On the 19th of February 2020, the European Commission presented ”A European Strategy for Data” and the ”White Paper on Artificial Intelligence (AI)”. Our 4boards.ai team has taken a deep dive into these documents and looked into how our research and the new strategies presented in these documents align to drive value creation in European businesses.
Our 4boards.ai research is a two-year project funded by Vinnova – Sweden’s Innovation Agency. The objective of our project is to build and disseminate research-based knowledge and a set of best practices and tools to enable corporate and other organizational boards to successfully govern and leverage AI in their innovation and sustainability efforts. Recently, we published our initial findings in a book chapter under Routledge, “AI leadership and the future of corporate governance: Changing demands for board competence”. We will soon publish an updated version in an e-book format.
At the base of our research is the fundamental principle that corporate boards and top management are ultimately responsible for a firm’s success. They influence firm performance through their strategic decisions – decisions that may either lead a business towards prosperity or worse put the firm at considerable risk, potentially taking it to its demise. Today boards are increasingly challenged in their decision making. Rapid advances in digital technologies, and in particular artificial intelligence (AI), along with dynamic and complex competitive environments are inducing established firms to develop new competences and processes and undergo larger digital transformation programs. These changes need to be guided and supervised at the board level, and just as we have been investigating how boards should guide and supervise the implementation of AI so has the European Commission been looking into AI under EU law and fundamental rights.
To begin with, in the first document, ”A European Strategy for Data”, the EU Commissions notes, “Citizens, businesses and organisations should be empowered to make better decisions based on insights gleaned from non-personal data”, since “the way that we organise data access and reuse will determine our future innovation capacity” (EU Comission, 2020c). This is very much in line with what we have been putting forward in our 4boards.ai project. Indeed, our research has led us to conclude that in order for firms to successfully build an innovation capacity based on data, corporate boards must guide the development and implementation of the firm’s AI-driven innovation strategy. Successful guidance leads to the creation of value in a multitude of ways, such as a) leaner & faster operations, b) tailored services, products and advice, c) ubiquitous presence, d) smarter decision-making, and e) new value propositions (adapted from (McWaters, 2018) and (WEF, 2018).
In order for firms to successfully build an innovation capacity based on data, corporate boards must guide the development and implementation of the firm’s AI-driven innovation strategy.
However, an innovation strategy can only be achieved if it is built on reliable data, which is noted in the European data strategy as a key aspect holding the EU back from realising its potential in the data economy (EU Comission, 2020a). Hence, the EU data strategy aims to “create a genuine single market for data, where personal and non-personal data, including confidential and sensitive data, are secure and where businesses and the public sector have easy access to huge amounts of high-quality data to create and innovate” (EU Comission, 2020c).
For this to be realized in business, our research indicates that boards need to guide management in the creation of a business-specific data strategy that incorporates the gathering, harvesting and analysis of big data. Furthermore, the existing Open Data Directive already makes data available for society, and the European data strategy aims to build on already available reusable data, which in our opinion at 4boards.ai will enable firms to strengthen their participation in greater data ecosystems.
Moving to the second document, the “White Paper on AI” addresses the need to create ecosystem trust. This can be achieved through the creation of a “legal framework that addresses the risks for fundamental rights and safety” (EU Comission, 2020b). Our 4boards.ai research supports this statement as we advocate for the board’s supervision of the firm’s AI implementation in order to build trust. This supervision of AI capability includes three areas: a) supervising data management, ethics and black box decision-making, b) supervising AI cybersecurity, and c) supervising business ecosystem participation and leadership. The above is key to guaranteeing a human-centred approach to the implementation of AI, rendered in the value that “the EU must ensure that the digital transformation works for the benefit of all people, not just a few” (EU Comission, 2020c). Furthermore, just as we have pointed out for the need for boards to supervise cybersecurity, the EU also puts a strong emphasis on cybersecurity by “promoting cooperation through a Joint Cyber Unit that protects critical European infrastructure and strengthens the cybersecurity single market” (EU Comission, 2020c).
Additionally, in our 4boards.ai research, we have been looking at how data and AI can support innovation to deal with the sustainability challenges that we face as a society. In the same way, the European Commission’s digital strategy is presented as a key enabler of the goal to “become the world’s first climate-neutral continent by 2050” (EU Comission, 2020c). This fortuitous alignment just puts in evidence that climate change is one of the biggest challenges ever faced by mankind and, that to address this, we need to put at work all our innovative capabilities for a green transformation.
It’s of utmost importance that guidance becomes aligned with existing corporate governance legislation and country corporate governance codes, in order to facilitate fast implementation.
Moving forward, we think that the documents, ”A European Strategy for Data” and the ”White Paper on Artificial Intelligence (AI)”, offer good advice for businesses, governments, and societies. However, it is also of utmost importance that guidance becomes aligned with existing corporate governance legislation and country corporate governance codes in order to facilitate fast and smooth implementation. We also recommend the European Commission and countries to advise businesses to improve their governance by already now focusing on key areas related to AI implementation. Our 4boards.ai research findings published in our book chapter and the forthcoming book, AI Leadership and the Future of Corporate Governance: Changing demands for board competence, offer a practical framework and set of tools for the guidance and supervision of AI implementation. More specifically, we recommend that boards under Board AI Operational Guidance: a) Guiding the gathering, harvesting, and analysis of big data in a data strategy, b) Guiding AI-driven innovation strategy and c) Guiding the participation and growth on a business ecosystem; and the three areas under Board Supervision of AI Governance a) Supervising data management, ethics and black box decision-making, b) Supervising AI cybersecurity and c) Supervising business ecosystem participation and leadership. In summary, together, these more general documents combined with our research specifically for corporate boards and top management offer strong guidance for boards and society to successfully drive AI implementation and secure the future competitiveness of Europe.
EU Comission, E., 2020a. A European strategy for data. [online] Available at: <https://ec.europa.eu/info/sites/info/files/communication-european-strategy-data-19feb2020_en.pdf> [Accessed 24 Feb. 1BC].
EU Comission, E., 2020b. On Artificial Intelligence – A European approach to excellence and trust. [online] Available at: <https://ec.europa.eu/info/sites/info/files/commission-white-paper-artificial-intelligence-feb2020_en.pdf> [Accessed 24 Feb. 2020].
EU Comission, E., 2020c. Shaping Europe’s digital future – Questions and Answers. [online] Press Corner. Available at: <https://ec.europa.eu/commission/presscorner/detail/en/qanda_20_264> [Accessed 24 Feb. 2020].
McWaters, J., 2018. The New Physics of Financial Services – Understanding how artificial inteligence is transforming the financial ecosystem. [online] World Economic Forum. Available at: <https://www.weforum.org/reports/the-new-physics-of-financial-services-how-artificial-intelligence-is-transforming-the-financial-ecosystem> [Accessed 26 Jun. 2019].
WEF, 2018. Digital Transformation Initiative – Maximizing the Return on Digital Investments. [online] World Economic Forum. Available at: <http://reports.weforum.org/digital-transformation/files/2018/05/201805-DTI-Maximizing-the-Return-on-Digital-Investments.pdf> [Accessed 26 Jun. 2019].
Illustrations: Sérgio Couto