Last month, in our series of board level events around the subject of diversity, Warren Partners hosted a cross-sector panel evening for CEOs to explore the impact of artificial intelligence (AI) on boards, talent governance and culture.
The evening's discussion was chaired by Joëlle Warren, Executive Chair & Founding Partner of Warren Partners, and she was joined by our three speakers: James Hall, Founder and CEO of Genfour, the Robotic Process Automation (RPA) and AI delivery specialist which he sold to Accenture in 2017; Kristina Murrin, CEO of The National Leadership Centre and former policy advisor to both the Blair and Cameron governments; and Phil Kemp, CEO of Bruntwood SciTech, a JV between property company, Bruntwood, and Legal and General Capital.
James Hall set the context and explained how “what we now call ‘AI’ started with task automation - the development of software ‘robots’ to automate what were often very narrow tasks, with varying degrees of success”. Today, of course, AI lets computers and devices handle many other tasks, traditionally performed by humans, and allows machines to think and learn.
The general view is that AI will impact every sector and industry; it will interpret language and answer questions; it will search and manipulate huge amounts of data to find themes, trends, how past behaviour may influence future decisions. It will create new businesses, new products (driverless cars) and services (digital assistants). Combined with face recognition data, AI will help security businesses spot discrepancies and fraud.
It will also transform decision-making, judging from how a well-known PE firm has used AI to develop an investment analysis tool and algorithm using over 50 different parameters to help them decide whether to invest in a company or not. “The system analyses huge amounts of data, interprets trends, does it superfast and changes how we arrive at decisions, including whether or not to buy or how to allocate capex. AI can even predict lawsuits. It has duly earned its place on our Board!”
The benefits are immense. AI will undoubtedly help optimise performance and drive innovation, and do so at pace, but the first challenge for boards will be to understand the impact on their business models and how fast their current products and services could become obsolete.
The other challenge is technology, which sits at the heart of this transformation. Here, James pointed out that “today, automation processes have become far more complex and transformative, to the point where the nature of the interaction between our carbon workforce (human) and our silicon workforce (machines) is one of the most important issues we face. So understanding what these technologies are, what they can do now and into the future, the risks that accompany them and their broader societal and economic implications, is critical”.
Boards need to understand what new and emerging technology they will need to invest in and how robust their existing IT platforms and infrastructure are to support the growing use of AI. “AI depends on two main components - computing power and data,” James commented. “Algorithms have been around for decades, but are getting ever-smarter, denser and more precise, fuelled by ever more data”. In fact, more data has been generated over the last two years than in the entirety of previous human history - a kind of data-driven Moore’s Law – even though 99.95% of it is not used.
Where it is used, however, the transformation it can bring about is profound. One example he cited is of an insurance company which can now process a claim from submission to payment within just three seconds! The key for boards, James argued, is focussing on the potential for that transformation. “Don’t worry about the detail, but explore how we can transform what we do - then find the technology to do it”.
Turning to the impact of AI on employment, like all our speakers, James believes we will not see mass unemployment as a result of AI. Instead, he sees greater engagement because people will not have to do ‘rubbish work’ and because the ‘democratisation’ of IT is making once complex tools much easier to use. “As we align and assemble more of these capabilities, we will make more profound leaps across the board”.
Kristina Murrin agreed that AI is not ‘going to take our jobs’ and cause sudden mass unemployment. She pointed to statistics from the World Economic Forum which suggest that for every job over the last three years that AI, in its broadest definition, has removed, it has created two new ones. In the same way that employment in agriculture plummeted in the mid part of the last century, the structure of the workforce and their skills adapt when major technological shifts take place.
However, even for organisations that ‘get’ the importance of this revolution, Kristina pointed out that ‘the elephant in the room’ is the gaping global skill shortage. In the UK alone there are 600,000 tech vacancies, costing the economy tens of billions of pounds a year. Drawing upon her own experience in FinTech, Kristina highlighted the fact that it is currently impossible to hire even mid-tier graduates with the right skills for less than £80k. “The term ‘war for talent’ is often misused, but in this context, that’s exactly what it is”.
