Artificial
Intelligence (AI) is about to exit the hype cycle, and innovative boards should
be empowering and positioning their companies to take on the advantages and
challenges that come with it. Chief marketing officers (CMO) in particular are
either using AI for competitive advantage already, or they are chafing at the
bit to do so. The directors of companies need to be ready to oversee the work
they are doing with the technology.

Whether used by
marketing departments for customer data analytics, targeting, recommendations,
or chatbot support within a company, there are implications to AI
implementation for a company’s leadership, strategy, risk, ethics, and
corporate social responsibility. The good news is that board members do not
need to understand the working of every feature, part, and possibility of AI to
be able to govern its use. This is like driving and even enjoying a Tesla—business
principles apply to and drive governance. Understanding exactly what is under
the hood can come a bit later.

Four broad areas exist
for company directors to consider:

Understanding and
staying abreast of developments in AI;Implementing AI within
marketing;Governing AI
initiatives after implementation; andContinuing with AI in
the future.

Understanding:
Institute an AI Council Within the Board

One of the most significant challenges involved in governing the use of AI is the frenetic pace at which the technology is advancing. Boards should be aware that AI can be applied to a variety of traditional marketing functions: dynamic pricing, demand forecasting, increasing conversion, customer support, and even for customer retention. A recent McKinsey study found that AI will make an impact on various retail sector business functions to the tune of  $600 billion, with other sectors facing significant disruption, too.

Meanwhile, boards should also understand the race across the world that is happening to understand, apply, and reap the benefits of AI. Eighty-five percent of Chinese companies are actively working in AI and China is dominating AI research and implementations. The European Commission chartered with ensuring trust about the use of AI published seven essential guidelines on ethics for AI including human agency, transparency, bias, social and environmental wellbeing and privacy.

While these are not yet governance laws, boards should expect to see laws sometime in the near future. For instance, the General Data Protection Regulation (GDPR)  already requires transparency about any algorithms used. Algorithms need auditing for bias from both technical and social perspectives. A similar law could emerge for use of AI, or GDPR could be more broadly applied to AI, for instance.

For these reasons, it
is useful to constitute an AI council within your company that is specifically
charged with educating the board on the technology and related regulations,
monitoring strategic AI initiatives and competition, reporting on risk and
ethics, and bringing the board up to speed on other related AI oversight
matters. An AI council with a diverse set of experts is best suited to create a
detailed and feasible transformation plan to ensure longevity and staying ahead
of the competition. With the help of an AI council, the rest of the board can
understand the landscape quickly in the business context and be ready to take
on strategic and governance challenges.

Implementing: AI As a
Platform, Not A Point Solution

AI presents a unique
opportunity to market across the customer lifecycle. Companies currently struggle
to consolidate customer data from channel silos and rely either on human skill
or chance to drive conversion. AI presents the real possibility of running one-to-one
marketing and sales to increase conversion based on individual customer
insight.

By consolidating customer data across traditional marketing channels along with transactional, customer support, and loyalty programs into a customer 360 database, AI can provide the following: highly targeted messaging, individualized promotions and pricing, and automated customer engagement and support, all in order to increase repeat and first time conversion.

Siloed marketing departments
with inadequate IT support find expensive and ineffective external point solutions
to make this type of marketing happen. A comprehensive data and customer
lifecycle platform that uses machine learning and AI is able to model the data
as required for differentiation and success at greater speed. 

To realize this potential, boards must drive transformation and sustained long term strategy. Technology implementation should start with clarity on business goals and continued transformation. Here are pitfalls to consider during implementation of such transformations that boards can help companies avoid.

Governing: Oversight
Framework

Since AI adds new challenges
and opportunities to marketing, directors need to be able to understand the
motivations, results, and risks for any marketing processes that use it. At the
outset of the board’s work to oversee AI practices within the company, the
board should request from the CEO and CMO a summary of the following:

opportunities being
pursued via AI;functions and features
in use;types of data and how they
are being used;privacy, bias, and ethics
considerations paired with measures or audit trails to track them;any findings by AI
such as new customer micro-segments or product and service features needed; any external sources
of data being used;any data partners who
might share data and how they might do that; and  any explanations or
assurances provided to stockholders, particularly around any rulings around
data, ethics, and corporate social responsibility.

Thereafter, a report every
six months on changes or progress within these areas is a good way to keep the
board informed about AI’s use and role within the company.

In regular reports, the CMO typically presents metrics such as “ad to sales” ratio and “contribution to sales.” Most marketing departments still struggle with attribution of marketing spend to conversion and cannot readily cite customer acquisition cost (CAC). The use of AI along with customer 360 data enables clarity on customer acquisition, conversion, satisfaction and retention or customer lifetime value (CLV). CMOs in concert with business unit owners should then present KPIs such as CAC, CLV, and sales growth, as improved by AI every half year.

Audit also plays an
important role in the board’s ability to oversee AI marketing efforts. Audit
reports on privacy and bias provided by the audit measures and independent
auditors must be presented yearly. The strategic plan should have half yearly
and yearly benchmarks for the use of AI. The board should gauge the need for
adjustments in strategy or actual progress based on the goals in the plan.

Continuing: Future-Proofing
and Longevity

Faced with ever-faster disruption, companies must future-proof themselves and their technology with continual transformation. Even the government is doing it. Boards must support a culture of measured risk-taking and agile culture and process. Preventing regime change from restarting and reinvesting is a key board responsibility. The AI council should work in concert with the board to list anticipated market changes and product or service features that drive deep differentiation. Whether by internal efforts or by acquisition, strategic planning and preparedness will ensure companies survive.