How To Set Realistic AI Expectations And Goals For Your Business

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Executives are vital to provide leadership to businesses, but they aren’t the only ones. Boards hold an equally important role. Though most boards sit more on the advisory side, members’ knowledge and opinions on company strategy, policy and who a company’s management should be can dramatically shape its outlook and finances.

Executive search firm Spencer Stuart published its annual Board Index earlier this month and found that many boards are slowly making evolutionary changes to better reflect today’s business realities. The operative word is “slowly.” The study found there’s more that needs to be done—and fast—to bring boards more in line with companies’ needs. Fewer than a third of CEOs told the firm they feel their company has the board it needs to address the issues they’re facing. And among boards, about a quarter say they have one or more members who should no longer be there because their skills and expertise are outdated. Yet many board members stick around for a long time. Only 58% of S&P 500 boards got a new member in 2024, and the turnover rate for board members is about 7% to 8%.

Spencer Stuart offered some advice for shaking up a stagnant board, other than the directive that board members need self-awareness to know when their service is no longer useful to the company. The entire culture behind board membership should be built around the board’s mission as a dynamic group committed to the company and its shareholders. Third-party evaluations into boards—and individual members—could assess their effectiveness. And adopting formal policies to promote turnover—including term limits, maximums or post-full-time-job-retirement requirements—could also help push the awareness that the board should be constantly refreshed.

In terms of incoming board members, Spencer Stuart found modest gains in many expertise and diversity-related factors. Nearly three in 10 new board members have financial expertise—up three points from last year—and the largest proportion of new board members come from tech or telecommunications backgrounds. Just over a third of board members appointed last year were first-time members, and 14% of those were younger than 50—all of these statistics are up 3% from 2023. The one place that saw a sizable gain was the number of new female board members with financial backgrounds: 34% appointed this year came from finance, while just 25% in 2023 did. However, that large step forward came with a small step back: The number of new women board members was down—representing 42% of new members this year, as opposed to 46% last year.

Even though generative AI has been talked about by the business community for almost two years, there are still many unrealistic expectations about what it can do for a company—often among board members who don’t have much technical knowledge. I talked to Krishna Sudheendra, CEO of digital transformation company UST, about what CEOs need to know about setting realistic expectations and goals for AI. An excerpt from our conversation is later in this newsletter.

Forbes is compiling its first-ever list of best-in-state CPAs, and nominations are now open. You can find all the details and submit a nomination here.

ECONOMIC INDICATORS

The interest rate cut that everyone was waiting for happened earlier this month. And yet there’s already lots of talk about how big the next one will be at the Federal Reserve policy-making committee’s next meeting in November. (According to CME FedWatch, as of Monday morning, 38.6% of economists project another half-percentage point cut.) This isn’t just a case of impatient analysts and investors, writes Forbes’ Derek Saul. After the rate cut was announced, yields on the 10-year Treasury note increased. These notes are the basis for interest rates on things including mortgages, auto loans and corporate borrowing—meaning financing might not be getting cheaper after all.

There are many reasons for Treasury yields to be increasing, some benign and some ominous. Some analysts say investors had already priced in the rate cut, especially since its yields are down compared with earlier this summer. But CNBC spoke with analysts who see uncertainty through the federal deficit and the Fed’s willingness to cut interest rates, even with inflation a bit higher than the 2% it sees as tolerable. On Friday, reports showed the Personal Consumption Expenditures Index—the Fed’s preferred inflation gauge—to be at 2.2% in August.

One of the reasons for this month’s rate cuts was the weakening job market, as the unemployment rate rose to 4.2% in August. That sent consumer confidence numbers down this month—from 105.6 in August to 98.7 in September, far below consensus economist forecasts of 104. Dana Peterson, chief economist at the Conference Board, said in a statement that consumers are concerned with fewer work hours, slower raises and fewer job openings, even though the labor market on the whole is healthy.

LEGAL ISSUES

The Justice Department sued Visa last week, arguing that the financial services giant violates antitrust laws with its debit card business. Visa accounts for nearly 60% of U.S. debit card transactions, and Attorney General Merrick Garland said it has “unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market.” While most consumers don’t see these fees broken out when paying for items, businesses must pay them. Garland said Visa’s conduct affects “the price of nearly everything.” The National Retail Federation, which has long pushed for more controls on transaction fees charged by credit and debit card companies, supported the lawsuit but said in a statement this is “just the tip of the iceberg.”

In a statement shared with several media outlets, Visa general counsel Julie Rottenberg said the lawsuit ignores that Visa is one of many competitors in the debit market. “When businesses and consumers choose Visa, it is because of our secure and reliable network, world-class fraud protection, and the value we provide.”

BIG MOVES

WeightWatchers’ bad year just got worse. On Friday, CEO Sima Sistani abruptly left the company, effective immediately. Forbes senior contributor Edward Segal writes this is yet another big hit for a company that has been trying to rebrand itself as people’s relationship with weight, health and weight loss drugs are in significant flux. As more people have turned toward weight loss medications—including Ozempic and Wegovy—membership and confidence in the company has fallen. Longtime WeightWatchers advocate, client and board member Oprah Winfrey even left the company, selling her stock and exiting its board in February. In March 2023, under Sistani’s leadership, WeightWatchers bought Sequence, a digital health platform that could prescribe weight loss medications, for $132 million. But the company has accelerated in the wrong direction, with its stock down more than 90% in 2024 alone, currently trading at less than $1 per share. The interim CEO is board member Tara Comonte, former CEO of TMRW Life Sciences.

