130 M C K I N S EY Q UA RT E R LY What evidence supports that the operational changes are both structural and sustainable? How confident is the management team that it can track and understand how AI is driving cross-functional processes? How should we shift our buy-versus-build approach to solidify our competitive advantage and our strategic flexibility? Functional Reinventors For companies embedding AI into selective work flows, the board’s role is to focus on scaling for value, securing coherence across initiatives, and mitigating vendor-related risks. Board committees in specific areas, such as audit, risk, and talent, play a stronger role in driving AI workflow transforma tions within their respective domains. - - Boards are focused less on the individual workflow modernization efforts and more on support ing management in allocating resources effectively, coordinating dependencies and governance issues across workflows, and determining which invest ments have the greatest application to a broad range of workflows (for example, developing data products that serve multiple workflows). Real-time dashboards can help boards track outcomes and progress. - - Boards can play a critical role by probing management to explain how competitive advantage is being protected. Functional reinventors are more likely to buy than build, given the generally narrow focus on workflows. “Vendor lock-in” isn’t a new concern, but boards can play a critical role by probing management to explain how competitive advantage is being protected and to what degree it is being ceded to vendors. Some vendor decisions have long-term implications, such as maintaining internal support capabilities, which management should clarify. Example: One regional healthcare system’s board now asks its CEO to present a consolidated map of all AI pilots each quarter, covering scheduling, transcription, and workforce tools. The board uses this review to challenge whether pilots are scal ing effectively and whether weak pilots are being defunded quickly enough. Boardroom test questions include the following: - Which high-value workflows can most benefit from AI? How does management set the parameters to manage the risk posed by AI programs in spe cific workflows? - What are the advantages and risks of buying ver sus building core capabilities? - What is the mechanism for tracking and scaling the most promising workflow programs? Pragmatic Adopters Boards of organizations that adopt a pragmatic approach toward AI should concentrate on strategic readiness and the risk of inaction. Board members can be most helpful by asking management to share and discuss market intelligence, including competi tor moves, market shifts, and AI evolutions. - During these reviews, board members should be ready to constructively challenge management to clarify if and how these developments could threaten the business’s long-term competitive ness and enhance any aspects of the current business model. Boards can establish clearly defined metrics and escalation procedures to track the maturity of the relevant AI capabilities deployed by any potential competitors, as well as conduct readiness assessments to ensure that the organization has sufficient foundations and capabilities to move quickly when an AI opportu nity presents itself. - - Example: One energy company’s board devotes a portion of its annual strategy retreat to review ing case studies of AI adoption from adjacent - AI Reckoning