As published in Private Company Director
The most transformative force shaping the business landscape today is AI. While AI’s reality and potential are widely discussed, I have found that its practical implications and applications are less well understood. It is supercritical that directors not only comprehend AI conceptually but also engage with it personally. To ignore AI is to risk obsolescence; to engage with it is to unlock unprecedented potential. Here, I will explain AI, demystify its various applications and emphasize why it is necessary for directors to personally engage with AI in order to advance that understanding in our roles on private company boards.
Understanding AI
AI refers to the simulation of human intelligence in machines that are programmed to think, learn and make decisions. AI systems can perform tasks that typically require human intelligence. They rely on algorithms, statistical models and large datasets to learn from experience and improve over time. AI is not a single technology but a constellation of technologies, including machine learning, neural networks and natural language processing (NLP).
Machine learning, a subset of AI, involves algorithms that improve their performance through experience. Neural networks, inspired by the human brain, are systems of algorithms that identify patterns in vast datasets. NLP, another critical subset, enables machines to understand and respond to human language, making human-computer interactions more intuitive.
People, and thus companies, are deploying AI across all industries, from health care to finance, manufacturing to retail sales. In health care, AI assists in diagnosing diseases and personalizing treatment plans. In finance, AI algorithms perform credit analysis and due diligence in a larger effort to protect investors.
AI shows up in a variety of ways. There are core products that you can use personally, like ChatGPT, Gemini, Perplexity and Claude. You can execute small time-saving tasks with these large language models (LLMs), and you can use these models to build bigger programs for your company’s proprietary use. You can also access from third-party vendors vertically integrated software packages that do larger tasks or solve specific problems for you. These sector-specific tools can be ones like Ren, which sends you news stories about everyone in your CRM every day, or outsourced packages that help multifamily housing owners manage revenue and interact with and anticipate the needs of residents.
These examples merely scratch the surface of AI’s potential, underscoring its versatility and world-changing impact. As I recently heard someone say, “If AI were a baseball game, what inning would we be in?” And the answer was, “We are getting pretty close to inventing baseball.” We are just getting started.
The Imperative for Personal Involvement
Active engagement. Reading about AI and its capabilities is a start, but it is not enough. As directors, we must immerse ourselves in AI to understand its nuances and applications personally. This active engagement is crucial for several reasons:
- Informed decision-making. By using AI tools ourselves, we gain firsthand experience and insights that enable us to make more informed decisions about how our companies can leverage AI.
- Strategic guidance. Our role involves guiding the company’s strategic direction. Personal familiarity with AI allows us to identify opportunities and risks associated with AI adoption and provide sound, experienced advice to management.
- Credibility and authority. Speaking with authority on AI requires more than theoretical knowledge. Practical experience with AI enhances our credibility and influence within the boardroom.
How to Get Involved
Engaging with AI does not require a technical background. Here are practical steps directors can take to get started.
Use AI tools. Experiment with AI tools and platforms. For example, tinker with AI-driven analytics software to gain insights into business performance or try AI-based writing assistants to streamline communication. I have been using ChatGPT since I first heard about it in January 2023. It has become a part of my daily life.
Attend workshops and training. Participate in AI workshops and training sessions designed for executives and board members. These programs often provide a solid grounding in AI principles and applications. I recently attended a conference about AI in real estate in New York City. I attended to make connections but returned with an understanding that there is a lot of knowledge out there to access and that many people have not started the investigation.
Collaborate with AI experts. Build relationships with AI experts and consultants who can provide guidance and support as you explore AI initiatives within your company. I can’t say that I have collaborated with AI experts yet, but I am following individuals on social media who are AI experts and they are teaching me a lot.
Pilot AI projects. Initiate small-scale AI projects within your company to test AI’s potential and to gather valuable experience. This could involve automating routine tasks, improving customer interactions or optimizing supply chain processes. At the same time, empower people within your constituent companies and in your own organization to start projects and become experts themselves. Encourage them and give them the freedom to explore.
