When science fiction calls the board to account

The capability of artificial intelligence (AI), once the domain of science fiction, has accelerated in leaps and bounds in recent times, as it disrupts many industries and displaces traditional roles.

Quantum computing, once confined to theoretical physics and university laboratories, is now on the cusp of real-world application: using ‘qubits’ that can exist in multiple states simultaneously, it can solve complex problems – such as cryptographic decryption, molecular simulation and optimisation – at speeds previously unimaginable.

Still following? For many directors, the pace of technological change is hard to keep up with.

Even though many of the concepts underpinning AI and quantum computing are not new, the technology is now at a stage where once-hypothetical real-world applications are becoming a reality. This means boards are likely to have to grapple with the existential question of how their organisation will adapt.

What does this mean for directors of New Zealand organisations?

In a tough economic climate, good directors should be assessing their organisation’s strategy and seeking any possible competitive advantage, including considering what competitors and others in the market are doing. Given current trends, this assessment is likely to involve considering the adoption of new and novel technologies.

Adopting innovative technologies has the potential to drive down costs, increase performance or differentiate an offering. However, before any new technologies are considered, directors would be well-advised to try to get a handle on the direction of technological travel, and what it means for their organisation.

In addition, in performing their roles, directors must ensure they comply with their duties under the Companies Act 1993, which include:

• • Acting in good faith and in what the director believes to be the best interests of the organisation
  • Exercising care, diligence and skill that a reasonable director would exercise in the same circumstances

These duties are technology-neutral, but not technology immune.

To fulfil these duties in this context, a director must have a reasonable understanding of how technological change will affect their organisation and how it operates.

So, is it possible for directors to discharge their duties competently if they don’t understand the technology available and the implications of what that technology can do? Do directors need a degree in quantum computing to keep up? 

Good directors can prepare themselves to make robust, enduring decisions by considering the following:

1. Seek expert input: There is no need to go it alone. The Companies Act expressly allows a director to rely on reports, statements and other information prepared or supplied, and on professional or expert advice given by an appropriately qualified employee or a suitable professional advisor or expert. Don’t think you need to work it all out yourself, seek expert input. However, make sure you critique and analyse that advice.
2. Work through the ‘noise’: A healthy dose of scepticism is warranted when it comes to innovative technology. Most technology is being sold by sales representatives who may profit from your inability to understand your needs or your eagerness to become an early adopter. Don’t expect new technology to be a solution to all the issues your organisation faces. Most technology is not truly disruptive at an industry-wide level, and its adoption is unlikely to paper over any shortcomings in the fundamentals of a business.
3. Remember the importance of people: Technology is implemented, used, bought and sold by real people. Turn your mind to how strategic decisions regarding technology will affect the human side of your organisation: whether that be your staff, customers or other stakeholders. Don’t forget the effects of any modern technology on the people entrusted to deliver it and those who will benefit (or not) from its deployment. Invest in digital literacy, so those who are engaged to deliver can do so from a position of understanding.

Ultimately, the role you assume as a director should allow you to take a step back and offer a balanced perspective on how technology might affect your organisation. So long as you don’t let the hype of new technology distract you from that position and you seek advice where appropriate, you should find yourself well-placed to discharge your duties.