Why AI Literacy Must Precede Deployment

A lack of technology literacy among boards and management can undermine a company’s AI infrastructure. Here is what boards can do to strategically govern AI for success.

Across industries, the deployment of artificial intelligence is accelerating. Firms are integrating generative AI assistants, decision-support systems, and autonomous agents into their operations with remarkable speed. Governance playbooks have been drafted, toolkits have been implemented, and oversight roles have been assigned. 

On the surface, it appears the infrastructure is in place. Beneath it lies a more foundational vulnerability: Even in organizations that have done everything “right,” AI failure is still inevitable when the board lacks the literacy to interpret, question, and realign the situation.

AI does not operate independently from a business’s values, incentives, or strategic priorities. Yet, building the AI model is often treated as the endpoint and governance merely a layer of insulation. The reality is far more complex and demanding.

Failure Does Not Require Malice

Most AI systems do not fail because they are malicious; they fail because they are misunderstood. They act on goals that do not reflect the firm’s mission and become irrelevant over time. When this happens, it is rarely a model issue. Instead, it is a leadership issue.

Consider a customer-facing AI chatbot that begins to generate polarizing or misleading content. The technical explanation may lie in outdated training data or inadequate data retrieval safeguards, but the real failure occurred when leadership approved the system without understanding its escalation protocols, interpretability limits, or alignment with brand values.

The AI did not go rogue. It simply filled the vacuum left by poor strategic integration.

Questions to Bolster Fluency

This gap stems from a fundamental misalignment: Many firms invest heavily in AI infrastructure but not in institutional fluency. They have models, data pipelines, and monitors but lack a shared understanding of what these systems optimize, what failure modes are plausible, and where human intervention must be preserved.

AI literacy is not about teaching board members to code; it is about equipping them to ask management the right questions. For instance, what assumptions does this model rely on? How will it behave when exposed to cases that are not mainstream? What signals does it take as input, and which ones does it ignore? What regulatory governance body has the right to intervene, and when?

Without asking these questions, what remains is organizational theatre where sophisticated systems operate with little strategic direction and no embedded accountability.

AI as a Strategic Actor

Boards should abandon the framing of AI as a discrete function, managed in isolation by data teams or chief technology officers. AI is a decision-making actor that can inform pricing, influence hiring, guide investment allocations, and prioritize customer service. That means AI is not an operational asset but rather a strategic force, and it should be treated as such.

Embedding AI within the broader corporate vision requires directors to understand conceptually what AI does and how it behaves over time. For example, how does it adapt as objectives change? How does the company detect when its decisions, while statistically valid, begin to contradict the organization’s values or commitments?

Illiteracy Amplifies Risk and Mutes Value

When boards and executive leaders lack AI literacy, the organization becomes vulnerable on three fronts. Risks are recognized too late, often after audits, public exposure, or regulatory scrutiny. Strategic potential is constrained, as leaders may lack the confidence to innovate responsibly. Accountability becomes diffuse when the board and C-suite do not understand who owns the outcomes of automated decisions.

This is not hypothetical. Recent AI incidents have shown that systems trained with good intentions can cause reputational harm, stakeholder backlash, and legal exposure. In each case, the damage was magnified by the absence of a leadership body equipped to detect, diagnose, and intervene before the impact scaled.

Toward a Literate Enterprise

Becoming an AI-literate enterprise demands action at multiple levels. Boards should bring AI oversight into the core of enterprise risk management discussions and not treat it as a separate track. Every AI-enabled process should have a named executive owner who is accountable for its success and its alignment with strategic and ethical priorities.

Fluency should expand beyond technical teams into the legal, compliance, operations, human resources, and marketing functions, with each understanding how AI affects its workflows and what governance levers it can exercise. This is a task for a company’s responsible AI office. Finally, AI governance itself should be dynamic. Static oversight structures will not keep pace with systems that learn and evolve. The board should commit to regular recalibration and feedback loops with management.

Firms that do this well will begin to see AI not just as a risk to contain or a tool to deploy but also as a capability that reflects and reinforces the company’s values, strategy, and long-term direction.

The Future Will Not Wait

AI is already shaping customer experiences, regulatory exposure, and core business decision-making. Simply waiting for regulatory guidance alone before acting is not prudence; it is abdication of the organization’s responsibility.

When the next AI failure occurs—and it will—the question will not be whether the firm had a toolkit. Instead, it will be whether the company’s leadership team understood the AI system well enough to prevent misuse, detect drift, and course-correct before damage became systemic.

AI literacy is becoming a leadership necessity. No successful AI model, however advanced, can operate without decision-makers who understand what the system is meant to do and when it begins to do something else.

The views expressed in this article are the author's own and do not represent the perspective of NACD.

Infosys is a NACD partner, providing directors with critical and timely information, and perspectives. Infosys is a financial supporter of the NACD.