In an Era of AI, Boards Must Disrupt Legacy Leadership

CEOs have leaned into generative artificial intelligence (genAI) like no other technology in history. According to Fortune, there were more than 30,000 mentions of AI on earnings calls by the end of 2023.

Yet, the Economist reported that, so far, genAI has had almost no economic impact. This could be why research shows that 66 percent of leaders are “ambivalent or outright dissatisfied” with their companies’ AI and genAI progress thus far. No matter the challenge, businesses cannot afford to sit on the sidelines. As a result, CEOs and boards should partner to balance risks and opportunities, with boards leaning in to ensure that management is adequately prepared and supported to integrate genAI into operations and overall business transformation initiatives. 

The Economist suggested that for AI to fulfill its potential, organizations will need to accelerate adoption, drive automation beyond niche applications, and scale productivity. Certainly, there are reasons why companies are slow to adopt AI. Data security, potentially biased algorithms, and hallucinations are impeding the rollout. At the same time, a new mind-set shift is needed to see AI in a different light. 

Adopt an Innovation Mind-Set, Beyond Iteration

Previously, when I prepared for board meetings, I usually found myself catering to the board’s expectations and language. I made sure to structure my work against the board’s priorities. At some point along the way, although I was meeting the board’s objectives, I realized I wasn’t truly helping directors help the company or its long-term viability. 

Leaders who hear what they need to hear will eventually be surrounded by people who have nothing meaningful to say. True leaders listen to the truth. The world needs more tellers. And the truth is that AI presents an incredible shift that most leaders are not, but think they are, prepared for.

Venture capitalist Vinod Khosla recently observed in an X (formerly known as Twitter) post, “Most businesses have no clue what is about to hit them in the next 10 years when most rules of engagement will change.”

Here, Khosla highlights the profound and transformative impact that AI will have on the business landscape. He believes that AI will disrupt almost every industry and change the fundamental ways in which companies operate, compete, and engage with employees and customers.

What is it that Khosla is warning leaders about? AI technologies are evolving at an unprecedented pace. Many organizations, especially those reliant on traditional methods of doing business, are unprepared for the speed and scale at which AI could disrupt their industries. What seems to be gradual technological progress today could result in sweeping changes in just a few years. 

AI will shift the competitive landscape. Leaders that harness AI effectively will have significant advantages in terms of efficiency, customer insights, innovation, and product development. 

It is already automating many routine tasks. Over a short amount of time, automation will dramatically alter the workforce. It’s up to leaders to determine whether that’s a boon or a threat to their organizations. Leaders that don’t anticipate these changes may struggle with workforce transitions and operational disruptions.

The technology could make many existing business models unsustainable and, worse, obsolete. For example, industries such as finance, health care, retail, and manufacturing will see profound shifts in how they operate, serve customers, and generate revenue. AI is expected to create entirely new categories of products and services. Companies that don’t innovate or experiment with AI to create these new offerings will risk being left behind. 

These are just some of the ways that the rules of engagement will shift. Added up, this could lead to the rise of new market leaders and the decline of incumbents that fail to adapt. If there were ever a time to innovate the role of boards and their impact on the organizations they advise, it is now.

Boards Cannot Afford to Fall into the Innovation Trap

Historically, every technological revolution has been folded into legacy systems and processes, all for good reasons. If business as usual is still working, why rock the boat? The same is true for AI. If companies can further optimize existing work and processes while driving efficiencies, productivity, and scale, as well as lowering costs along the way, what’s the problem? After all, established processes, workflows, and culture often favor incremental improvements over radical change—until they don’t. 

This exemplifies an iterative mind-set, and it is often mistaken for one of innovation. This is the innovation trap. Iteration works until the need for innovation becomes the only way forward. The trick is that iteration can look a lot like innovation to those who don’t understand the difference between incrementalism and transformation. 

It is easy to fall into the innovation trap. With every new technology revolution, investments masquerade as innovation because they are new to the organization, requiring new strategies, skills, and resources to support them. The catch is, if a company uses new technologies to improve what it did yesterday, it is iterating and not innovating. While iteration is important, if a company is not innovating, it isn’t future-proofing itself. 