TOMORROW’S TRENDS

UST CEO On How To Set Realistic AI Expectations And Goals

Nearly two years after ChatGPT ignited massive interest in generative AI, many companies have been working to bring AI-powered solutions to their companies. But the hype around AI is still huge, and CEOs need to understand realistic expectations for the technology. I talked to Krishna Sudheendra, CEO of digital transformation company UST, about how companies can be realistic about the benefits and return on investment they can get from AI. This conversation has been edited for length, clarity and continuity.

Are expectations for what AI can do right now in the short term out of hand? Or do you feel like everybody kind of has the right expectations and ideas?

Sudheendra: Right now, especially if you look at the boards and the investors, they feel AI is this magic wand. AI has been around. Generative AI and content generation [is] new, and the power, because of the new semiconductor chips and all the technologies coming together, has been enhanced. But right now, many people think that it is this magic wand that is going to bring my cost down dramatically. Companies are announcing, ‘We are going to take out $3 billion in cost because of AI,’ or ‘We are going to enhance our market value by $XXX+ because of AI.’

Where you can really see it in action is in your productivity tools. How can you re-look at your ways of work, whether it’s your software development cycle, core generation, internal productivity or call center operations. You can bring in generative AI technologies to really make things productive. We have seen in order of magnitude 20% to 40% reduction in cost and improvement in efficiency. Those are the real use cases that are getting into production.

But there are a lot of pie-in-the sky use cases which are not really getting out there. Yes, there are POCs [proofs of concept], but nobody is really ready to get things into production.

There are regulations that need to come into play. There has to be a complete governance layer in terms of ethics. All of those are yet to be formed and, without that, we cannot really have a mass adoption of AI, especially helping businesses to grow or significantly enhance their customer experiences.

How can the people inside of the business who grasp the concept of AI temper expectations for the boards, the investors and people who just see “the magic wand?”

It’s all about starting small, setting realistic expectations and showing the results. I have seen CIOs, CTOs and some of the smart technologists saying, ‘Let’s look at how we can really improve our software engineering using AI.’ Or our call center performance, our supply chain operations or their operational performance, using document, vision, analytics and so on—bringing all of these technologies together. They have been able to show some early results.

They have to set realistic expectations with their board, saying there is still a lot of work that needs to be done bringing all the data together, putting things onto the cloud. A lot of the digital transformation is incomplete today. Otherwise, AI is bound to hallucinate and give you wrong results.

A realistic expectation needs to be set: As we start, where can it be applied, and when would we get results? And then clearly show a larger, longer roadmap to the board and investors saying, ‘Here’s my AI roadmap. This is what I’m achieving today, realistically. This is the art of possible. We need to get our digital transformation in place. We need to get our resources in place. We need to get the investments in place, and here is a way to get there.’

How do you build your roadmap from what can be done today to what can be done in the future?

Every company needs to have an AI strategy. The thought leaders, the technologists, the architects, the business leaders within the company need to come together. Today, the awareness of what AI can do is very limited. I think there needs to be an AI education for the board [and] the senior leadership team. They have seen their children in high school, trying cool things on ChatGPT. That can solve smaller problems, but to apply AI in an enterprise and really look at business strategy.

Such an education should lead the businesses to have AI strategy. When UST did a survey, it was very evident that there is [a] lack of talent in the market. External experts need to come in to define what an AI strategy will look like. Then every company can build its own, which will also include a significant portion of digitizing their current environment. Companies have not even completed their digitization roadmap, and [it] will become an integral part of the AI roadmap.

Most importantly, the regulation needs to catch up. Whether it’s healthcare, retail, [or something else,] industry leaders need to help formulate some of the regulations. Regulation and governance need to go hand-in-hand while defining the AI strategy for the future.

FACTS + COMMENTS

After several years of tight availability and sky-high prices, economists from Cox Automotive said on a webcast that the automobile industry is becoming more affordable.

$47,870: Average transaction price for a new vehicle, down 1.7% from 2023, and 4% less than 2022

22%: Year-over-year increase in sales of subcompact SUVs, the best-selling type of vehicle

‘The story is steady demand’: What Cox Automotive Director of Industry Insights Stephanie Valdez Streaty said about EV sales, which represent about 9% of the total market

STRATEGIES + ADVICE

With all of the work and dedication required to be a CEO, burnout is always a possibility. CEO and entrepreneur Jessica Zweig recently published a book, The Light Work, about how to come back after burning out.

Social media makes it easy to build your personal brand, and as an executive—especially if you’ve got a smaller or brand new company—there are many reasons to do it. Here are 10 things branding can do for you and your business.

VIDEO

QUIZ

A Rite Aid in Compton, California, has attracted national attention for its unique approach to deter shoplifting. What did this store do?

A. A security guard is stationed in every aisle

B. Nearly all merchandise is locked up

C. It has a mandatory bag and jacket check at the door

D. It only accepts online orders and delivers shoppers’ purchases to the parking lot

See if you got the answer right here.