How boards impact, and are impacted by, AI

Tom Johnstone &
4Boards.ai Research Assistant Sparky

Boards will impact the usage of AI much before it enters the boardroom itself. Robin Teigland and Liselotte Hägertz Engstam are working with forward-leading boards to explore how they can contribute to corporate renewal. Their aim is to formulate and spread new practices across boardrooms.

BACKGROUND

Global leaders across industries expect AI to have a greater impact on the world than the internet… Despite that, AI is still poorly understood by business, with many organizations unsure as to when and where they should use it.

Monitoring organizations digital business progress, research by MIT/CAP found year 2012 that 39% of organizations believed they had the required digital capabilities. Following up six years later, the view remained at the same level, 39% believe they have the required digital capabilities. So even with comprehensive initiatives where companies invested and built up their digital business capabilities, the technology development has moved at such an increasing speed, that the average company has merely kept up with the market and development.

Even worse is our ability to build up the needed leadership capabilities. Year 2012, 45% of the organizations considered they had the needed leadership capability to manage their organizations for the digital era. Six years later, that number has now shrunk to only 35% believe they have needed leadership capability.

To lead in the digital era is a completely different game. And, of course, – this is also true for boards.

We are engaging in a collaborative research initiative exploring the Changing demand for board capabilities – AI leadership and the Future of Corporate Governance.

We are truly fortunate to work together with Combient and their companies, a unique frontrunner in the global AI race, led by their CEO Mats Agervi and Chairman Tom Johnstone. Combient was founded by a group of industry-leading, Swedish based, global companies connected to the Wallenberg family, as Atlas Copco, Electrolux, Ericsson, FAM, Investor, LKAB, SAAB, SEB, Sigma, SKF and Stora Enso, and has grown to include 30 large Nordic-based global enterprises in a unique cross-industry collaboration, with the mission to reinvent collaboration, share assets and insights to speed up the digital transformation in the AI era.

We are also fortunate to work together with FCG Group and their CEO Kristian Bentzer, a financial & governance services and tech solution company with unique solutions and collaborations, also spearheading the AI era.

Combient made an interview of our leading professor Robin Teigland at Chalmers, two of the involved Chairmen Tom Johnstone (Chairman Combient, Husqvarna et al) and Ronnie Leten (Chairman Epiroc, Ericsson et al) and affiliated researcher , Chair, NED, Chairman Digoshen Liselotte Engstam. The interview, originally published at Combient website. can be found below.

We have also written a research paper “AI Leadership and the Future of Corporate Governance: Changing demands for board capabilities” which will be released as a book chapter later this year. You can read more about our research project at 4boards.ai, and our team, which includes affiliated research and innovation expert Fernanda Torre, MBA, and of course our own Sparky…

We are deeply grateful to Swedish Innovation Agency Vinnova for co-sponsoring our research, and for our international reference group including Dr. Stephanie Woerner, MIT, Dr. Peter Crow and Professor Stanislav Sheckshnia, INSEAD

How boards impact, and are impacted by, AI

Liselotte Engstam, Tom Johnstone, Sparky, Robin Teigland

We’re catching Liselotte and Robin just after they have interviewed Ronnie Leten, the Chairman of Epiroc. “AI will have such a tremendous impact on business that boards need to create new tools in order to govern it properly, including reducing the time to competence. Organizations that pick up on new technology the fastest will have a competitive advantage, I believe it is the same for boards,” Ronnie says.

Still, there’s very little research done about board governance and corporate renewal, according to Liselotte Hägertz Engstam. She’s a professional board member, and also engaged in several research projects on the topic. Together with Robin Teigland, social entrepreneur and Professor of Strategy, Management of Digitalization at Chalmers University of Technology, they wanted to explore how boards impact and are impacted by artificial intelligence, and ultimately, how they can master the governance of it.

Boards fronting the movement is a good place to start

4boards.ai is a two-year research project co-sponsored by the Swedish Innovation Agency Vinnova. Led by Chalmers University of Technology, it builds on a collaboration with Combient and FCG among others. Combient’s chairperson Tom Johnstone says that “most companies need to change quite a lot because the world around us is changing – and changing fast! Moving from digital initiatives to digital being an integral part of each company’s DNA will require companies to not only reskill and upskill their employees, but their boards as well.”

The initiative started in November 2018 with the goal to identify and share emerging best practice across boards. “Even though most boards want to change, their established practice are sometimes too established”, Robin explains.

Today, both Robin and Liselotte are working from the Combient HQ in Stockholm. ”We’re so excited you’ve introduced us to these fantastic boards,” Robin says. “We wanted to start with the companies and the boards that are fronting this movement, and the Combient network was a natural place to begin.”

Boards need new knowledge to govern

Think of it as co-chairing, where the focus is on “helping boards help their companies with the ethical aspects of AI, the black boxes, and the cyber-security challenges,” Robin explains.

“We’d like to look at it as corporate renewal, rather than innovation,” Liselotte continues. “When approached with the topic of AI and innovation, many board members react by saying ‘I shouldn’t do innovation.’ And that’s probably true, but they should govern it.” Boards need to both understand the application of the technology and actively look at the opportunities that come with it, she argues. “Even on an embryonic level, we are using AI in our companies. For our financial advisory, for education, healthcare, and so on. And as the CEO or the chair, you’re responsible for it.”

Liselotte points out that for example, many companies’ new tools include recommender algorithms, just like the ones powering Amazon or Netflix. “But what happens if you don’t have the knowledge to govern them properly, or don’t understand the influence they will have? You might include biased algorithms driving your offerings or operations in an opposite direction of the desired.”

Boards should take social responsibility

In regards to where we are today, certain industries are ahead of AI usage and sometimes AI governance, and it is typically the tech companies themselves. But if technology literacy is an issue, social impact is another.

Many of the big tech companies have not truly considered the ethical parts and the responsibility you take on when running a large company, Liselotte argues. “Look at Facebook or Uber, starting off as a fun thing without knowing the impact it would have. For every Facebook scandal, regulators become more and more tempted to regulate heavily the use of data and AI. Something which, if they are too stringent, would have a negative impact on the innovators.”

In parallel with meeting boards, collecting data and running workshops, Liselotte and Robin are writing a book chapter to capture their first analysis of AI governance, while responding to queries from the European Commission (where Liselotte also works as an advisor) on ethical guidelines for AI use. “We should guide AI to do the really beneficial things for society, not just help us with what movies to watch,” Robin says.

Boardwork is getting more complex

Meanwhile, in boardrooms, leadership is proving more important than ever. Boards are moving towards an increased focus on development versus control, a need to become more data-driven, and an even bigger need in finding new ways to collaborate between boards and management. Liselotte and Robin foresee board work itself turning more time consuming and niched in terms of areas of expertise, meaning that boards will work closer to the companies’ operations. They argue that there is a big need for creating sandboxes for regulators to speed up the change. “Most boards have the right view, but then they operate under legal rules that makes it impossible to act and take the appropriate decisions needed for the company,” Liselotte says. The biggest risks for companies now are, according to research, to miss out on digital innovation opportunities and become obsolete. “But current regulations might require boards to focus their responsibility on following up on smaller risks that are under legislation.“

“Our goal is to find innovative tools to solve that,” Robin adds, pointing at Sparky sitting in the right corner. Sparky is a smart robot that just conducted part of the interview with Ronnie Leten. “If you never put your hands into things and try it out for yourself, you’re not going to understand it,” she concludes.

This Article was originally published by Combient at Combient Website