5 days ago
Tech fluency on corporate boards: embedding AI and innovation into business strategy
As AI and disruptive technology keep changing the business world at lightning speed, boards are under constant pressure to stay on top. Innovation is a key part of how companies grow and stay competitive—but many boards still aren't ready for what's coming, says Sonita Lontoh, independent board director of Nasdaq-listed Sunrun and NYSE-listed TrueBlue and advisor at Silicon Valley VC firm Sway Ventures
CLOSING THE FLUENCY GAP
While every company is at a different point of maturity in its AI and technology journey, Lontoh sees a few challenges that boards often face. One of the biggest is the lack of technology literacy on many corporate boards—especially outside the tech industry. 'Many boards either don't have any real technology knowledge or rely too much on a single 'tech expert' to translate it all,' she says.
That's not optimal. Just like board members are expected to be financially literate, directors should have some level of technology fluency even when they may not necessarily need to be experts, Lontoh says. Without it, boards may lean too heavily on management's opinions. That can make it hard to challenge decisions when necessary or spot strategic, paradigm-shifting opportunities.
EMBEDDING TECHNOLOGY INTO BUSINESS STRATEGY
Another issue is that often, technology and innovation aren't fully integrated into the company's business strategy for long-term value creation. Lontoh notes that in some organizations, these efforts are still treated as siloed initiatives owned primarily by IT or the technology department. As a result, boards can struggle to evaluate whether tech investments are truly moving the company forward when innovation isn't linked to larger business goals. 'Boards need a holistic view so they can understand whether technology decisions are aligned with big-picture objectives and tech initiatives are actually resulting in real business outcomes,' she says.
On top of structural issues, there's also the sheer pace of technological advancement. Lontoh points to AI as a good example. 'Things are moving at an exponential pace, and boards are trying to figure out how to have the right governance frameworks that let companies explore new AI tools while still being ethical and responsible,' she says. Striking the right balance between innovation and risk is tricky, especially when the technology itself seems to evolve on an almost weekly basis.
OUTSIDE PERSPECTIVES
Lontoh has some suggestions on how boards can up their tech knowledge and fluency. First, boards should get regular briefings not only with internal tech leaders, but also to hear from outside experts. 'I've seen boards get a lot of value from meeting with venture capitalists or founders who've built and scaled disruptive companies, for example,' she says. These kinds of conversations help directors break out of old paradigms and spot new possibilities.
Boards should also mix their continuing education efforts by attending not just governance conferences, but also technology conferences, to hear first-hand from the leaders at the forefront of these new innovations and get a pulse of what's going on in the market.
She also recommends that board members try out emerging technologies firsthand. 'Especially with GenAI, just using it can be really eye-opening, but surprisingly, many global directors have little or no experience with it.' This needs to change, she says. 'The more hands-on experience directors can get, the better they'll understand what these tools can actually do.'
STRUCTURING AGENDAS AROUND INNOVATION
Another important question is how boards should structure their committees to ensure they have the time and space to oversee technology and innovation risks and opportunities adequately. There's no one-size-fits-all answer, Lontoh says. It depends on the company's industry, growth stage, and specific challenges. 'If you're in a high-growth space, your needs will be very different from a company in a declining category, for instance,' she notes.
Some boards assign all technology and cybersecurity risk oversight to the audit committee, but that may not always make sense. Instead, Lontoh suggests boards periodically reassess whether their current committee structures, compositions, and risk oversight allocations are still 'fit for purpose' to provide effective oversight for their particular situation.
That includes looking at whether it might be appropriate for some companies to have a standing technology and innovation committee to provide the board with the appropriate structure to be able to look at technology and innovation holistically—encompassing not just risks, but also opportunities, talent, and other aspects of technology and innovation that will create long-term business value for the company.
SETTING THE RIGHT TONE AT THE TOP
Boards also have an important role to play in encouraging innovation across the organization, Lonton says. That starts with mindset. 'Boards should set the right mindset to encourage management to look at technology and innovation as a strategic imperative that can materially change the long-term value of the company,' Lontoh says, 'and not just as an operational initiative.' She encourages boards to ask business leaders tough questions: How are these technology investments improving customer experience? Are they helping us retain talent? Are they actually moving the needle on growth?
And last but not least, boards should also influence management to adopt a healthy culture of innovation. 'A healthy culture of innovation combines an element of trust, openness, agility, and accountability,' Lontoh says, 'It's important because to be successful in innovation is as much about culture as it is about technology.'
