Board members are responsible for corporate governance but have limited means to understand emerging technologies that their companies might / not be adopting. They often rely on management for that understanding. With the proliferation of Generative Artificial Intelligence (GenAI), 1 in 2 board members are saying that their companies are actively exploring the capabilities that GenAI offers according to a 2024 KPMG Director’s survey. Because there are almost immediate gains to be had - all knowledge workers can have productivity benefits with GenAI per a 2023 Bain study which predicted that GenAI will improve productivity by 27-41% across industries via automation of labor time.
But, as companies assess the transformative power of GenAI across functions and use cases, board members must improve their understanding of this technology and ask CEOs the right questions around it. Board meeting agendas usually cover three dimensions: strategy, budgets, and risks. When it comes to GenAI, these agendas intersect in complex ways, demanding thoughtful inquiry and deliberations.
Here are five questions every board member must ask management around GenAI:
- Are we experimenting enough with ever-changing frontier AI models?
Frontier models are the most advanced, innovative models that are pushing the boundaries of what AI can achieve. These models must be tried out as soon as they are made available. But 9 out of 10 companies are only conducting limited experiments with GenAI and are in a reactive mode, waiting for the hype phase to get over, according to a 2024 BCG survey of 1400 C-suite executives. Board members need to bring in a greater sense of proactiveness to experimental projects and urge management to stay up to date on frontier model development, to derive the best possible value from GenAI. - Are we spending enough on GenAI?
Board members need to urge CEOs who are not confident about spending on emerging technologies, because of a lack of understanding, to spend more. Insisting on a budget for GenAI investments and implementation is necessary. BCG estimates that GenAI investments are 4.7% of IT budgets in 2024 and predicted to grow over 60% to 7.6% of IT budgets in the next three years. For CEOs who are already spending, Board members need to monitor ROI and KPIs periodically, which brings us to our next 2 question suggestions. GenAI experiments can achieve objective and subjective success, depending on the use case and the function. ROI can be measured for use cases where objective success is seen and KPIs can be used to gauge impact in use cases where success is more subjective. - Do we measure ROI for use cases where objective success can be achieved and KPIs in other cases?
For proven use cases, such as productivity gains for knowledge workers in specific functions like engineering, ROI measurement and reporting is necessary. But measuring ROI is not possible in many use cases across functions like sales, marketing, and finance for instance. Not being able to measure ROI leads to the scrapping of 30% of GenAI projects according to Gartner. Board members must insist on KPI measurements for such use cases until they reach a cliff, beyond which productivity gains could exponentially increase and ROI becomes more evident. For areas where objective success cannot be measured immediately, Board members must urge management to have a robust KPI framework that will help the company keep track of the impact of GenAI across functions, like sales, marketing, finance operations, and others. KPIs by function can be cross-tabulated with the type of experiment being conducted – early-stage experiment (try once), incremental pilot (try again), exponential pilot (try broadly). - How do we identify and mitigate risks of GenAI?
Board members need to be concerned with the risk of customer data being compromised – A 2024 Cisco Data Privacy Benchmark Survey showed that 40% of employees have shared customer information with a public LLM (Large Language Model). Controls need to be put in place to prevent this from happening, in the form of AI Security and monitoring tools. - Do we have a formal AI Change Program?
Board members encourage the creation of formal AI Change Programs, that the CEO should run and report back to the board periodically. The review agenda can cover the following points at a minimum:- Status of AI experiments and projects running across the company?
- Pipeline of future GenAI projects with a timeline representation
- Budget reports – GenAI spends, ROI, KPIs
- Compliance check – has the company violated GDPR, EU Digital Services Act, or other significant acts such as CCPA (California Citizen Privacy Act)
By asking these 5 essential questions, Board members can ensure that their company harnesses the transformative power of GenAI while mitigating its risks and driving business success in the AI-driven era.
