This document discusses the challenges that boards and leadership teams face in governing companies in the era of rapid technological change and disruption from AI. It notes that company lifespans are decreasing as digital transformation increases the pace of disruption. While many companies recognize the importance of digital transformation and AI, leadership is often not aligned on strategies and few have advanced maturity in AI. The document calls for new approaches to governance, including updated board competencies, distributed leadership models, and a focus on long-term sustainable value creation. It promotes a research initiative called 4Boards.ai to help boards leverage exponential technologies like AI more successfully.

1. Old fashioned Governance in the Era of AI Disruption –
The Challenges of AI for Sustainable Corporate Governance
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January 2019
Liselotte Engstam, Chairman & Research Director, Digoshen, NED
Robin Teigland, Professor, Chalmers University of Technology

2. The Company Leadership and Boards Challenge
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Rapid advancements in digital & exponential
technologies, in particular Artificial
Intelligence
Increasingly dynamic, complex, and
uncertain competitive environments
Higher customer, shareholder and
stakeholder requirements for fast innovative
response with sustainability considerations
The Challenge:
• Updated competencies
• Updated leadership &
governance approaches

3. More Companies at Risk for ”Kodak Moments” at Even Faster Pace…
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Research; , Carpe Diem, American Enterprise Foundation, 2018 Corporate Longevity: Turbulence ahead for Large Organizations, Innosight 2016
Fortune 500 Companies : From 1955-2018 only 11% remain… S&P 500 lifespan fell from 33 to 15 years.
Risk that 50% of large companies gone in 10 years time...
Disrupting or being disrupted..

4. Disruption Anticipated yet Fewer Prepared
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Research; Aligning the organisation for the digital future, MIT/Deloitte 2016

5. Digital Maturity Increasing, Distributing Decisionmaking
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Research; Digital Coming of Age. MIT/Deloitte 2018
Agree/
strongly agree
59% of CEOs claims have delegated
33% of reportees agree

6. Companies Progresssing but Leadership Falling Behind
Research; Understanding Digital Maturity – MIT/CapGemini 2018
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7. Disruptive Innovation As Highest Risk
Research; ERM 2018 - N Carolina State Univ/ Proviti (n=728)
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8. Question
Our organization has action plans that sufficiently address the
digital threats and opportunities for the next three years.
Strongly Disagree Disagree Neutral Agree Strongly Agree
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9. Few Companies with Advanced AI Maturity
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Research; AI in Europe & Sweden by EY and Microsoft 2018 (n=267)

10. Boards and Top Management Not Aligned on AI Importance
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Research; AI in Europe & Sweden by EY and Microsoft 2018 (n=267)
Significant
Impact
High Impact
Some Impact
Little Impact

11. Question
Our board has clarity on how to apply AI in the organization to
create value over the next 3 years.
Strongly Disagree Disagree Neutral Agree Strongly Agree
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12. Updated Leadership Needed
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Research; Digital Coming of Age. MIT/Deloitte 2018

13. •62% of
boards report
they are digitally
savvy
Source: MIT CISR 2014 Board Survey, 81 companies.
Based on public
data, 24% of
boards are digitally
savvy
Source: MIT CISR 2018 Board Study, 1122 companies, based on
coding of public proxy data.
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Boards Overestimate Their Digital Savviness

14. • Only 24% of boards of US firms with over $1 billion
in revenue are digitally savvy.
• Companies with digitally savvy boards had
• 38% higher revenue growth
• 34% higher ROA
• 34% higher market growth
• 3 digitally savvy directors are required to impact
performance
Source: MIT Research 2018
Digitally savvy directors change the risk conversation from
evaluating the project risk of a particular initiative to the
business model risk of not doing something new
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Digital Savvy Boards – The Next Frontier

15. Question
Our Board and Leadership Team have the right competence to
reinvent the enterprise for the digital era.
Strongly Disagree Disagree Neutral Agree Strongly Agree
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16. The Leadership and Board Challenge Requires New Approaches
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• ReThinking the enterprise with updated strategy and innovation
• New strategic risks and ethical response management
• New business models with more sustainable value propositions
• Data management for additional value creation
• Management of algorithmic blackbox operations
• Distributed & agile leadership & teams
• New skills & competencies
• Learning culture
• More partnership and contingent workforce
• Automation and AI both for cost reduction and new value creation
Requires an updated approach to corporate governance and
board work

17. Board Agenda Topics for 2019
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• Align board composition with strategy and future
needs
• Connect digital disruption with strategy and risk
management
• Focus on long-term value creation & understand
views of all stakeholders
• Make CEO succession & talent development a
priority
• Assess, monitor & reinforce culture as a strategic
asset & critical risk
• Refine discussions around cybersecurity and data
privacy as risk management issues
• Reassess crisis prevention and readiness
Source; On the 2019 Board Agenda, KPMG

18. Rethink board
processes and
procedures
(software, tools, etc.)
Rethink board competences
and mindsets
(IT quotas, “hooders” on boards)
Rethink board task focus
(disruptive innovation, new business models)
Rethink corporations and value creation
(boards in the digital era, digital transformation of
society and business)
“Boards and four levels of digitalization” - Morten Huse
Elements in
Corporate Governance
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Invitation for selected boards to join:
• Opportunity to (under confidentiality & chatham rules)
• engage in a company-tailored workshop and
interviews to assess best practices and develop
action plans
• join several multi-company workshops to explore &
discuss value creation and board dilemmas and best
practices
• join seminars to increase insights in AI-enabled
innovation & sustainable value creation
• receive insights from 4Boards.ai reports
Research-based Initiative to Explore Board Best Practices
4Boards.ai Objective
To identify, codify and disseminate a set of best practices to enable
corporate boards to more successfully govern and leverage AI and other
exponential technologies in their innovation and sustainability efforts

19. Website & Contacts
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Website: 4Boards.ai
Contacts
Liselotte.Engstam@digoshen.com
Robin.Teigland@chalmers.se