Beyond Digital: How AI-Savvy Boards Drive Superior Corporate Performance
In today's rapidly evolving technological landscape, simply having a "digitally savvy" corporate board is no longer enough to gain a competitive edge. What was once a differentiator has become a baseline expectation. A new research briefing from the MIT Centre for Information Systems Research (MIT CISR) reveals that it's now boards with a deep understanding of Artificial Intelligence (AI) that are propelling some companies to outperform their peers.
This research updates previous MIT CISR findings from 2019, which showed that U.S. organisations with over $1 billion in revenue and digitally savvy boards outpaced their industry counterparts by approximately 30% across various metrics, including market capitalisation growth. The landscape has shifted dramatically since then.
The Evolution of Boardroom Acumen: From Digital to AI Savvy
Researchers Peter Weill, Stephanie L. Woerner, Jennifer Banner, and James Moore repeated their analysis in 2024, finding a significant surge in digitally savvy boards—from 24% in 2019 to a remarkable 72% in 2024. This widespread adoption of digital understanding has effectively neutralised it as a performance differentiator.
The research underscores a critical point: "Since 2019, the technology innovation curve has steepened, with large organisations leveraging new digital technologies such as generative and agentic AI, robotics, and xTech technologies." To truly thrive in this dynamic environment, companies must cultivate both digital and AI savviness at the board level.
Defining and Measuring Savviness
The researchers define digital savvy as "an understanding, developed through experience and education, of the impact that emerging technologies will have on businesses’ success over the next decade." A digitally savvy board is characterised by having three or more directors who possess this understanding.
To assess digital savviness, the researchers employed machine learning to analyse the biographies of board directors, identifying 275 words and phrases indicative of digital expertise. They also conducted interviews with non-executive board directors for qualitative insights.
Shifting Boardroom Conversations (2019 vs. 2024)
The study tracked the evolution of technology-related discussions within boardrooms:
In 2019: Discussions primarily revolved around digitally enabled business transformation, business models, cybersecurity, and IT systems reliability. Only 8% of S&P 500 companies had dedicated technology committees, and CIOs and CISOs were the typical presenters on digital issues.
In 2024: The conversation broadened significantly. Board members showed increased concern about cybersecurity regulations, observed a slowing of traditional digital transformation, and focused more on selling digitally enabled products and leveraging digital partnerships for new customers and services. The number of S&P 500 boards with a technology committee nearly doubled to 15%, and a wider array of executives, including technical leaders and heads of business units, now present to the board.
The AI Edge: Outperforming the Competition
After confirming the widespread presence of digitally savvy boards, the researchers refined their criteria to specifically include machine learning and all forms of AI. The results were compellingly similar to their 2019 findings on digital savvy: 26% of company boards were found to be both digitally and AI savvy, and these companies demonstrated superior performance.
Companies with this combined board-level expertise reported an average return on equity (ROE) 10.9 percentage points above the industry average. In stark contrast, the 74% of companies with non-savvy boards averaged an ROE of -3.8 percentage points below their industry average. This substantial gap suggests that companies led by digitally and AI-savvy boards are likely larger, more highly valued, and positioned for greater growth.
The Role of Board Committees
To understand the operational mechanisms of these high-performing boards, the researchers analysed board committees, which are subsets of directors focused on specific topics. They found that digitally and AI-savvy boards were statistically more likely to have committees dedicated to cybersecurity, talent, and technology/digital products. The overwhelming sentiment among interviewed directors supported the establishment of such technology committees, underscoring their importance in addressing these critical issues.
Cultivating Future-Ready Boards: Advice for Leaders
Based on their extensive interviews with directors, the MIT CISR researchers offer three key pieces of advice for boards and executive teams striving to stay current with fast-moving technologies:
Educate: Boards should proactively engage in continuous learning. This includes inviting external speakers to meetings, arranging technology demonstrations, and developing structured board education programmes. Collaborating with tech partners like universities, venture groups, and startup accelerators can also provide invaluable insights into emerging technologies and trends.
Make Time and Prioritise: Board agendas are notoriously packed. It's crucial to prioritise discussions on fundamental technological shifts, focusing on why certain actions are necessary for the business rather than getting bogged down in the how. This strategic approach allows boards to allocate time effectively to high-impact topics.
Focus: Establishing a dedicated technology committee is a powerful way to signal the importance of technology in business strategy. These committees provide a focused forum for board members to delve into technology's role and ensure it's strategically integrated into the company's overall vision.
In conclusion, the competitive landscape has evolved. While digital literacy is now a prerequisite, true outperformance in the modern economy is increasingly driven by boards and executive teams that possess a sophisticated understanding and strategic command of artificial intelligence. Companies that invest in cultivating AI savviness at their highest levels are better positioned to navigate rapid technological change and secure a competitive advantage.
Disclaimer: This article is based on a research briefing from the MIT Centre for Information Systems Research (MIT CISR) and reflects the findings and insights of the researchers. The information provided is for general knowledge and informational purposes only and does not constitute professional advice or endorsements. The performance of companies is subject to various market and operational factors, and individual results may vary. Readers should consult with qualified professionals for specific guidance related to their unique circumstances.