On corporate Boards and Artificial Intelligence

Board members have had ample time to ask the right questions, choose the right advisers, and draft a strategic vision centred on Artificial Intelligence (A.I.)
Smart corporate Boards already know that they must have an A.I. strategy which has to be implemented the soonest in order to retain their competitive advantage. These Boards have also signed off budgets for newly created Data Science teams, procurement of A.I. solutions and have pushed eagerly for the adoption of these tools. They know that they need to act without delay.

But progressing with change in an organisation and at the Board level it’s an exercise in patience, perseverance and pain. You need to know who you are dealign with, so you can manage them. The past few years have been the catalyst for revealing three main types of Board and senior executives:

• The Visionaries. They understand A.I. and how it serves their business, choose their advisers based on their A.I. pedigree and advice impartiality, and finally, have the grit to lead their business through implementing it.
• The Comfortables. They understand A.I. but lack the desire to correctly prioritise it and are “a little bit preoccupied with other matters”, as one of them candidly described their perpetual procrastination.
• The Unawares. They don’t understand A.I. and don’t want to, purely because “this A.I. thing is just another fad. Our clients will always want to interact with people. We don’t need robots” and they shake their head in polite rejection.

The Visionaries

This is a rare breed. They’ve already put their A.I. teams together and chosen their A.I. advisers which are not necessarily the big-four consulting firms. The Visionaries are able to identify trends. They are driven to be ahead of their competition. But how do they do it? They succeed because they are intellectually curious and keep themselves informed well beyond the usual sources for our industry: The Financial Times and The Economist. They make time to inform themselves and have a thirst to find out more, usually they are voracious readers, too. The more they know, they ask better questions and make better decision.

The Visionaries have already written comprehensive Board papers on A.I. and have actively pushed them for approval. They constructively challenge their fellow Board members. They are in a relentless quest to find a new technological angle to preserve their market share and serve their clients better. They know that they ought to re-imagine their business to increase its market share and profitability.

But here is the most important element of their success: they choose their A.I. advisers wisely. The Visionaries prefer to work with independent A.I. advisers, who are impartial with their advice on selection of A.I. tools. Independent advisers also means independent thinking, unconstrained by some corporate ‘mission’ – that’s where the value is.

The Visionaries know that A.I. is a vast and complex field. With insights and speed, it can unlock the value in all types of emerging technologies from VR to blockchain. This space can only be navigated successfully with the help of advisers who have a pedigree in A.I. and no vested interest to push their chosen A.I. vendor, just so they can cash in their commission. Pedigree and impartiality are the preconditions of a successful A.I. delivery.

An A.I. pedigree is usually the measure of the advisers’ sole focus on A.I. technologies. Critically, this is also a measure of their ability to deliver at the implementation stage. In simple terms: if you cannot deliver what you recommended, then you are yet another empty suit selling empty advice.

The Visionaries know that if they use the big-four consultants they will receive the same advice which everyone else receives and most likely they will end up liaising with the junior staff rather than have access at the Partner level.

The Visionaries know that Big-four consultants are keen to replicate their advice at scale rather than making it truly bespoke for each client. And so, is there any intrinsic and strategic value to appointing advisers who give the same advice over and over again? Simply put: if you buy the same advice which everyone else gets, what’s the value to your business?

More importantly, the ‘big-four consultants’ do not focus just on A.I.. Their lack of A.I. specialism is evident in their work. They are “jack of all trades” when it comes to technology. Sometimes that’s decidedly a strength. However, when you build your company’s future on general advice, you are likely to miss the details and that’s where the stumbling blocks are.

Finally, the Visionaries know that there is a limited window for them to leverage A.I. as a competitive advantage for their company. This makes them unstoppable. They live to reimagine their business in a technology fit enterprise, keen to chip into competitors’ market share. If you want an example, look no further than the Visionaries at Goldman Sachs and their unlikely move away from their institutional space into retail with Marcus.

The Visionaries are fine with feeling uncomfortable. They are quick to go outside of their comfort zone, in search for business growth and profitability.

The Comfortables

You can find them as a minority in almost every Board. They sit between the Visionaries and the Ignorants. They understand that the A.I. narrative is not going to go away. They usually exist in businesses which have recently started to understand that A.I. is a need not a want.

In some cases, they are the leaders of businesses which still enjoy health margins and have benefited from:

• Labour arbitrage by charging UK fees for services provided in India or more recently Poland
• Client captivity meaning that they have made it so expensive and cumbersome for their clients to change service providers that clients would rather stay put. If you want o find out how this works, look no further than wealth management firms’ approaches to client account change.

The Comfortables have a vague understanding that A.I. has been redefining market forces and that this determines who stays in business and who ‘goes away’. They usually partner with lone voices inside their company who have the strength of character and vision to say that “if we don’t deploy A.I. we’ll lose our jobs”.

Despite all of this, the Comfortables lack the focus and the grit to pursue an A.I. strategy. They find superficial excuses like “we are a little bit preoccupied with other things right now”.

