More than two-thirds of boards intend to approve the implementation of artificial intelligence (AI) in the next year, although there appear to be significant hurdles to successful integration.
The Leadership in AI 2021 report conducted by Board Agenda in association with professional services firm Mazars and business school INSEAD, finds that there is considerable interest from boards in AI’s ability to influence key areas such as customer service, operations, finance and accounting, and research and development.
But the survey also found many organisations and boards lack the knowledge and skills to ensure successful integration. Adoption of AI was also found to be undermined by a shortfall in knowledge and understanding at board level. Other obstacles to progress include legacy IT systems, poor data and resistant company cultures.
Deficient boardroom knowledge and skills is a cause for concern, and links to wider questions about the state of technology expertise on boards—an issue affecting many organisations as digital transformation gathers speed across industry.
Almost three-quarters (73%) of respondents say they intend to implement AI in the next 12 months, with the topic now a significant board-level issue. A further 72% say the board authorises implementation.
Where and how AI is applied to firms is broad and varied, according to the research, with just under half the respondents targeting customer services. Other areas chosen for AI implementation include operations, data management, logistics, supply chain, finance and accounting. This chimes with other industry report findings, such as research from McKinsey which recently revealed a 25% increase in the use of AI in standard business processes.
The research also shows that a large majority of respondents claim increased efficiencies as the principle benefit of AI, while 55% claim cost savings and 53% expect increased revenues.
The return on investment expected from AI is evident. Respondents report seeing positive signs within their organisations already suggesting they believe benefits can be realised. Covid-19 has also increased interest in AI. More than half of the respondents—54%—claim the virus has already accelerated adoption or plans for future adoption of AI.
However, the study revealed significant constraints to AI implementation at the very top of firms.
Despite having the power to assess and approve AI in organisations, a significant proportion of boardrooms surveyed have failed to take advantage of potential opportunities due to a lack of understanding about AI and its use.
More than half the survey respondents (53%) claim their boards are not sufficiently skilled or knowledgeable about technology and AI and their implications for business and industry.
Two-thirds (67%) were unable to confirm the board or senior management were up to speed with AI services and relevant legislation. When asked whether the board and senior management had assessed the necessary skills and training for AI within their organisations, 44% say they have not. The research also found that just 25% of company boardrooms have looked at skills and training required for AI, and just 23% have assessed the potential implications for governance and compliance.
Writing for Board Agenda, Asam Malik, head of technology consulting at Mazars, and Anish Venugopal, head of data and automation, say: “Recognition of the value of AI at board level is significant but as we have found in our report, recognition, understanding and a plan of implementation are very different challenges.”
They are also concerned about the potential risks.
“It is, perhaps, a symptom of rapid technological advancement that many boards are struggling to fully understand AI. There would appear to be a considerable knowledge gap at the top of organisations about its transformative capacity and application.
“The impact of AI on business will be considerable, so a lack of understanding on boards will not only cause constraints but also significant risks for organisations.”
Ethical and cultural constraints
The study also reveals organisation-wide constraints to AI implementation which boards and senior management will need to address. Three-quarters of respondents (76%) agree there are significant ethical or cultural changes within firms which need to be managed, and a resounding 73% believe a lack of AI skills and knowledge within the organisation is a major constraint to adoption.
This is closely followed other concerns such as legacy IT systems, unclear business value and “resistance in some parts of the organisation”. Cultural and ethical questions are often raised around the deployment of AI and this was borne out by our research. This is patently an issue that boards and senior management will need to address.
Professor Theodoros Evgeniou of INSEAD sees organisations struggling with rapid transformation. “As the speed of artificial intelligence innovation and data driven business transformation accelerates, boards and executives struggle to grasp how these technologies will impact their business. While AI can enable new business models, products, revenue streams and efficiencies, it is also a source of new risks.”
He sees investing in AI knowledge and skills as being a key driver of change. “If they are to control their technology-driven destinies, organisations must develop new capabilities at all levels to enable data-driven decision making, AI-driven job augmentation (rather than replacement) and innovation, as well as new practices, processes and organisational structures.”
What is clear from this study is that the pace of change in AI is accelerating as the benefits become increasingly evident. However, if the rewards are to be fully grasped, the deficiency in technology knowledge and skills at board level will need to be addressed without delay.
The findings from the AI leadership survey drew comment from board directors and leading industry bodies:
AI is becoming more technologically advanced and mature; as such, it’s essential for boards to understand how AI fits into their digitisation strategy and very important to ensure responsible ethical oversight of AI including implications for all stakeholders including customers, employees and shareholders. Data science skills are at a premium so talent development will be key to success. Businesses who haven’t got this on their agenda need to do so with urgency. Jacqui Ferguson, non-executive director on the boards of Tesco Bank, Croda PLC, Wood Plc, and Sunday Times NED Award Winner 2019
This is a very timely report. The impact of the pandemic and the demand for greater efficiencies means that AI is entering the mainstream. Board understanding, their oversight and the necessary governance, risk and control mechanisms are critical to ensure that adoption is successful and provides the return anticipated. Successful implementation requires technical, cultural and ethical consideration. Human responsibility doesn’t go away. Explainability tools offer one support mechanism to augment the ability of boards to provide oversight and ensure that business acts ethically. Maggie McGhee, executive director, governance, ACCA
Managing the consequences of the increasingly common use of AI technologies is a challenge for many board members. The results of the research conducted by Board Agenda are extremely useful. They highlight the urgency of tackling this challenge effectively and provide some food for thought that encourages boards to put this issue firmly on their agenda. Dr Ian Peters MBE, director, Institute of Business Ethics (IBE)
AI is transforming the business landscape in ways which were not imagined even a decade below. AI solutions are driving new, innovative approaches that can create benefits for any business—or provide opportunities for competitors to overtake or disrupt the unprepared. The rapid growth in new, hungry companies looking to change the business landscape requires boards to ensure they have access to the right expertise, and devote enough time to considering the implications. This report should provide a timely provocation for any company to examine its AI strategy. Dr Phil Clare, Institute of Directors and deputy director, Research Services (Knowledge Exchange and Engagement), University of Oxford
Five years ago the challenge was to get boards to understand how technology was going to impact their business and we know what happened to those left behind. Today’s challenge is equally important: how to get boards to really understand AI and data. They ignore this at their peril! Simon Calver, chair, UK Business Angels Association, non-executive director Moo.com, Musclefood, Firefly Learning
“This excellent report highlights how digital technology now permeates strategy and operations for most businesses and therefore cannot be a specialist subject at Board level. The scale and import of decisions on AI that face most business require understanding, judgement and insight in the Board. These are not marginal investments but core to the future. Equally the ethical and reputational implications of AI are radical and Boards that fail to grasp this expose their organisations to extraordinary risk. Gillian Karran-Cumberlege, Head of Chair & Board Practice Fidelio Partners