Boards are struggling to be fit to respond to a rapidly changing technological environment, according to a new report.

Technology Leadership in the Boardroom: Driving Trust and Value, released earlier this month by the National Association of Corporate Directors, describes how new technologies, especially generative AI, have prompted organizations to rethink their strategic timelines and value propositions and to determine whether they have the required leadership in the boardroom and C-suite. As the report puts it: “Directors and C-suite executives who entered the leadership ranks even five years ago may not fully grasp the technology-driven operating models that are creating value today.”

“These technology trends are not just impacting the way we operate, they’re redefining who we are as businesses—our strategies, our business models, how we create value, how we engage customers,” said Friso van der Oord, senior vice president of content at NACD. “That’s obviously not part of the operating experience of many directors.” 

Technology trends are not just impacting the way we operate, they’re redefining who we are as businesses.

Friso van der Oord, NACD

The report notes that technological savvy involves more than just being aware of the latest trends and tools, but also how to manage them in a way that secures the trust of users and customers. “Boards are now put in a position where they need to accomplish two things that are really hard,” van der Oord said. “They need to encourage management to take risks, move fast, and be disruptive. On the other hand, they need to encourage management to manage risks, minimize risk, and be responsible.”

To do that, the report emphasizes the need for boards to develop “technology proficiency” to make effective decisions. That doesn’t necessarily mean board members need deep expertise on the latest technologies. But they do need to understand the implications of those trends, which may require standing up a separate technology committee. 

“Every new director is expected to demonstrate some level of fluency around technology, but most importantly the impact that technology may have on the strategy, business model, workforce, and overall industry,” van der Oord said. “Board seats are a scarce commodity, so you don’t want to give away a board seat to a technology expert whose knowledge may become obsolete in a year or two.”

One recommendation the reports makes for boards to develop that fluency is to make sure that they develop multiple time horizons, looking at changes that may happen in the next year, three years, and five-to-ten years. That helps organizations avoid getting caught into short-term, reactive thinking. The report also recommends that boards make strategic thinking around technology a key element of their review of the chief executive, or their hiring process for one.

“The CEO might have a very strong leadership profile, but they may still need a chief innovation officer or digital marketing officer or chief technology officer,” van der Oord said. “If the CEO isn’t able to convey the digital strategy, then succession planning becomes really important.”

The report was produced by a blue-ribbon commission assembled by NACD and including leaders from Toyota, Nielsen, Harvard Business School, and elsewhere.

[elenabs/istock]