Navigating the Power of Generative AI

As the world grapples with the nascent technology of generative AI, company executives are racing to understand its potential impact and prepare for what lies ahead. While the early adopters have witnessed its disruptive capabilities, the role of the board in supporting their CEOs remains unclear.

The fast-paced development and adoption of generative AI further complicate matters. To assist board members in effectively guiding their companies through this transformative era, we have outlined four key questions that boards should consider asking their company leaders. These questions will help align management's strategic decisions with the power and risks associated with generative AI.

Question 1: How will generative AI shape our industry and company in the short and long term?

Understanding the potential impact of generative AI on industries and businesses is crucial for developing a sensible strategy. The first wave of applications is expected to revolutionize software engineering, marketing and sales, customer service, and product development. Industries heavily reliant on these functions, such as media and entertainment, banking, consumer goods, telecommunications, life sciences, and technology companies, will experience the early impact.

However, companies in other sectors must not delay assessing the value generative AI can bring, given its rapid growth and adoption. Research shows that generative AI can increase worker productivity across industries, potentially adding $7.9 trillion in value globally. Each company must explore immediate efficiency opportunities while considering the long-term implications of generative AI on the competitive environment and future-proofing their strategies and business models.

Question 2: Are we striking the right balance between value creation and risk management?

Harnessing the potential of generative AI requires a cautious approach that balances value creation with risk management. Just like traditional AI, generative AI presents privacy concerns, ethical risks, and security vulnerabilities. The technology can perpetuate hidden biases, increase the risk of security breaches, and infringe on legal protections. Moreover, generative AI's propensity to generate inaccurate information with authority poses dangers to both companies and society, fueling concerns of misinformation. To mitigate these risks, companies must evaluate each use case's value and risks, align them with the company's risk tolerance and objectives, establish legal and regulatory frameworks, continually assess unknown risks and ethical concerns, and ensure effective oversight of generative AI's design and usage.

Question 3: How should we organize our company to leverage generative AI effectively?

Unlike previous AI technologies, generative AI requires a coordinated approach to implementation. Merely conducting pilot projects is insufficient in today's rapidly evolving environment. Appointing a senior executive responsible for overseeing generative AI activities and establishing a cross-functional team comprising data science, engineering, legal, cybersecurity, marketing, and design experts can expedite strategy formulation and implementation. A coordinated approach would prioritize use cases that deliver fast, high-impact results while considering more complex applications. Ensuring strategic partnerships and alliances with domain-specific experts and infrastructure providers is also crucial to harness generative AI's full potential while avoiding vendor lock-in and third-party risks.

Question 4: Do we possess the necessary capabilities to leverage generative AI effectively?

To keep up with the pace of generative AI, companies must assess their technological stack, talent pool, and organizational culture. A modern data and tech stack, coupled with robust data governance and security procedures, is essential for success. Companies must identify their AI talent needs, reskill their workforce, and attract

References

PwC: The power of AI and generative AI: what boards should know
McKinsey: Four Essential Questions for Boards to Ask About Generative AI
Deloitte: AI Governance for Board Members