For boards, the innovation trap becomes harder to see, because, in the short-term, the spoils of incrementalism are wrapped in cost savings, profitability, and shareholder returns. Without innovation, however, the once-vibrant streams produced by iteration eventually thin and run out. This is when a pivot becomes reactive rather than proactive, delivering a costly if not fatal blow to the organization.

Iteration Versus Innovation

The dichotomy with innovation is that it can eventually replenish and grow shareholder value, but the strategy to get there is not guaranteed and comes with costs, risks, and uncertainty. But if leaders routinely explore how to align new technologies, beyond iteration, to unlock net new value creation and do something that the company didn’t or couldn’t do yesterday, it potentially augments the company’s future trajectory. This would be iterating and innovating. Organizations need to practice the discipline of both; CEOs need the runway to do so and boards should become the air traffic controllers to guide and protect them.

There are many cases where business as usual does not survive disruption. AI is yet the next disruptor, a harbinger of innovation. But this time, the innovation is exponential. 

Scaling new technologies through iterative investments can effectively create a linear path of growth. Think about the most-cited genAI benefits today: time saved, reduced costs, optimized self-service for customers and employees. GenAI is quickly delivering incremental benefits while becoming the status quo. Empowered, creative, and bold leaders are also asking, What can be done with time saved? What else could high-performing teams do while automation tackles repetitive tasks?

An example of how AI can cut costs and drive growth is IKEA’s Billie, an AI chatbot designed to handle first-level customer interactions. After launching in 2023, Billie managed 47 percent of the queries that were typically routed to IKEA’s call centers, successfully resolving 3.2 million interactions and delivering an impressive €13 million in savings. At a time when many executives are looking to AI for cost-cutting, particularly through workforce reduction, IKEA chose an augmented path. Rather than downsizing, the company reskilled 8,500 call center employees, empowering them to transition into roles that required human expertise, such as remote interior design consulting and digital retail sales, to help build deeper customer relationships and solve complex problems. This shift not only safeguarded jobs but also led to €1.3 billion in sales through these enhanced customer experiences and contributed to nearly 4 percent of IKEA’s total sales in its first year of use. This type of transformative vision can redefine an organization’s future by blending automation with human intelligence to drive both efficiency and growth. 

These outcomes demonstrate the valuable relationship between iteration and innovation. Combined, they can yield linear and exponential performance and returns. 

Disrupt or Be Disrupted

How can boards advocate for long-term AI innovation when most organizations operate against short-term, quarter-to-quarter strategies and measures? Start with a mind-set shift.

Working with C-suites to evaluate the potential and risks of AI and to establish centers of excellence is important, but these are not long-term solutions to viability. Boards should advocate for cultures of AI-powered innovation.

They can do this by empowering executives to challenge fundamental assumptions about business and operational models. Executives should be given the room to explore new horizons for innovation and transformation while also iterating linear growth.

Boards can collaborate with C-suites to iterate and innovate toward a more rewarding and promising future by considering the following actions:

• Align AI initiatives with short- to long-term strategic objectives.
• Develop a long-term AI-powered innovation road map that outlines key milestones and timelines for achieving long-term AI innovation objectives.
• Allocate resources strategically. Dedicate a specific percentage of resources to long-term AI innovation projects while maintaining focus on short-term operational needs. 
• Foster an organizational culture that values long-term thinking and innovation.
• Adopt a balanced scorecard approach that includes both short-term operational metrics and long-term strategic indicators related to AI innovation.
• Educate fellow board members and executives to ensure that they understand the long-term potential and implications of AI technologies.
• Partner with academic institutions to access cutting-edge research and expertise, which can provide a competitive edge in long-term AI innovation.
• Communicate the short- and long-term AI vision, including the path to get there, to stakeholders and investors to manage expectations and justify investments in innovation. 
• Monitor and adapt to market changes and adjust long-term AI strategies in response to significant market shifts without losing focus on the need to continuously innovate. 
• Highlight successful AI implementations and their impact on the business to demonstrate the value of sustained innovation efforts.

A mind-set shift among board members and C-suites is critical today. Businesses that fail to adopt these innovations could lose their competitive edge.

Brian Solis is a digital anthropologist and futurist who serves as the head of global innovation at ServiceNow. In his role, Solis advises business and technology leaders around the world on business and digital innovation and transformation strategies. He is the author of Mindshift: Transform Leadership, Drive Innovation, and Reshape the Future.