Does the current board configuration include members with the right level of artificial intelligence expertise? Does your board have members who can accurately assess the increased impact of AI on society, its risks and opportunities for operational efficiency and revenue growth? Heather Redman, director of PPL Corporation and venture capitalist specializing in trading, including AI startups, recently sat down Corporate Board Members Columnist Matthew Scott discusses why companies need to add AI expertise to their boards and how to do that. Below is an edited transcript of their conversation.
Why is artificial intelligence becoming such a critical expertise that the Corporate Commission needs to add to the committee in the coming months and years?
Remember, the board started adding directors with cybersecurity expertise a few years ago because it was functionally necessary, and because SEC cybersecurity rules were on our minds. This made cyber so important from a defensive standpoint, and the board had to adapt. Currently, the board needs to add AI expertise. Because technology has a defensive aspect (how do you manage AI risks?), and more importantly, AI can also generate new business opportunities, new revenue growth opportunities, new business lines that can be opened, and great profits in operational efficiency. Adopting AI can lead to real business transformation.
It's similar (but large) to how companies adapt to the Internet. At first, the companies asked, “How does this internet work and how does it affect us?” The companies then learned to use email, online advertising and e-commerce, and were able to gain some efficiencies, but the overall operation remained unchanged. The Internet has been exposed to a lot of businesses very deeply. It was an existential threat to some businesses, but it was also a great opportunity for other businesses to change. The Internet has promoted many efficiencies and new opportunities in many companies, but has not changed the overall operation.
Artificial intelligence will become a technology for industrial and economic transformation. It will have a much greater impact than the internet. We are still waiting for a major impact, but in two to ten years it will affect every industry in our economy from top to bottom. So no matter what industry you are in, you need to have the attack and defensive capabilities that AI offers. You need to have the ability to see AI from the perspective of “How do you make your organization more efficient?” It is important that the board is ahead of this next monumental shift.
Every business needs to develop strategies on how to manage the changing environment AI will create over the next decade.
That being said, what type of AI experience will make a valuable addition to the Corporate Committee for potential director candidates?
The board loves to add a newly retired CEO today. Because they have a lot of time and lot of great experiences. It can provide great value in terms of thinking through business transformation, how best teams can work together constructively, how cost savings, and how growth can be built across different business cycles. However, as AI technology is changing rapidly, the board must focus on finding very modern candidates for the technologies that exist today. This is because, as I mentioned earlier, over the next 2-10 years, we will need someone who can help us understand what is happening as AI technology gains a new twist.
The board should look for people in some companies in the AI frontier, such as humanity and open AI. Their industry is very busy, their companies pay very well, their jobs are very strict, so those people are hard to get. But if you can get candidates from any of those companies and spend time on your board while continuing with their company, they are suitable for the board.
Another group of people I think are good candidates are investors who can rate a lot of technology as part of what they're doing. They tend to have a very broad and very up-to-date view as they learn a lot of new technologies and see multiple deals that need to keep competitive and up-to-date. These potential candidates may be more accessible as they are interested in which technologies are working at the enterprise level and which technologies are transforming the industry. This keeps the technology flowing today, unlike executives who may have worked for AI-related companies two or five years ago.
Should the board focus solely on C-suite-level executives, or should unproven AI expertise also consider board seats?
Finding people with deep AI expertise but also with board experience is always a struggle. We usually look for it in C-Suite. Boards should not compromise on choosing board-enabled people. It demonstrates the ability to operate in the boardroom in a way that people want to show up. Maintaining a proactively functional committee is paramount. So, if you can expand your search and find a Chief Technology Officer or Chief Product Officer who already has experience on the board, or an investor who is actively screening AI startups, you may be well provided.
How can companies approach the real process of adding directors with meaningful AI experiences to their boards?
I spend more time studying companies that showed they made breakthroughs in AI, including some frontier model companies. This will provide directors with a better opportunity to be educated about what is happening with AI technology. Spend more time with the investor community. In many cases, companies are associated with one or more venture capital companies or service providers who can contact other venture capital companies investing in this sector. I spoke to service providers like major accounting firms to find potential candidates. They are very involved in AI networks as the AI networks themselves are starting to use AI and provide many services to clients by implementing technology.
There may also be many industry conference directors available to attend, which will help the board delve into learning more about AI technology. And I sincerely recommend trying AI. Board members will also find themselves invaluable by expanding their professional and social circles to know who may be considered future board candidates.
What can current board members do to improve their personal understanding and experience in AI in ways that benefit the company?
It's important that everyone on the board is up to date on what AI is and use it in their daily lives. I recommend that the director try AI. Find out if people ages 15 to 21 use AI. They grow up with it and can give you clues as to how experts are using AI and how they are using it. Hire one from the street if necessary, but learn from them.
There are many good seminars for executives and executives that are held regularly. Some useful books are available on AI. However, there is no alternative to experimenting with technology. Integrating AI into your life in a meaningful way can help you understand how it can mean and can be useful for the company. Second, if your company suggests using AI or combating business transformation using AI, you will be able to understand what makes the most sense, and the advantages and disadvantages of each situation. That's how current board members can add value to the board.
What happens to companies that can't add related AI experiences to the board?
There are a few things that can happen. What worries me most is that the board is risk aversion. This is a natural thing to do when you don't understand something, right? I've seen some of the actions. It's about getting back to the company some of the simple things that can bring about small improvements that can at least stay in the middle of the pack. That would be a disaster.
Another thing is that the board knows nothing about AI, allowing the board to do what makes sense to management without oversight. If you don't have the ability to ask the right questions, you are not able to find obvious AI risks and putting your company at risk.
Finally, say your company is competitive within your industry. But perhaps there is an opportunity to jump over the competition using AI. If you have a great board that's been very informed, AI could be a transformative game changer that will become a catalyst for management that allows your company to move forward to the top of your industry. However, if you don't have the proper expertise on your board, you risk missing out on that opportunity. AI presents us with once-in-a-century opportunities. You don't want to miss it.