In some cases, they think that paying for A.I. strategic advice it’s too expensive. And so, they go ahead and purchase whatever A.I. solution comes their way or just because everyone is talking about it, especially during Thursdays evening drinks. That’s where they find the best A.I. advice: It’s cheap and cheerful. Their logic may seem solid “if my mate from a similar business model company, thinks that this particular A.I. solution works for them, then it should work for me too”. In doing so, they set themselves up for “told you so, it doesn’t work” and “stop chasing those shiny things”. Why? simply put if I have a headache, and you have a headache, it doesn’t mean that we can deal with it in the same way. The underlying cause might be different. A wise person would interrogate the cause before treating it and that’s why you go to an expert with a pedigree and who has no vested interest to sell you the most expensive solution or indeed sell their own solution (!)

Word to the wise: A.I. solutions are not created equal. Purchasing the wrong A.I. solution is yet another way to destroy value in a business and damage your reputation.

The Unawares

They are seen less and less. However, they are prevalent in sectors like wealth management / private banking where the main belief is that their business models will continue to exist just because their clients prefer to only engage with a human in a face to face meeting. They think that because “we have been doing this for 60 years, and look how successful we have been” there’s nothing to change. Blockbuster Board papers show that their Board truly believed that Netflix has no chance as a competitor just because their customers preferred “bumping into their neighbours; reading the back of DVD slips and walk to the store”. Netflix is in business. Blockbuster is out of business. Blockbuster set themselves up by discarding the future and their new competition.

The Unawares are defensive and dismissive. They become defensive when you try to explain to them how quickly the world of wealth management is moving. They would roll their eyes if you mention Ant Financial’s 850 million active users in all categories including wealth management, a 10 year old AI company which looks after the equivalent of 2.5 times the population of the United States and 34 times that of Australia. The Unawares are not curious about what A.I. is and what this technology can do to grow their business. They actively dismiss any information on A.I. provided to them. You’d see at conferences leaving right before the A.I. in wealth management session.

Nothing, absolutely nothing, could convince them otherwise. If you insist with your progressive ideas, they rudely dismiss you and make it personal. They are ready to take you down in a mano-a-mano discussion. All this bravado and aggressiveness, is just a sign of their own insecurities. They are actually afraid of what the future looks like. They don’t know this future. This future is uncomfortable and fast. This future is everything what they don’t have experience in. And deep down in their moments of sincerity, they are aware that this technology is shaking up the status-quo.

However, more importantly, they also know that they’ll retire in a few years or they’ll move jobs, so why rock the boat now? This thinking is cause of significant concern, because the well-being of a business should be good governance and ongoing concern, transcending one’s retirement date or place of work or indeed job title. Boards and executives should be genuinely and actively concerned in equal measure with preserving shareholders’ value as well as protecting their employees and their clients, which actually means protecting their companies.

When the Unawares win the argument, it’s just a Pyrrhic victory.

All change

Financial Services is an unforgiving business space. It’s highly competitive and crowded. The traditional market forces which have been taught in business schools are changing shape and scope. Large management consultancies have been rushing to develop new frameworks, new labels and have published insightful strategy papers. Boards may read them all, but they are left with a massive challenge ahead: how do we make it happen? There a simple answer:

• Surround yourself with Visionaries
• Bring in an independent A.I. strategic adviser
• Win the hearts and minds of your people.

There are numerous examples of successful companies which lacked Visionaries when they needed them the most. When market forces changed direction, only visionary leaders are able to steer their companies away from an inevitable crash. Unsurprisingly, Goldman Sachs and Blackrock have been amongst the first to advance A.I. solutions within their internal business processes. JP Morgan employs 50,000 technologists and devoted $10BN to technology in 2018. The Boards of large organisations benefit from the headspace needed to evaluate their business strategies in the context of transformational A.I. developments. Upon close inspection of their Board composition, it becomes clear that ‘Visionaries’ always form the largest majority.

Choose wisely your A.I. advisers and your Board

Business transformation with A.I. is a strategic decision which will define and achieve business profitably for decades to come. In order to take this road, you need your leadership and your Board to be formed by a majority of Visionaries. Find them. Keep them. Nurture them. They are your future.

Clara Durodié is a technology strategist specializing in applied artificial intelligence (AI) in financial services, with a focus on AI Ethics and strategic AI adoption for business profitability.

She is internationally recognized for her expertise, advising Boards of leading financial institutions, think-tanks, governments, and academia. She also mentors AI startups on funding and growth strategy. She is consistently named on numerous global lists of leading women in fintech, and is the Chair of the Non-Executive Directors Board’s special committee on Best Practice for AI Adoption (UK) and a member of IEEE Global Initiative on Ethics of Autonomous and Intelligent Systems (USA). Clara has advised the World Economic Forum’s 4th Industrial Revolution Centre in San Francisco (US) on AI Board leadership requirements.

Clara is a member of the Chartered Institute for Securities and Investment (CISI) London UK, has a Certificate in Investment Management and holds an Masters degree from University of Oxford. When not collecting fine art, Clara is pursuing research at the intersection of neuroscience, machine learning interrogating how episodic memory informs savings and investment decisions. Clara is a founding Steering Committee member for AITECHTalents.