Boards are being asked to govern AI and digital transformation initiatives using vocabulary that hasn’t fully settled yet. Phrases like “digital transformation,” “agentic workflow” and “AI strategy” carry different meanings for different people sitting around the same table. That’s not a knowledge problem; rather, it’s a governance problem—and a potentially costly one.

Listen to “Why Is Digital Transformation So Misunderstood?” Deep Dive

A few weeks ago, I attended a Private Directors Association (PDA) panel where I’m a member. The panel discussion was about “Digital Transformation and Organizational Resilience.” The audience was comprised of PDA members as well as prospective members who currently hold a board position or are looking to obtain one. With AI as the topic on every board’s mind, attendees were looking to learn more about AI governance, strategy and the questions that boards should be asking when considering a digital transformation initiative.

As the moderator kicked off the discussion, one of the questions pertained to digital transformation. The question immediately seemed to trigger confusion about exactly what “digital transformation” actually means. One of the attendees responded with an answer that explained it as using a new form of technology to transform how some aspect of the business can be improved or optimized, which, for the most part, is certainly true.

The room fell silent for a few seconds, as if most of the attendees had their own interpretation of what digital transformation meant to them. This resulted in a larger discussion among the panelists that went on for several minutes.

This Fragmentation of What Words Mean

As I thought about this further and harkened back to my own experience with using certain phrases that may not be familiar to everyone, I realized that digital transformation means different things to different people. A McKinsey article about “The Catchall Fallacy of Digital Transformation” validates exactly what I witnessed during the panel:

“Like any commonly used phrase, ‘digital transformation’ has devolved into a catchall term that means different things to different people. That’s a problem . . . If leaders can’t be clear about what a digital transformation is, and align their organization around a specific program, they can’t expect to be successful.”

Which makes it even more important for boards to have a clear understanding of what digital transformation means to whom, and how they are looking to benefit from it.

At your next board meeting, try asking different people across the organization what digital transformation means to them, and I’m confident you’ll get a different answer from each of them. An example of how digital transformation is interpreted differently depending on the job title or business is demonstrated here:

Process Transformation (e.g., digitizing workflows)

Business Model Transformation (e.g., how value is delivered)

Domain Transformation (e.g., leveraging tech to enter new markets)

Cultural/Organizational Transformation (e.g., shifting mindsets and agility)

Operational Transformation (e.g., cloud migration and infrastructure)

Why Does This Matter at the Board Level and Beyond?

As I looked around at the 50-plus attendees, it became clear to me that any words explaining AI, digital or transformation needed to be carefully chosen and expressed in a way that a broad level of experience can be comprehended and easily translated back to a board or leadership team. If you’re unclear about what something means, how can you explain it to other board members who may have even less experience with the subject matter than you do?

I’ve seen this happen before at other panels and webinars, and I’ve been just as guilty at times when speaking about topics like answer engine optimization (AEO) or user experience. It’s almost like speaking another language, or the way a lawyer or investment banker references terms that are completely foreign to me. This isn’t about a lack of knowledge or trying to be the smartest person in the room; rather, it’s about reading the room and the makeup of the audience so the explanation or discussion is clear and presented in a way where everyone nods in agreement versus creating a state of confusion.

The $125 Million Cost of a Misunderstood Meaning

When words carry different meanings for different audiences, there’s more than just a comprehension cost. There can be real financial consequences.

In 1999, NASA’s Mars Climate Orbiter mission failed because two teams used the same word to mean different things. The engineering team at Lockheed Martin calculated thruster performance data in English/Imperial units (pound-force seconds), while NASA’s Jet Propulsion Laboratory believed the data was being provided in metric units (newton-seconds).

The disconnect, with one team speaking “Imperial” and the other speaking “Metric,” caused the orbiter to enter the Martian atmosphere at a much lower altitude than intended, causing it to burn up in the planet’s atmosphere. Hence, a program everyone believed had been well-executed ended in failure.

The project didn’t fail because of inexperience; instead, it failed because each team assumed the data was in the unit system they themselves were most familiar with and nobody thought to ask for clarification on this crucial factor.

This is what’s happening in boardrooms today. Words are tossed around, and each stakeholder in the room carries their own interpretation of them. When a vendor presents a board with a proposal for a “scalable AI agent workflow,” is every director hearing the same thing? Or is each one filling in their own definition, setting the stage for a Mars Climate Orbiter moment of their own?

The same can be said of a board governing an AI investment when the term “digital transformation” carries different operational definitions across each business unit.

What Digital Transformation Means to . . .

With new technologies and terminology appearing hourly, it’s becoming nearly impossible to not only keep up with them, but to interpret what they do and what they mean to me, or to you. A Forbes article about how we talk about AI confirms my point of view:

“The terminology is multiplying faster than most teams can absorb, and becoming fluent in it is now one of the biggest barriers to adopting AI. When terms like ‘agents,’ ‘orchestration’ or ‘intelligent workflows’ enter the conversation without a shared understanding, people may nod along without full confidence in what they are agreeing to. That is when misalignment sets in.”

To get ahead of this, the author suggests creating “a shared AI vocabulary.” Or, in the case of this post, maybe it’s a shared digital transformation vocabulary. While it may sound simple, it’s not. It’s a way of gathering all stakeholders in a room and asking what each term or part of the process means to them, then documenting it.

This document becomes the board and leadership team’s strategic digital transformation guide, capturing terms, what they mean to the organization and its goals, and the desired outcome of the project. It can then be shared with vendors and other key stakeholders.

If you disagree, try the experiment I mentioned earlier by asking five different people across various departments to explain what something means. You’re sure to get five different responses.

This isn’t about seeing which board member knows more or less than the other; rather, it’s about boards being honest about what they know and what they need clarification on. The result is a board that’s transparent and aligned.

What Every Board Director or Executive Leader Should Ask

Before your next board meeting, reach out individually to each member of the board and ask them to write down what “digital transformation” means to the company. Compare the responses to see whether there’s a disconnect and whether you have a potential “Imperial vs. Metric” moment that needs clarification.

Listen carefully to how the leadership team is conveying “digital transformation” or an AI initiative across the company and how this messaging is being communicated to senior and mid-level teams. Is it digestible or is it ambiguous? When the next technology investment proposal is up for review and approval, will the language in the deck mean the same thing to every director who approves it?

At the next board meeting, raise this question directly: how do we democratize the language of technology across this organization so that it’s understood at every level of digital knowledge?

The Board’s Real Job

I include myself in this. I’ve been the person in the room using terminology that simply didn’t translate to my audience. The discipline of building shared language is one I’m still working on, too.

“The board’s job isn’t to know every technical term. It’s to make sure every term being used in the room means the same thing to every person in the room.”

If you’re navigating an AI or digital transformation conversation at your company or a board you serve and you’re not sure the language is landing the same way for every stakeholder, that’s a useful conversation to have. Email me at mike@scheinerinc.com.

As always, thank you for reading and/or listening.

Header Image: Rodion Kutsaiev for Unsplash+