is not just keeping up with competitors but instead staying ahead of the curve. This includes understanding the process for identifying and evaluating emerging technologies, how the company is developing or acquiring the necessary skills, and how it’s staying informed about relevant regulatory and ethical considerations.
Corporate boards have a crucial role in overseeing and guiding digital transformation and AI initiatives. The key is not to have all the answers but to ask the right questions, promoting strategic alignment, responsible practices, and a culture of innovation. By focusing on these areas, boards can help their companies navigate the digital landscape successfully and create lasting value.
Still have questions about how your Board can best guide digital transformation? Learn more about our Board advisory services.