Boards challenge their executives to get with the digital age — but many haven’t followed their own good advice.
They’re starting to use more digital tools to gather information, post questions and comments, connect individuals in remote locations, and present ideas more visually. (Examples include collaboration platforms such as MeetX, Virtualboardroom, Diligent, and Boardpad.) But there are plenty of other tools they could be using to do their jobs better — technologies that have proved useful in other contexts.
Through virtual-reality technology, for instance, boards could gain a deeper understanding of their companies and the value they create. In a gaming context, the idea is to put on a headset and enter a different world, try on a different perspective. (Some headsets really immerse you in the experience.) But business applications for VR are starting to take off, too. By using the technology to play
role of customer, investor, product developer, factory worker, and so on — making the kinds of choices they must make — board members could see the business (somewhat literally) from various stakeholders’ vantage points. It would be an antidote to the insularity that so many boards are criticized for, and a useful complement to the simulations and war-game tools that help with scenario planning and anticipating competitors’ moves.
While games and simulations are great for broadening our perspective and building analytic skills, we’re all still flawed, biased human beings who struggle to process floods of information. So why not incorporate artificial intelligence into boards’ decision making? Some companies are already doing this. Last year, Deep Knowledge Ventures, a Hong Kong–based venture capital firm, appointed an algorithm called VITAL to its board, and IBM is developing a version of Watson (famous for beating contestants on Jeopardy) for the same purpose. AI has the capacity to collate and interpret far greater amounts of information than people can; it’s able to spot patterns and trends that are not immediately obvious to us. With its assistance, boards can make sense of all the market, customer, and competitor data at their disposal — both historical and current — and analyze it with greater rigor. AI tools free up valuable meeting time for discussions about the most important decisions and trade-offs. They allow humans to focus on what they do best — asking the right questions, using their judgment, inspiring others — while robots attend to the diagnostic and analytical tasks. That’s the case for now, at least. According to Ray Kurzweil, a director of engineering at Google, robots won’t become more clever than humans until 2029.
Let’s also consider enterprise social-network tools and workflow management programs, like Yammer and Trello, which can facilitate more dynamic communication among board members and help them analyze their activities, interactions, voting patterns, and so on. With a central repository for communications, it’s easier to share presentations, budgets, quality reports, compliance reviews, and supporting analyses. The board of Communities in Schools, a U.S. nonprofit that coordinates community resources to help at-risk students stay in school, used Yammer to create a private “Sounding Board” so members can exchange and comment on ideas, reducing the number of emails (which are inefficient and harder to keep track of). Such platforms can be opened up to selected individuals outside the organization, too — for example, to expert advisers — so that they can more easily contribute ideas and respond to comments and questions in a safe, closed online environment.
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The pressure for boards to become more “digital” is coming from a number of sources. Outside stakeholders are beginning to demand greater visibility into boards’ operations, in light of the many well-publicized governance failings related to culture problems, poor risk management, and fraud. Increasingly, investors are expecting boards to match or surpass their own ability to collect and analyze information. Progressive chairs will soon start appointing more board members with digital backgrounds so they can use data and predictive analytic tools to more precisely gauge where and how the business can grow profitably. Companies’ top executives will grow frustrated if their own digital transformation efforts are not assessed by boards that are capable of both understanding and challenging them.
Of course, executives will also become more guarded as their boards begin to dip more easily into the organization, potentially blurring the boundaries of good governance. They may worry that more information in board members’ hands could lead to poorer decisions if it’s not being examined with the right set of lenses. So there will certainly be tension around boards’ becoming more digital. Roles will probably need to be redefined and recontracted. The chair’s job will inevitably change — it will involve presiding over all kinds of interactions, physical meetings being just one of many.
This won’t be a simple or smooth transition, but it’s one that needs to happen. Boards that embrace it will gain a clearer perspective on what’s really going on with their companies and the environment in which they’re competing. They’ll collaborate better; they’ll become more productive and more transparent to stakeholders. The growing pains are more than worthwhile.