Boards of the Future: Steering Success with Digital and AI Savvy Leadership
In today's rapidly evolving technological landscape, the cornerstone of corporate outperformance is shifting. Once a significant competitive edge, having a digitally savvy board is now merely the baseline for organisations seeking to thrive. The new frontier of competitive advantage lies with corporate boards that possess a keen understanding of artificial intelligence (AI). This insightful observation stems from recent research conducted by a prominent centre for information systems research.
The Evolving Definition of Savvy Leadership
Back in 2019, research revealed that UK organisations with revenues exceeding £1 billion, boasting digitally astute boards, outperformed their industry counterparts by approximately 30% across various key metrics, including market capitalisation growth. However, a re-evaluation of this analysis in 2024 showed a dramatic shift: the proportion of digitally savvy boards surged from 24% in 2019 to a remarkable 72%. This indicates that digital savviness is now a widespread characteristic rather than a distinguishing factor in performance. To truly excel in the current dynamic environment, companies must embrace both digital and AI savviness, as these combined attributes correlate with superior performance.
As an expert in the field noted, "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."
Digital savviness is defined 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 comprises at least three directors who embody this understanding. Researchers employ machine learning techniques, analysing director biographies for specific keywords and phrases indicating digital acumen, alongside conducting interviews with non-executive directors, to assess this quality.
Shifting Conversations in the Boardroom
In 2019, discussions among board members predominantly revolved around digitally enabled business transformation, evolving business models, cybersecurity, and the reliability of IT systems. At that time, 8% of companies within the S&P 500 had established technology committees to address these concerns, with Chief Information Officers and Chief Information Security Officers typically presenting on digital matters.
Fast forward to 2024, and the boardroom agenda has expanded considerably. Topics now include heightened concerns regarding cybersecurity and related regulatory reporting, a deceleration in some aspects of digital transformation, and an increased focus on selling digitally enabled products and forging digital partnerships to access new customers and services. The number of boards in the S&P 500 with dedicated technology committees has almost doubled, reaching 15%. Moreover, a wider array of executives, including technical leaders and heads of business units, are now presenting to the board on these critical topics.
Upon discovering that 72% of companies now possess digitally savvy boards, the researchers refined their criteria to specifically include machine learning and all forms of AI. The updated analysis yielded results akin to those from 2019: 26% of company boards demonstrated both digital and AI savviness, and these organisations also exhibited superior performance compared to their peers.
Companies with both digitally and AI-savvy boards experienced an average return on equity that was 10.9 percentage points above the industry average. In stark contrast, the 74% of companies with non-savvy boards averaged 3.8 percentage points below their industry average. This compelling data suggests that organisations with digitally and AI-savvy boards are likely to be larger and more highly valued due to growth expectations and other factors.
The Strategic Role of Board Committees
To gain deeper insights into the operational nuances of digitally and AI-savvy boards, researchers delved into the functions of board committees—subsets of directors who specialise in particular topics and advise the broader board. In the research sample, boards typically had an average of four committees, ranging from one to twelve.
The findings indicated that digitally and AI-savvy boards were statistically more likely to have committees dedicated to cybersecurity, talent, and technology and digital products. Almost all interviewed directors championed the establishment of board technology committees within their organisations, underscoring the critical importance of these issues.
Cultivating Continuous Technological Understanding
Based on extensive interviews with directors, the researchers offer three key pieces of advice for boards and executive teams to remain abreast of rapidly advancing technologies:
Educate: Boards should actively seek external speakers for meetings, arrange technology demonstrations, and develop tailored education programmes. Collaborating with technology partners, such as universities, venture groups, and start-up accelerators, can also be invaluable for keeping pace with new technologies and trends.
Prioritise Time: Board agendas are often crowded, making it challenging to allocate sufficient time to crucial topics like cost-cutting and addressing unconscious bias. When planning board agendas, it is essential to prioritise discussions on why certain actions are necessary, rather than getting bogged down in the how, which can consume excessive time.
Maintain Focus: Establishing a specific technology committee can effectively highlight the importance of technology's role in business strategies. Such committees empower board members to deeply consider how technology integrates with overarching business objectives.
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