AI Perspectives #21: Boards at the Digital Crossroads
How boards are confronting the urgent need for digital and AI leadership, closing expertise gaps, and balancing innovation with accountability in a rapidly changing global landscape.
Digital transformation has evolved from a strategic option to an existential necessity for companies across industries. In 2025, boards of directors face unprecedented challenges in guiding their organizations through digital and AI-driven transformations. Recent research from prominent institutions reveals that while the importance of digital leadership is universally acknowledged, many boards still struggle with implementing effective governance frameworks, developing necessary expertise, and balancing innovation with oversight.
The Digital and AI Savviness Gap
The most significant challenge boards face today is the widening gap between the required and actual digital competence at the governance level. According to March 2025 research from MIT's Center for Information Systems Research (CISR), the bar for board effectiveness has risen substantially in recent years. While their 2019 research found that 24% of boards were "digitally savvy," their updated 2025 analysis reveals an important shift: mere digital savviness is no longer sufficient for competitive advantage.
The latest findings show that boards now need to be both digitally AND AI savvy to drive superior performance. Only 26% of company boards currently meet this advanced standard, creating a clear differentiation between leaders and laggards in digital transformation. This represents a substantial challenge as technologies continue to evolve rapidly.
McKinsey's March 2025 survey further highlights this expertise gap, revealing that only a minority of organizations have established robust AI governance structures. As one board member candidly expressed in a recent interview: "We know AI will transform our industry, but we're struggling to find the right balance between encouraging innovation and ensuring responsible use".
AI Governance: Leadership Without Expertise
A particularly controversial aspect of the digital savviness gap is the disconnect between responsibility and expertise. According to McKinsey's State of AI 2025 report, 28% of organizations place AI governance responsibility with their CEO, while 17% assign it to their board of directors. However, most of these leaders lack specialized knowledge in emerging technologies.
This creates a precarious situation where those accountable for critical technology decisions may not fully comprehend their implications. As the MIT Sloan Management Review notes, "AI is not a single thing. It is a system comprising the technology itself, the human teams who manage and interact with it, and the data upon which it runs". Without adequate understanding of these complexities, boards risk approving initiatives that create unintended consequences.
The Integration Challenge: Breaking Through Silos
Another significant obstacle boards face is the fragmentation of digital initiatives across organizational silos. MIT Sloan research emphasizes that "siloed business units often hinder digital transformation efforts. When different departments operate independently, they resist integrating new processes, leading to inefficiencies and poor adoption".
This fragmentation creates governance challenges at the board level, where directors must evaluate the overall digital strategy without clear visibility into how various initiatives connect. A February 2025 analysis from Emixa identifies this as one of the top challenges companies face, describing it as a "'Spaghetti IT landscape' where organizations have adopted many tools over the years, but they aren't integrated".
The integration challenge extends beyond technology to organizational structure and culture. Boards must consider not just individual digital initiatives, but how these initiatives transform core business processes and create a cohesive digital ecosystem. This requires a comprehensive understanding of both technology and organizational change management-areas where many boards lack expertise.
Balancing Innovation and Oversight
Perhaps the most controversial challenge boards face is finding the appropriate balance between enabling innovation and maintaining proper oversight. As digital technologies become core to business strategy, boards must simultaneously encourage experimentation while fulfilling their fiduciary duties to manage risk.
This tension is particularly apparent in AI governance. According to an April 2025 LinkedIn analysis on AI governance, there exists a substantial "governance gap" where "AI implementations without appropriate oversight can lead to unintended consequences, including regulatory violations, reputational damage, and erosion of stakeholder trust. Conversely, overly restrictive governance can stifle innovation".
Peter Weill, Senior Research Scientist at MIT Sloan, emphasized this dilemma in a March 2024 interview: "Boards must help companies move forward at a sufficient pace, advocating for change, supporting and sometimes nudging CEOs". This requires boards to develop a nuanced understanding of digital technologies that goes beyond surface-level familiarity.
The traditional governance approaches that prioritize compliance and risk reduction often prove inadequate for digital transformation initiatives that require agility and experimentation. As one study notes, "Most organizations rely on traditional governance approaches that prioritize compliance and risk minimization"6, creating friction with the innovation imperative.
Current Approaches and Solutions
Despite these challenges, leading organizations are developing innovative approaches to enhance board effectiveness in digital transformation leadership. These approaches focus on three key areas: board composition, education and development, and governance frameworks.
Critical Mass of Digital Expertise
MIT CISR's 2025 research provides a clear directive on board composition: "It takes three to digitally tango". Their analysis reveals that adding just one or two digitally savvy directors has minimal impact on performance, but companies with at least three such board members demonstrate significantly improved outcomes.
This "critical mass" approach allows boards to develop collective digital intelligence rather than relying on a single expert. As Peter Weill explains, "Recruiting one or even 2 such board members makes no measurable impact on performance, but companies with 3 digitally savvy directors had significantly increased performance".
Structured AI Governance Frameworks
Leading organizations are implementing structured approaches to AI governance that balance innovation with responsible oversight. The April 2025 LinkedIn analysis recommends "essential board agenda items," including:
AI strategy alignment review
Risk profile updates
Significant application reviews
Governance framework evolution
McKinsey's 2025 research reinforces this approach, finding that "CEO oversight of AI governance is one element most correlated with higher self-reported bottom-line impact from an organization's gen AI use". This highlights the importance of senior leadership engagement in technology governance.
Education and Development
To address the expertise gap, boards are investing in specialized education programs. MIT Sloan's "Becoming a More Digitally Savvy Board Member" course exemplifies this trend, focusing on helping directors "increase their digital savviness and have more productive discussions around the opportunities and threats of the digital economy".
As the course description states, "When a board lacks digital savviness, it can't get a handle on important elements of strategy and oversight, and thus can't play its critical role of helping guide the company to a successful future". This recognition of the need for continuous learning represents a significant shift in how boards approach their development.
Looking Forward: The Evolving Board Role
As digital transformation continues to reshape industries, boards must evolve from their traditional oversight role to become active partners in digital leadership. This requires a fundamental rethinking of board composition, processes, and culture.
The most advanced boards are moving beyond simply approving digital initiatives to actively shaping digital strategy. As noted by Dilitrust in April 2025, "The digital lead from the board tells everyone that technology is neither a tactical tool nor an emergent field on which to experiment and prove value, for it becomes integral to the heart-of-the-business strategy".
This evolution requires boards to develop what McKinsey calls "digital competitive advantage," a clear understanding of how digital technologies create value within their specific business context. Without this understanding, boards risk approving initiatives that appear innovative but fail to deliver meaningful business outcomes.
Conclusion
The challenges facing boards in leading digital transformation are substantial but not insurmountable. By developing collective digital and AI savviness, implementing structured governance frameworks, and striking the right balance between innovation and oversight, boards can effectively guide their organizations through the digital era.
As digital technologies become ever more central to business strategy and operations, the distinction between "digital strategy" and "business strategy" continues to blur. In this environment, boards cannot delegate digital leadership, they must embrace it as a core governance responsibility. Those that succeed will position their organizations to thrive in an increasingly digital and AI-driven business landscape.