Kristina went on to say that some countries realise that this issue demands a strategic political response. Israel, for example, has a national strategy for identifying and nurturing home-grown talent, screening every child in the country for ‘patterning’ skills from a young age, with the view to identify the top 5% of teenagers for further development. As a result, it has produced five times as many tech billionaires per capita as Silicon Valley. “There’s no reason why a similar programme couldn’t be put in place in the UK”. AI will lead to employee displacement and create new jobs. Boards may need to be more proactive going forward in enabling employees to retrain, putting greater onus on businesses to ‘home grow the talent for the future’. Phil Kemp here encouraged businesses to seek out the talent that is often overlooked inside traditional functions, and cited the example of a rather “unique individual who was a star at data analytics and proved a real asset in using machine learning to help Bruntwood make better decisions – pretty unusual in the property sector”.
Another major issue is that, either due to their age or their background, most people running companies are not IT or technology specialists. However, it is vital that boards know enough about the issues to be able to attract the right talent and ask the right questions - particularly in regards to the ethical and governance issues around AI, areas in which companies have to start taking more of a lead if they are to retain (or regain) public trust.
Which leads us onto the topic of moral and philosophical issues. Kristina raised this: “It is critical that companies using AI consider its moral, ethical and governance aspects. AI has as much potential to wreak havoc as it has to help – in the wrong hands it could be very dangerous”. AI could clearly be a force of good as well as a force of evil, and some global companies are setting up Ethic Committees to address problems of cybersecurity, privacy, GDPR and data use/sharing. Who will be the keeper of data, who will manage it and how will it be shared - issues which Facebook and Cambridge Analytics were pulled up on. Beyond this, there are other, broader issues, as James pointed out: “As human beings”, he said, “we still need social interaction and so we need to consider the impact of technology on the human psyche”.
Having said all this, AI offers tremendous opportunities to drive innovation, new thinking and address old and new problems. Phil Kemp emphasised this: “My advice to boards is that they shouldn’t be afraid to go on the journey and to do whatever it takes to embrace the change that AI will make possible; that means giving people the freedom to experiment and to be bold even if they or their ideas sometimes seem strange or obscure. Even a business that might be considered ‘dull’ can prove attractive to technically talented people if the questions it is asking and the problems it wants solving are sufficiently interesting”.
So in conclusion, what should boards think about and what should they put in place?
With boards responsible to shareholders, employees, customers, community and other stakeholders, AI is a modern boardroom issue. It cannot be ignored and definitely cannot be left to the IT team / department.
Investors and Shareholders will be demanding that companies disclose AI as a material risk that may affect demand for traditional products and services, and affect revenues and results. Data is the fuel but answers based on historical data may be biased or controversial and lead to legal challenge / privacy laws / reputational harm. Consumers and Communities are becoming more vocal. Employees too are looking for answers as technology is fast demanding new skills.
AI will reshape manufacturing, transport, agriculture, shopping, banking, automotive, healthcare, defence, your news feed etc. It will have a profound impact on some existing business models. In engaging with all stakeholders, boards will need to ensure they adequately cover and articulate all risks, opportunities, and strategies presented to them. In a world that changes very fast, reassessing and reviewing this messaging will be needed on a much more frequent basis.
As Phil Kemp put it: “Boards can only solve the right problems if they ask the right questions – so they need to have a sufficient understanding of technology to be able to do this and to be able to communicate effectively with technical specialists”. When embarking on any technology project, he said, “it is about the business first - the technology needs to deliver the business needs, but communicating and understanding these is a two-way process. We need to bring ‘tech’ to the boardroom; NEDs would do well to get up to speed; not understanding technology is no excuse!”
On a lighter note and in closing, Phil left us with one final thought. In the 1990s, when he was working at Vodafone, he remembers discussing with friends a vision of the future where people used mobile phones to take photos and even do their shopping. He recalls the reaction vividly - lots of laughs!