Company boards need to be “quite switched on” to make sure innovative technologies like artificial intelligence (AI) don’t inadvertently create business risks, a seasoned executive has warned.
Heavily-hyped AI and machine learning (ML) have become front-of-mind for many executives but widespread adoption “can get out of control”, Wendy Stop, non-executive director of the Commonwealth Bank and Coles, said during an ACS Reimagination 2019 panel discussion about innovation.
“You would have to have your head in the sand if you weren’t looking at the global landscape these days,” she said, “and boards have to be quite switched on to less-regulated competitors’ use of AI for business advantage.
“You need to decide whether you’re a leader or a fast follower, then work your strategy around that.”
AI adoption surged this year, with a recent RELX survey of 1,000 executives finding that 72 per cent are using it – up from 48 per cent last year.
Fully 93 per cent believe AI and ML positively impact their industries – compared to 69 per cent the previous year.
While FOMO looms large, widespread AI adoption doesn’t automatically translate into business success: Accenture recently found that three-quarters of executives fear business failure within five years unless they embrace AI, but 76 per cent are struggling to adopt it.
The risks of innovation
With governance, risk and compliance (GRC) mandates tighter than ever, AI needs to be managed as a potential business risk and not just as a catch-all for business innovation.
“Oversight of AI is much more important than probably any other technology that we have ever played with,” said Mary-Anne Williams, director of the Innovation and Enterprise Research Lab within the UTS Centre of Artificial Intelligence, who exhorted boards not to blindly embrace AI innovation without “absolutely critical” oversight.
Enthusiasm for AI must be tempered with assurances around data and privacy risk by asking questions such as whether the technology could produce harm for customers, whether the business needs consent, or whether AI incorporates bias that could discriminate or create legal or reputational issues.
“These are questions the board needs to ask, and ask in a very genuine way,” Williams said.
“You can’t tack it on at the end – but if the board is successful in understanding AI and developing strategies for it, and integrating it into mainstream business strategy, the payoff is huge.”
The innovation culture starts at the top
Bridging the conceptual gap between innovation and corporate strategy remains crucial for company strategists.
As a company founded on disruption, Carsales.com learned early on that fostering innovation was crucial to success.
“Technology is a skillset that’s in demand at a board level,” explained Managing Director and CEO Cameron McIntyre, “but business models are changing so rapidly – and businesses are being constantly disrupted – that you need people in board seats who understand that, and are prepared to take risks.”
Two decades of company ‘moon shots’ had seen failures as well as strong successes, McIntyre said, but “we are more than happy to fail. Our attitude is that we don’t want to look back in 20 years’ time saying, ‘if only we had done that’.”
Growth isn’t the only concern for innovation-minded companies: data security, governance and privacy as well as the resilience of the underlying network “are what keep me awake at night”, Tabcorp Managing Director and CEO David Attenborough said.
With technology teams comprising 20 per cent of staff, he said, “things that are recognised need to be properly thought out and planned ahead.”
Technology roadmaps were “part of the whole business, and it’s incremental communication that is being continually updated to the board.”
“Every strategy has to be connected to a specific competitive need – and it’s OK to [start small then] mature and develop into something much more comprehensive and impactful.”
Building the innovation culture
Increasingly tech-aware boards are less and less blockers for AI and other innovation, with just 16 per cent of RELX respondents suggesting it had yet to win over top-level converts.
The challenge was leveraging employees’ enthusiasm to foster innovation, said Stop, noting that the “overused” word may already be there but “often isn’t labelled as ‘innovation’ at the board level.”
“The board wants to see a pipeline of ideas,” she explained, “and they want to know that the company is constantly thinking about new ways that we can do things and how we should do them.”
Identifying innovation was a crucial first step, with initiatives like internal competitions drawing out innovative ideas.
Innovation “shouldn’t be something unique to ‘innovation people’ there in the corner,” Stop said, “but something that is a mindset and is right throughout the organisation.”
Boards “need to be thinking about what their values are as an organisation. You want a culture where it is OK to fail.”