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What boards need to know about emerging tech

By Paula Loop, Leader, PwC’s Governance Insights Center

This feature was produced by Pricewaterhouse Coopers, and does not reflect the opinions or point of view of Vox Media or Vox Creative. Vox Media editorial staff was not involved in the creation or production of this content.

New technologies—from artificial intelligence and drones, to 3-D printing and predictive analytics—are disrupting how companies compete and create value. US CEOs believe investing in tech is the most direct path to meaningful innovation and operational efficiency, but new technologies are also generating risks that boards are scrambling to contain.

The average age of a director at a public company is 63 years old. And the majority aren't sitting executives who work through technological advancements in their day jobs. Given the pace of technological change, how can boards really be on top of their game?

Directors recognize their dilemma. Nearly one-third of those polled in our Annual Corporate Directors Survey say their board isn't sufficiently or at all engaged in overseeing or understanding the company's annual IT budget. Similarly, a third say the company's approach to IT strategy and risk mitigation doesn't anticipate potential advantages from emerging technologies.

What's the solution? Should we swap all sitting directors with millennials and the technologically savvy? Or should we push companies to prioritize IT awareness and devote elements of board meetings to IT education? The answer lies somewhere in between.

Some boards look for people who understand new technologies and their impact on business. In fact, directors have identified IT strategy expertise as a higher priority at the board level than cyber risk expertise. But the debate over whether to designate a seat on a board to someone with specialized technology and digital expertise remains complex. Directors with this expertise are being added to some big-name boards, but other boards don't want to give up a seat to someone who may not have a broader range of skills and experience.

getting on the right page

What can companies do to help? The CIO is one place to start. (The Chief Digital Officer may increasingly play a role as well). Boards are certainly communicating and engaging more: 25% of directors say they meet with the CIO at every formal meeting, up from 18% in 2012. But the big question is whether those meetings are really productive for boards.

We know that directors believe cybersecurity is a significant risk and want to spend more time discussing it. But if the board's interaction with technology is primarily around cybersecurity, they're missing the bigger picture. CIOs need to outline the full tech landscape for directors. They need to present technology data in a way so boards can grasp and absorb all the concepts. They need to be able to articulate the company's tech picture clearly, without using excessive jargon. If CIOs can present these issues to management, they should be able to present them to the board.

start with the basics

CIOs should start by presenting a broad look at IT, highlighting a baseline of where the company is today and then focusing on where it aspires to be in the future. How does the company's technology compare to its peers? Is it ahead of the curve or always playing catch-up? Are we presenting ideas via demos (show don't tell) and curating sessions with relevant leading startups and innovators? What is the company's digital agenda and where is it trying to go?

Understanding the baseline might take a bit of an investment up front, but smart boards should be able to move forward from there to an oversight role. They should start to ask about deferred maintenance risks or probe the company about its digital plan. They can also focus on technology skills and talent. And they'll want to hear what the CIO's opinions are about the company's IT vulnerabilities and opportunities. Occasionally, the company should also consider bringing in subject matter specialists; sometimes hearing the data in a different way can help bring it all together.

Open and transparent interactions with the CIO can help the board stay up to speed on the fast-changing nature of technology and its impact on the company. As a result, the company benefits from more robust discussions in the boardroom that will lead to better board oversight of technology.

Follow @paula_loop on Twitter, and get more insights for boards and institutional investors at PwC's Governance Insights Center.

© 2016 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

This feature was produced by Pricewaterhouse Coopers, and does not reflect the opinions or point of view of Vox Media or Vox Creative. Vox Media editorial staff was not involved in the creation or production of this content.


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