Real-World Applications and Examples
Where I work, we have embraced AI to solve various challenges and enhance operational efficiency. One notable example is our use of AI-powered analytics to improve compliance processes. By integrating AI into our financial analyses of our client companies, we are uncovering initial insights in mere minutes, providing us with the documentation that we need in our files to appease our regulators, but also enabling us to make more informed and practical decisions about our own business and compliance processes.
Some of our clients have deployed AI-driven customer service solutions. Using advanced language models like GPT-4o, they have created intelligent chatbots that handle customer inquiries, freeing up human resources for more complex tasks.
For subsequent applications, I believe that we should start discussions about the future P&Ls of our enterprises. As we empower ourselves and our colleagues to become more efficient in our responsibilities and tasks, AI won’t replace us, but will augment our productivity even further, allowing our companies to energize growth and reduce expenses. AI is the most cost-effective way to improve any business. How do we budget and plan for that?
Case Studies from Industries
Retail. A leading retail company has implemented AI-driven demand forecasting to optimize inventory management. This resulted in a significant reduction in stockouts and overstock situations, leading, of course, to increased customer satisfaction and reduced operational costs. This is extremely valuable, especially in light of significant inventory issues in the retail sector over the past several years.
Manufacturing. Many manufacturing firms have deployed AI-powered predictive maintenance to monitor equipment health and predict failures before they occur. This strategy minimizes downtime and extends the lifespan of critical machinery.
Finance. Many investment firms leverage AI algorithms to analyze market data and identify investment opportunities. This enhances their portfolio management strategies and could help to deliver enhanced returns for their clients.
The Path Forward
To fully realize the benefits of AI, it is essential to cultivate an AI-ready culture within the organization. This requires:
- Leadership commitment. Demonstrate a clear commitment to AI from the top. As directors, our endorsement of AI initiatives sets the tone for the entire organization.
- Employee empowerment. Equip employees with the necessary skills and knowledge to work with AI. This can be achieved through training programs, workshops and continuous learning opportunities.
- Ethical considerations. Address the ethical implications of AI deployment. Ensure that AI systems are used responsibly and transparently, with a focus on fairness, accountability and privacy. This is a complicated topic that I don’t yet quite understand, and which I have not yet uncovered well enough in my everyday use of AI, but I remain vigilant about the ethics of AI as I try to do around all aspects of my business life.
Overcoming Challenges
Adopting AI is not without its challenges. Common obstacles include:
Data quality. AI systems rely on high-quality data. Ensuring data accuracy, completeness and relevance is critical for successful AI implementation. We have all heard about hallucinations, when incorrect or misleading information is passed off as if it were true. I have encountered many challenges around this personally and, at times, it causes me to stop using AI for a few days as I get frustrated. But I always come back around and try again, using a different approach — just like with anything else in business. AI software vendors are focused on solving hallucination challenges — but always check your work. Your job as a private company director is to help remind your leadership of questions around accuracy, bias and even intellectual property infringement.
Integration. Integrating AI with existing systems and processes can be complicated. It is important to have an idea in your head of what you want to accomplish, but, at this point, I think it is a bit of a stretch to suggest that we have a clear integration strategy and the right technical expertise to navigate this process. Integrating AI into your businesses and into your business life is going to be clunky. It takes a lot of practice — which is just another reason to get started now and to be persistent. Your job in your leadership position is to guide senior management to the right answers in this problem-solving and to help mind expenses, which can escalate quickly if too much third-party software is relied upon.
Change management. AI adoption often requires significant changes to workflows and business processes. Effective change management strategies are essential to minimize disruption and ensure a smooth transition. I dislike the term “change management” — But things inevitably must change. Which means we need to stay nimble and open-minded. Guide your constituents to adapt and do things differently. This is an important role for you as a private company director.
The Future of AI, The Future of Boards
Our futures in business are, no doubt, linked to AI. We have no choice but to engage with it. As private company directors, we must understand and harness this technology to drive innovation and competitive advantage — and to simply keep up. By personally engaging with AI, we can lead our companies with confidence and authority, ensuring that they remain at the forefront of their industries. The journey to AI mastery begins with a single step — take that next step today and unlock the boundless possibilities that AI has to offer.